Demand and supply remain balanced for now

The outlook for IDC operators in 2021 is slightly more cloudy than in 2020. Our checkswith industry participants suggest that the strong customer demand in 2020 hascontinued into 2021. However industry capacity increase will also be elevated in 2021,with our ground-up analyses suggesting cabinet capacity could grow another 40%,same as in 2020. Overall, we believe supply/demand remains balanced in tier 1 cities andleading operators are well placed with over 75% of capacity increase this year alreadylocked-in with customer orders. Carbon neutrality is likely to become an emergingtheme for IDC operators this year and, while this is unlikely to have any immediateoperational impact in the near term, we believe IDCs with a clear ESG policy could tradeat premium valuation versus peers. Our preferred picks are GDS and Chindata.