[ET Net News Agency, 08 January 2025] The National Development and Reform Commission and
the Ministry of Finance jointly announced the notification regarding the equipment upgrade
and consumer goods replacement policy for 2025. This includes implementing subsidies for
purchasing digital products such as mobile phones, expanding subsidies for replacing old
appliances, and improving the standards for car replacement subsidies. However, the market
believes that the new round of replacement subsidies fell short of expectations in
stimulating domestic demand. As a result, only the household appliance sector saw gains
while stocks related to mobile devices and automobiles faced selling pressure.
Additionally, the collective decline of Tencent (00700), SMIC (00981), and local property
blue chips dragged the Hang Seng Index down for the third consecutive day, with a midday
report at 19,137, down by 309 points or 1.6%, with a turnover exceeding HKD 91.7 billion.
The Hang Seng China Enterprises Index stood at 6,941, down by 108 points or 1.5%. The
Hang Seng Tech Index reported 4,258, a decrease of 96 points or 2.2%.

"Cheung Chi Wai: initial support seen at 19,054"

Recently, the US Department of Defense updated the list of Chinese military enterprises,
adding Tencent (00700), CATL (300750), and SenseTime (00020) to the list. The related
shares have experienced consecutive declines, impacting the market sentiment. Tencent, a
heavyweight stock, was affected by news that South African Naspers subsidiary Prosus sold
off approximately HKD 150 million worth of shares on the 6th of this month, causing its
stock price to continue to decline today and leading the Hang Seng Index to fall for two
consecutive days. Cheung Chi Wai, a joint managing director at Prudential Brokerage Ltd,
told ET Net News Agency that Tencent's performance is crucial, as a single stock dragged
the Hang Seng Index down by over 100 points yesterday. Therefore, if Tencent cannot
stabilize, it will be difficult for the Hang Seng Index to remain optimistic. In addition
to Tencent, as Trump's inauguration approaches, the market is concerned about the US
taking a tough stance against China, continuing to press on various fronts such as trade
and chips, affecting investors' intentions.
Furthermore, with Trump's inauguration approaching and the Lunar New Year, the market is
more inclined to wait and see. In the past, the central government often reduced reserve
requirements or interest rates before the Lunar New Year to ease the funding pressure for
businesses before the year-end. This year, with the Lunar New Year coinciding with Trump's
inauguration, the market is waiting to see if the central government will introduce more
measures besides reserve requirement reductions and interest rate cuts, such as the series
of consumer goods replacement subsidy policies proposed by the National Development and
Reform Commission today.
From a technical perspective, the trend of the Hang Seng Index is weak. The index has
been repeatedly falling since reaching above 20,000 points in December, with a cumulative
drop of over 800 points. Even though there have been rebounds after declines, the rebound
amplitude is not expected to be significant, and there is a high probability of further
declines. Since the Hang Seng Index fell below the lower boundary of the rising channel
that began in September, the likelihood of a downward movement is higher. However, it is
anticipated that there will be initial support around 19,054 (the November low).

"Impact of Hong Kongers' outbound travel on the real estate market"

Yesterday (7th), the Director of Lands announced the land sale plan for the fourth
quarter of this fiscal year (January to March 2025), with one residential land parcel
being offered for bidding in addition to the land sale list. Cheung Chi Wai stated that
due to the lack of enthusiasm among developers for land parcels offered in the previous
quarters, resulting in cases of bids not being successful, it is understandable that the
government is slowing down land sales. Although the US started cutting interest rates last
year, the information released alongside the rate cut in December led the market to expect
the pace of rate cuts next year to slow to two times. Therefore, the support for the real
estate market from rate cuts has been discounted.
Cheung Chi Wai pointed out that besides the slower pace of rate cuts next year, the
continuous outbound travel of Hong Kong residents is also unfavourable for the real estate
market. According to Immigration Department data, in 2024, over 104 million Hong Kong
residents travelled abroad, with 81.91 million going north, representing a 53% increase
year-on-year. Additionally, according to data from the Japan National Tourism
Organization, Hong Kong residents visited Japan over 2.4 million times in the first 11
months of last year, spending approximately 35.6 billion Hong Kong dollars. Cheung Chi Wai
believes that the continuous outbound travel and consumption of Hong Kong residents not
only affect local retail businesses but also impact local commercial properties, leading
to challenges in rental rates and demand for office spaces, which are interrelated. In
recent years, the vacancy rates of local commercial properties and office spaces have been
rising continuously. As many property developers hold numerous commercial properties and
office spaces, the risks in commercial real estate will ultimately affect the entire real
estate industry.
Among various property developers, Cheung Chi Wai believes that CK Asset (01113) is
relatively less affected because the group is actively selling properties, resulting in
relatively low inventory backlog. As for Link REIT (00823), although it mainly develops
retail properties for daily needs, with local rental levels currently low, challenges
exist as some large stores may need to be converted into smaller ones to be rented out.
Overall, although the stock prices of many real estate companies have returned to the
levels in September last year, and even the levels before the rate cut in August, Cheung
Chi Wai believes that there are still risks in the current real estate stocks and does not
recommend buying at this time.