Eliza Wong
Major Foreign Shareholder Exits Chinese Fiber Optics Leader
In a significant move that has captured market attention, Draka Comteq B.V., one of the founding shareholders of Yangtze Optical Fiber and Cable Joint Stock Limited Company (长飞光纤光缆股份有限公司), has completely exited its position through a series of strategic disposals. The foreign shareholder divestment, finalized on September 19th, represents a major shift in the ownership structure of one of China’s top-performing stocks this year.
The Netherlands-based company sold its remaining 37.5953 million H-shares, representing 5.00% of total equity, via block trade on the Hong Kong Stock Exchange. This transaction marks the culmination of a five-month divestment process that began in April, during which Yangtze Optical Fiber’s shares experienced extraordinary growth, with H-shares surging over 400% year-to-date.
Timing and Execution of the Divestment
The foreign shareholder divestment strategy unfolded during a period of exceptional market performance. Draka Comteq B.V. initiated its selling program on April 17th, when the stock was already showing strong upward momentum. The disciplined approach to the foreign shareholder divestment allowed the company to capitalize on the rising valuation while minimizing market disruption through carefully timed block trades.
Market analysts note that the foreign shareholder divestment occurred amid growing institutional interest in China’s fiber optics sector, particularly driven by data center expansion and 5G infrastructure development. The completion of this foreign shareholder divestment removes a major overhang from the stock while transferring ownership to potentially more long-term oriented investors.
Stock Performance Context
Yangtze Optical Fiber has emerged as one of the standout performers in Chinese equity markets this year. The company’s A-shares have gained over 300% since January, while its H-shares have delivered even more impressive returns exceeding 400%. This remarkable appreciation occurred against a backdrop of mixed sector performance and broader market volatility.
The stock’s ascent accelerated particularly in September, with the A-share price hitting multiple trading halt thresholds and reaching all-time highs. On September 19th, the same day as the final foreign shareholder divestment, Yangtze Optical Fiber’s A-shares closed at limit-up, marking their third涨停板 (trading halt due to maximum daily gain) in four sessions.
Valuation Concerns and Risk Disclosure
Following the exceptional price performance, company management issued formal risk warnings to investors. In a September 19th disclosure, Yangtze Optical Fiber noted that its rolling price-to-earnings ratio had reached approximately 155 times, significantly above historical averages and sector benchmarks.
The company explicitly cautioned investors about several key risks:
– Telecom market demand remains insufficient with ongoing average selling price pressure
– First-half 2025 net profit declined 21.71% year-over-year despite revenue growth of 19.38%
– Hollow-core fiber technology, which has attracted market attention, remains in early development stage without material revenue contribution
– Technology disruption risks could impact competitive positioning if new alternatives emerge
Detailed Divestment Timeline
The foreign shareholder divestment process followed a structured approach across multiple months:
April 17, 2025: Initial sale of 28.2468 million H-shares (3.73% of total equity) reducing stake from 23.73% to 20.00%
June 5, 2025: Secondary disposal of 32.9685 million H-shares (4.35% of total equity) bringing ownership down to 15.65%
July 7-21, 2025: Additional sales of 5.83 million H-shares (0.77% of total equity)
July 29, 2025: Further reduction through block trade of 37.5953 million H-shares
September 4, 2025: Major disposal of 37.5953 million H-shares (5.00% of total equity) reducing stake to exactly 5.00%
September 19, 2025: Final complete exit through sale of remaining 37.5953 million H-shares
Strategic Rationale Behind the Divestment
According to official filings, Draka Comteq B.V. described the foreign shareholder divestment as motivated by financial management and business development considerations. The company emphasized that the transactions did not involve share pledges, freezes, or other restrictions, and indicated no plans for additional changes to its position in the coming twelve months.
Industry experts suggest that the foreign shareholder divestment likely reflects portfolio rebalancing following the tremendous valuation increase rather than a negative view on Yangtze Optical Fiber’s prospects. The disciplined execution across multiple months allowed for optimized pricing while managing market impact.
Company Fundamentals and Market Position
Yangtze Optical Fiber stands as a global leader in optical fiber preform, fiber, and cable solutions. The company manufactures and sells various standard specifications of optical fiber preforms, fibers, and cables widely adopted in the communications industry. Their product portfolio also includes customer-specific optical modules, specialty fibers, active optical cables, submarine cables, as well as radio frequency coaxial cables and accessories.
