[ET Net News Agency, 09 April 2025] Following "Black Monday," the volatility in the Hong
Kong stock market is far from over. Neither side in the US-China trade negotiations has
shown any willingness to ease their stance. The White House has announced that from
Wednesday, a further 54% tariff will be imposed on all imports from China, meaning that
all Chinese goods will face a minimum tariff of 104%. Both countries are facing the risk
of a complete economic decoupling. The Dow Jones Industrial Average in the US saw its
gains of over a thousand points wiped out during the day, while the Hang Seng Index opened
this morning down 632 points, or 3.1%, with no blue-chip stocks rising. Fortunately, the
declines in tariff-sensitive stocks narrowed during the session, and both SMIC (00981) and
Xiaomi (01810) saw gains against the trend, causing the Hang Seng Index's midday loss to
narrow to 312 points, or 1.6%, closing at 19,494. The Hang Seng China Enterprises Index
reported 7,340, down 90 points or 1.2%. The Hang Seng Tech Index stood at 4,524, down 43
points or 1%.
In the first half of the day, the main board saw a turnover of nearly HKD 207.8 billion,
with continued net inflows of HKD 17.549 billion from Southbound trading supporting the
market.

"Nip Chun Pong: The Hang Seng Index has found initial support around 19,000 points; it
needs to rise above 20,600 to be considered safe"

The White House confirmed that from Wednesday, US Eastern Time, it will impose a 104%
tariff on imports from China. In response to this news, the Hang Seng Index opened over
600 points lower, but the decline has since narrowed. Nip Chun Pong, the Chief Strategist
at Blackwell Global Securities, told ET Net News Agency that the market is currently
waiting to see what countermeasures Mainland China will take. However, he personally
believes the likelihood of China raising its import tariffs to 104% in response is low.
Instead, he thinks the focus will be on targeting US exports of raw materials like
soybeans and poultry, as well as sectors like services and entertainment. Nip Chun Pong
noted that in the face of high US tariffs, the central government has several strategies
to respond. In the financial markets, in addition to the stabilising the market, the
People's Bank of China is also prepared to cut reserve requirements at any time.
Additionally, measures to boost consumption were rolled out in March, and the market is
keen to see if similar policies will be introduced this month.
He noted that despite the overnight Hang Seng Index futures (black period) having
plummeted over 1,000 points earlier this morning in response to the U.S. imposing steep
tariffs, the main index opened with relative stability. Should Washington refrain from
introducing additional China-targeted measures in the near term, the HSI is expected to
find support around the 19,000-point level. However, given that the tariff war has only
just commenced, the market outlook remains cautiously uncertain. Analysts emphasize that
only when the Hang Seng Index successfully rebounds to the 20,600-point threshold can this
downward trend be considered temporarily stabilized.
He mentioned that despite the market's concerns about the pressure on capital outflow
from the depreciation of the renminbi, the reality is that from May to September last
year, when the renminbi depreciated, the Hong Kong stock market did indeed perform poorly.
However, with major global financial markets facing sharp declines, capital flows must
also consider investment returns and market stability, meaning that the depreciation of
the renminbi may not necessarily lead to capital outflows.

"Renminbi depreciation benefits exports to other markets"

Nip Chun Pong believes that in light of the substantial US tariffs, it is expected that
Mainland China's exports will inevitably be impacted. Consequently, companies heavily
reliant on exports to the US, such as Shenzhou International (02313) and Techtronic
Industries (00669), will be the most affected. Shipping stocks closely tied to export
activities, like OOIL (00316), are also likely to suffer. Although pharmaceutical and
biotech stocks have shown weakness recently, Nip Chun Pong stated that this is not
primarily due to tariffs but concerns over the potential resurgence of US biosecurity
laws, which could significantly impact companies like WuXi AppTec (02359), as these firms
derive a significant portion of their revenue from the US.
Despite the tariffs having a certain impact on China's exports, Nip Chun Pong believes
that because the US is simultaneously imposing tariffs globally, this is likely to further
increase global prices. Chinese products, being competitively priced, are expected to
maintain a certain market presence. Following yesterday's significant depreciation of the
renminbi, with the USD/CNY exchange rate rising to 7.4, Nip Chun Pong pointed out that
this depreciation will make Chinese products more competitive. Although exports to the US
market may be affected, there will still be advantages in exporting to other markets,
which could help mitigate the impact of the downturn in the US market.

"Telecom stocks are robust, chip stocks should be approached with caution"

During market volatility, Nip Chun Pong is optimistic about the three major telecom
stocks in Mainland China, noting that China Unicom (00762) has performed particularly well
today, with its stock price rising by about 3%. He indicated that the three major telecom
companies primarily focus on the Mainland China market, and their revenues are stable with
attractive dividends, making them less susceptible to the impact of the tariff war.
Meanwhile, domestic chip stocks have seen speculative trading today, with SMIC (00981)
standing out, having risen by over 10% at one point. Nip Chun Pong remarked that amid the
trade war, there are expectations for increased domestic chip production. However, he
cautioned that SMIC's performance last year was mediocre, with the current price
reflecting a relatively high price-to-earnings ratio of 45 times. Additionally, with no
dividends, its defensive qualities are lacking, and its outlook will depend on the first
quarter's performance. While there is speculation in the market, he anticipates that the
stock price will face resistance around HKD 46.