Finance Associated Press October 21st (Editor Feng Yi) Driven by the heat of restructuring and mergers, today Shanghai Electric Group (601727.SH; 02727.HK) AH shares both soared. As of the time of publication, Shanghai Electric Group's A shares hit the limit up, H shares surged more than 30%, with trading volume exceeding 0.8 billion Hong Kong dollars.

On the news front, on October 18th, Shanghai Electric Group announced that its subsidiary automation group plans to acquire 100% equity of Ning Sheng Industrial held by Electric Holdings in cash, at a transaction price of approximately 3.082 billion yuan.

According to the disclosed relevant announcement, Shanghai Ning Sheng Industrial Co., Ltd., as the equity management platform for industrial robot-related businesses, mainly holds 50% equity of Shanghai Fanuc Robotics Co., Ltd. and 25% equity of Shanghai Fanuc International Trading Co., Ltd.

It is understood that Shanghai Fanuc Robotics was jointly established by one of the world's four major industrial robot giants, Japan's Fanuc, and Shanghai Electric Group. Financial data also shows that the company's revenue in 2020, 2021, and 2022 were 3.785 billion yuan, 5.875 billion yuan and 7.593 billion yuan respectively; with net income during the same period being 0.33 billion yuan, 0.789 billion yuan, and 1.332 billion yuan respectively.

According to the Ministry of Industry and Information Technology, as of July 2024, China holds over 0.19 million valid patents related to robots, accounting for about two-thirds of the global share. China has been the world's largest industrial robot market for 11 consecutive years, and in the past three years, its new installed capacity accounted for over half of the global total.

It is also worth noting that Shanghai Electric Group's current merger and acquisition have coincidentally hit two major 'hotspots' in the short-term market.

On one hand, the market's enthusiasm in the merger and acquisition sector has been continuously increasing under policy support recently, large movements of central SOE mergers and restructurings are ongoing, gradually becoming a hot direction for market transactions.

Recently, the Securities Regulatory Commission held a special symposium to further comprehensively deepen the reform of the capital markets. Representatives at the meeting also repeatedly mentioned recommendations for promoting more high-quality technology companies to go public, as well as merger and acquisition cases implementation.

According to a report from Haitong Securities, on September 24th, the Securities Regulatory Commission issued the "Opinions on Deepening the Reform of Mergers and Acquisitions of Listed Companies Market", aiming to further stimulate the vitality of the mergers and acquisitions market; recently, a series of heavyweight policies have been introduced to encourage and potentially enhance the efficiency of the mergers and acquisitions market, helping listed companies transform and upgrade towards new quality production forces.

On the other hand, under the policy orientation of "advancing China's modernization, with technology taking the lead", the current market's pursuit of technology stocks is higher than other sectors, with concepts such as "new quality production forces", "hard technology", "specialized, special, and new" showing significantly increased popularity.

In addition, analyst Lin Chenxing from Huafu Securities also stated in a report on October 20th that with the arrival of policy bottoming out, the high elasticity of Hong Kong-listed technology investment opportunities is worth seizing.

Backtest data shows that in the past 10 years of the market, the cumulative return of the CSI Hong Kong Stock Connect Technology Index has been significantly better than mainstream broad-based indices such as the Hang Seng Index, the Hang Seng Composite Index, and the Hang Seng Hong Kong Stock Connect Index. It has significant advantages for medium to long-term and short-term investments.

Huafu Securities also points out that with the continuous recovery of the domestic economy, the intensive implementation of policies, the warming up of industrial capital repurchases, continuous injection of funds into the Hong Kong stock market, supporting the resilience of the Hong Kong stock market.

Interestingly, Shanghai Electric Group also announced concurrently with the release of the restructuring and acquisition proposal that it has requested authorization from the shareholders' meeting, including authorizing the repurchase of A-shares not exceeding 10% of the company's issued A-shares or H-shares not exceeding 10% of the company's issued H-shares. The subsequent implementation of the repurchase may have a positive impact on the stock price.