Amidst the retreat of Hong Kong Stock Connect, why has southbound capital chosen to aggressively increase its holdings in YIDU TECH (02158) at this critical moment?

On August 24, YIDU TECH (02158) closed down 10.2% at HKD 3.875, with a trading volume of 22.422 million shares and a turnover of HKD 87.8961 million. Amid the looming shadow of being excluded from the Hong Kong Stock Connect, market sentiment was temporarily low. However, underlying the market data were signals that told a different storynet buying by southbound funds amounted to 3.0067 million shares that day, accounting for 13.41% of the day's trading volume, with a single-day net buying amount as high as HKD 11.7863 million, reaching a new high since June 25, 2026, and marking two consecutive trading days of net buying, totaling HKD 16.9402 million. This contrarian move speaks volumes: while retail investors sold off shares in panic over the potential exit from the Hong Kong Stock Connect, the southbound funds, who understand the logic behind the Hong Kong Stock Connect better than anyone, were picking up bargains. In fact, prior news about YIDU TECH being excluded from the Hong Kong Stock Connect had already sparked concerns in the market. As the core channel for southbound capital, the exclusion of a stock implies that more retail investors from Mainland China would be unable to buy in directly through this channel, leading to diminished liquidity expectations. Yet, the actions of southbound funds provided an instinctively counterintuitive answer. Data shows that over the past five trading days, southbound funds have cumulatively net bought 4.6155 million shares, with a total net buying amount reaching HKD 18.8312 million. Meanwhile, over the past 30 trading days, the cumulative net selling was only HKD 7.1765 million. This indicates that within less than a week, southbound capital not only offset the net selling from the previous month but also significantly shifted to net buying. As of August 24, southbound funds collectively held 244 million shares, marking an increase of 1.25% from the previous trading day, with a total holding value of HKD 944.5 million, accounting for a substantial 22.71% of shares outstanding. In other words, nearly one out of every four shares of YIDU TECH that are in circulation is held by southbound funds. The reason that southbound funds are willing to increase their positions against the market trend is rooted in the core logic that the Hong Kong Stock Connect's exclusion affects liquidity expectations rather than the company's fundamentals. YIDU TECH has clearly demonstrated in its 2026 fiscal year that it is at a historic turning pointreporting its first annual profit of HKD 78.766 million, net profit attributable to parents reached HKD 72.709 million, significantly exceeding the upper limit of its profit forecast by about 30%. Furthermore, the operating cash flow turned positive in the second half of the year at HKD 29.3 million, marking the company's shift from "burning cash for growth" to "self-sustaining." More importantly, YIDU TECH's three major business segments are growing robustly: AI for Medical revenue exceeded HKD 380 million, with gross margins soaring from 29.7% to 39.7%; AI for Life Sciences revenue surpassed HKD 270 million, with 17 out of the top 20 global multinational pharmaceutical companies as clients; AI for Care revenue was about HKD 170 million, a year-on-year increase of 37.6%. When a company simultaneously boasts "first-time profitability + positive cash flow + high growth across three major segments + increasing data barriers," the status of the Hong Kong Stock Connect does not fundamentally impact its long-term value assessment. From a trading perspective, the drop on August 24 showcased signs of panic selling. The stock price plummeted 10.2% that day, but the trading volume surged to 22.422 million shares, with a turnover nearing HKD 88 millionsuch a volume drop often indicates a panic sell-off, and southbound funds coincidentally absorbed this portion of shares at that moment. Calculating an average transaction price of HKD 3.92, southbound funds acquired a large number of low-priced shares at relatively lower levels. From a valuation perspective, with a profit of HKD 78.766 million in the 2026 fiscal year and an approximate market value of HKD 4.5 billion, the static PE ratio is just above 50 times. However, if the second half's profits are annualized (about HKD 141.5 million), the dynamic PE ratio would fall into the range of about 20 times. For a company with a revenue growth rate of 14.6%, continuously rising gross margins, and operating in a high-growth AI medical segment, this valuation clearly appears undervalued. Looking back at history, southbound funds often display proactive behavior around the time a stock is excluded from the Hong Kong Stock Connect. While the market is still digesting the negative sentiment around "exclusion", they are already casting their votes with real money. Cumulatively net buying HKD 18.8312 million over the past five trading days, while accumulating only HKD 7.1765 million in net selling over the past 30 trading daysthis swift shift indicates that southbound funds have recently reached a clear consensus: the short-term bearish sentiment from the Hong Kong Stock Connect's exit has been overly reacted to by the market, while the fundamental turning point of YIDU TECH represents a more significant long-term variable to watch. When panic spreads and stock prices plummet, the smart money that understands the logic of mainland investors quietly positions itselfthis in itself is a counter-intuitive signal that deserves attention. After all, in the capital market, the most expensive thing is often not being undervalued but missing the opportunity to capitalize on that undervaluation.