The company’s half-year 2025 report revealed several important financial metrics:
– Total operating revenue: approximately RMB 6.384 billion (19.38% year-over-year growth)
– Net profit attributable to shareholders: approximately RMB 296 million (21.71% year-over-year decline)
– Gross margin pressure from average selling price declines in conventional single-mode fiber products
Technology Development and Market Dynamics
A significant portion of recent investor enthusiasm has centered on Yangtze Optical Fiber’s development of hollow-core fiber technology, which has potential applications in data centers and high-speed communications. However, management has been careful to temper expectations, noting that hollow-core fiber remains an emerging technology without established markets, stable pricing, or material contribution to financial performance.
The company’s traditional telecom market business continues to face challenges from insufficient demand and price competition. Conventional single-mode fiber and cable products still represent the majority of overall fiber optic demand, and pressure in this segment continues to impact overall profitability despite revenue growth.
Additional Shareholder Movements
Beyond the foreign shareholder divestment by Draka Comteq B.V., Yangtze Optical Fiber disclosed another potential reduction on September 4th. Shareholder Yangtze Communication (长江通信) announced plans to sell up to 1.1 million A-shares, representing approximately 0.15% of total equity, citing its own operational development needs.
The proposed disposal would occur over three months beginning 15 trading days after the announcement date, using centralized bidding transactions. While materially smaller than the foreign shareholder divestment, this additional potential selling pressure contributes to the overall supply dynamics affecting the stock.
Historical Context and Founding Relationship
Draka Comteq B.V.’s relationship with Yangtze Optical Fiber dates to the company’s establishment. Originally one of three founding shareholders, the Dutch company held a 37.50% stake when Yangtze Optical Fiber transformed into a joint stock company. Following the initial public offering of A-shares, Draka Comteq B.V. maintained a 23.73% position comprising 179.8278 million H-shares.
The complete foreign shareholder divestment thus represents the end of a multi-decade investment relationship that began when the company was founded. The exit occurs at a time of both exceptional valuation and challenging fundamental performance, creating a complex narrative for market participants to interpret.
Market Implications and Investment Considerations
The foreign shareholder divestment at Yangtze Optical Fiber offers several important lessons for investors in Chinese equities. First, it demonstrates how founding shareholders may choose to monetize positions during periods of exceptional market performance, even when fundamental metrics show mixed results.
Second, the transaction highlights the continued importance of block trade mechanisms in facilitating large position changes without excessive market disruption. The foreign shareholder divestment was executed entirely through block trades on the Hong Kong Stock Exchange, allowing for efficient transfer of substantial ownership.
Sector Valuation and Risk Assessment
At a current rolling P/E of approximately 155 times, Yangtze Optical Fiber trades at a significant premium to both historical levels and sector peers. While growth prospects in fiber optics remain attractive, particularly for data center and advanced technology applications, current valuations appear to incorporate substantial future success.
Investors should carefully consider several risk factors:
– Telecom market demand recovery timing remains uncertain
– Price competition continues to pressure traditional product margins
– Emerging technologies like hollow-core fiber require substantial additional development
– Technology disruption risk from alternative solutions or competitors’ innovations
Forward-Looking Perspective
The completion of the foreign shareholder divestment removes a known overhang from Yangtze Optical Fiber’s stock, potentially allowing new investors to establish positions without concern about additional sales from this particular shareholder. However, the company’s elevated valuation and mixed fundamental performance create a complex investment case.
Market participants should monitor several key developments in coming quarters:
– Progress in commercializing advanced fiber technologies including hollow-core solutions
– Margin stabilization in traditional telecom products
– Data center market adoption rates for specialized fiber products
– Competitive dynamics and technology developments across the global fiber optics industry
Strategic Considerations for Investors
The foreign shareholder divestment at Yangtze Optical Fiber represents both an opportunity and a cautionary tale. While the stock has delivered extraordinary returns, current valuations demand exceptional future performance to justify further appreciation. Investors should approach with careful risk management and realistic expectations about both the timing and magnitude of emerging technology contributions.
The company’s leadership in fiber optics technology provides a strong foundation, but execution risks remain substantial. Those considering investment positions should maintain balanced exposure sizes and continuously monitor both fundamental performance and valuation metrics.
For current shareholders, the completion of the foreign shareholder divestment may reduce near-term selling pressure, but attention should now turn to operational execution and technology development milestones. The coming quarters will be critical for demonstrating whether current valuations can be supported by improving fundamental performance.
