[ET Net News Agency, 05 February 2025] The Chinese response yesterday to the various
trade countermeasures proposed by the US was perceived as restrained. President Trump
showed displeasure with retaliatory actions against China and changed his stance, stating
that he is not in a rush to talk to Xi Jinping. After an 8-day break, A-shares resumed
trading today with narrow fluctuations. Trading resumed through the Hong Kong Stock
Connect, with the Hang Seng Index opening narrowly higher, then reversing to a decline. In
the morning session, it fell by as much as 372 points to 20,417 points but later steadily
recovered. At midday, it closed down by 142 points or 0.7% at 20,647, with a turnover on
the main board exceeding HKD 114.2 billion. The Hang Seng China Enterprises Index reported
7,576, down 67 points or 0.9%. The Hang Seng Tech Index reported 4,946, down 30 points or
0.6%.

"Nip Chun Pong: Tariff negotiations will continue to influence the market"

The market is hopeful for negotiations between China and the US on tariff issues, with
the Hang Seng Index closing high by 572 points yesterday (4th). However, recent reports
indicate that Trump stated he is not in a hurry to talk to Xi Jinping and has no issue
with retaliatory tariffs on Chinese goods. A-shares had a mediocre performance on
resumption, while Hong Kong stocks reversed losses, with a significant decline of 300
points this morning. Nip Chun Pong, the Chief Strategist at Blackwell Global Securities,
told ET Net News Agency that external trade has a significant impact on the Chinese
economy. Trump's statements about delaying negotiations and the depreciation of the yuan
have affected the performance of Hong Kong stocks today. Additionally, A-shares opening
low, combined with the significant gains in Hong Kong stocks yesterday, make today's
pullback reasonable.
Nip Chun Pong mentioned that since US-China tariff negotiations take time, the
short-term trend of Hong Kong stocks may continue to be influenced by the progress of
negotiations. If the Hang Seng Index can close above the 20,500 level today, the outlook
remains optimistic, with a chance for an upturn tomorrow. If today's closing is below
20,300, the future trend may show a downward pattern within the range of 20,300 to 20,700.
However, US-China tariff negotiations are crucial, and if the situation deteriorates, such
as an increase in tariffs, the Hang Seng Index could continue its downward trend.
Trump's change of stance to delay talks with Xi Jinping suggests that US-China tariff
negotiations may not progress as smoothly as previously expected. Stocks sensitive to
tariffs experienced a pullback this morning, with Shenzhou International (02313) dropping
nearly 7% at one point. Nip Chun Pong believes that export stocks are sensitive to tariffs
negotiations. If the negotiations between China and the US encounter obstacles, these
stocks will also be under pressure. Due to the uncertainties in the tariff negotiations,
these stocks are expected to hover at low levels in the short term. Investors should be
cautious as these stocks carry risks until the situation in the tariff negotiations
becomes clearer.

"Chips demand will increase in Mainland China, can be considered after pullbacks"

In addition to export-related stocks being under pressure, chip stocks and AI-related
stocks also experienced pullbacks this morning. With the resumption of trading through the
Stock Connect, SMIC (00981), which has been a hot topic among southbound investors,
dropped by nearly half at one point, while Kingsoft Cloud (03896) dropped by up to 12%.
Nip Chun Pong pointed out that chip and AI-related stocks have been continuously
speculated on recently, with significant accumulated gains, so profit-taking is normal.
The rise of DeepSeek recently further drove funds into the chip and AI-related sectors.
Although DeepSeek technology is not exclusive, Alibaba (09988) and Meta's Llama are also
open-source. Despite DeepSeek's cost advantage, this advantage is expected to be
temporary, as the market will see other competitors emerge. Anticipated increased demand
for chips and AI-related sectors suggests that SMIC's revenue is likely to continue to
rise in 2025. Therefore, although there were pullbacks in stock prices this morning, there
is no cause for concern.
Nip Chun Pong continued to mention that SMIC reached a new high in stock price
yesterday, surpassing its previous peak of HKD 44.8 in 2020. From a technical perspective,
although the stock price pulled back this morning, the recent temporary trend still shows
a small positive candlestick pattern. Since it did not fall below the large positive
candlestick from yesterday, it indicates that the stock is still in an upward trend. He
expects SMIC to potentially reach HKD 49 to 50 in the future. Apart from SMIC, its peers,
such as Hua Hong Semi (01347) and Shanghai Fudan (01385), can also be considered during
pullbacks.