[ET Net News Agency, 13 February 2025] US inflation may heat up again, with expectations
for a rate cut this year solidifying at only 25 basis points. However, the agreement
between the US and Russia to negotiate a ceasefire in Ukraine has boosted market
sentiment. Tech stocks continue to lead gains in the Hong Kong market, with strong
performances in domestic demand and gaming stocks, driving the Hang Seng Index to break
through 22,000 shortly after the market opened. It closed at 22,191, up 333 points or
1.5%, hitting an intraday high of 22,206, continuing to create a four-month high, with
trading volume nearing HKD 156.4 billion. The Hang Seng China Enterprises Index rose to
8,165, up 107 points or 1.3%. The Hang Seng Tech Index reported 5,360, up 79 points or
1.5%.

"Cheung Chi Wai: Expect big gains with small pullbacks in Q1"

Trump spoke with Putin for an hour, and both agreed to initiate negotiations to end the
Ukraine war. Trump subsequently called Zelenskyy to discuss next steps. Trump stated that
a ceasefire in the Ukraine conflict would be achieved in the "near future," reducing
geopolitical risks, which lifted the Hong Kong market, breaking through 22,000 in early
trading. Cheung Chi Wai, a joint managing director at Prudential Brokerage Ltd, told ET
Net News Agency that the atmosphere in the Hong Kong market has warmed recently, not only
due to hopes for a ceasefire but also because Morgan Stanley released a report stating
that AI is driving the upward trend in Chinese stocks, and they believe this rally will
not end soon. Cheung agrees, noting that the chip concept has been speculative in US
stocks for over a year, while the Hong Kong market has only been rallying for a month
since starting from 18,600 points on 13 January. He believes this upward trend may
continue through Q1, showing a pattern of significant gains with minor pullbacks,
potentially challenging the October high of 23,241 points. However, due to the
uncertainties in Trump's policies, it is currently difficult to estimate when the market
might challenge 23,000.

"200 billion special bonds for saving Vanke remains uncertain"

According to Mainland China media, after the Spring Festival holiday, several cities in
Guangdong have been rapidly issuing announcements regarding special bonds for the
acquisition of idle land. From the perspective of participating entities, state-owned
enterprises and urban investment companies are primarily entering the acquisition list.
Yesterday, the property sector surged on hopes that the government would resolve liquidity
issues, but today it has retracted.
Cheung Chi Wai believes that due to the large size and quantity of private enterprises,
the likelihood of benefiting from special bonds is low. Rescuing some private enterprises
might be seen as biased, but it is impossible to save them all. He further pointed out
that while the government's use of special bonds to rescue the property sector is somewhat
helpful, it is not substantial. Although there was a rebound in the property sector when
the central government intervened last year, it could not sustain momentum thereafter.
Furthermore, evaluating property firms requires considering not just debt resolution but
also business growth; resolving debt issues only means the enterprise will not go
bankrupt, not necessarily that performance will significantly improve. He noted that the
fundamental problem troubling the property sector is not debt but oversupply of housing.
Only with economic improvement and the ability to sell houses can the property issues be
resolved. Heavy debt is not a problem as long as houses can be sold, allowing for gradual
repayment.
Recent reports suggest that Chinese government departments are providing assistance to
Vanke (02202)(SHE: 000002) to address a RMB 50 billion funding gap this year, including
considerations for allowing local governments to use about RMB 20 billion of special bond
quotas to purchase Vanke's unsold properties and vacant land. Cheung Chi Wai believes that
whether the 20 billion special funds from local governments can solve Vanke's 50 billion
funding gap remains uncertain. As of the end of September 2024, Vanke's debt ratio is
72.42%. Addressing previous debt issues will likely lead to new debt problems, so it
cannot be assumed that government intervention will completely resolve Vanke's challenges.