[ET Net News Agency, 04 March 2025] The White House has announced that Trump has signed
an order to raise tariffs on Chinese imports from the previous rate of 10% to 20%,
effective Tuesday. Additionally, the U.S. will impose tariffs on Canada and Mexico. The
global trade war has escalated, causing instability in external markets, and Hong Kong
stocks opened lower. BYD (01211) is launching a major share placement, which has dragged
down the entire automotive sector. The Hang Seng Index opened below 23,000, dropping as
much as 459 points to 22,547. However, domestic demand stocks helped the index recover,
and it reported a half-day figure of 22,901, down 105 points or 0.5%, with a turnover
exceeding HKD 156.9 billion. The Hang Seng China Enterprises Index was at 8,357, down 62
points or 0.7%. The Hang Seng Tech Index stood at 5,521, down 14 points or 0.3%.

"Lee Wai Kit: Tariffs will impact the revaluation of Hong Kong stocks, making a drop to
22,000 likely"

The U.S. has imposed an additional 10% tariff on China, along with a 25% tariff on
Mexico and Canada, which will take effect soon, leading to a sharp decline in U.S. stocks
the previous night. Hong Kong stocks continued their downward trend, and the news of BYD's
large-scale share placement caused the Hang Seng Index to open more than 300 points down.
However, after approaching the twenty-day moving average (around 22,452), some funds
entered the market to seek a rebound, narrowing the half-day decline to 100 points. Lee
Wai Kit, a director of the Brokerage Department of TF International Securities, told the
ET Net News Agency that aside from the impact of BYD's share placement, the recent
resurgence of the trade war has made the market wary of technology stocks. Although there
may not be a direct impact, the atmosphere is unfavourable, affecting the overall
valuation of shares.
Following Nvidia's performance, AI-related tech stocks in the U.S. are starting to
adjust, but Lee believes that the declines in Hong Kong stocks may not necessarily be
linked to external factors. The U.S. market has been speculating on AI for longer than
Hong Kong, making its pullback more reasonable. The Hong Kong market did not follow suit
at that time and is currently experiencing declines primarily due to specific negative
factors.
This morning, the Hang Seng Index showed some rebound strength near the twenty-day
moving average, but Lee believes the likelihood of falling below this level is
considerable. Given the fluctuating news on tariffs, from a previous 10% increase to now
20%, market uncertainty has surged, requiring time for the market to digest and revalue.
Therefore, a drop below the twenty-day moving average seems likely, with support looking
towards 22,000 and awaiting news from the Two Sessions for potential support.

"Car stocks "fall first" to avoid large discounts on placement risks"

BYD has announced its first share placement in over three years, planning to issue
nearly 130 million new H shares, which will account for approximately 4.27% of the
expanded total shares. The placement price is set at HKD 335.2, representing a 7.8%
discount to the previous closing price, raising around HKD 43.383 billion. The discount is
not large, but the amount raised is substantial, marking the largest share placement in
the Hong Kong market in four years. BYD opened nearly 8% down but rebounded after hitting
a low of HKD 334 during the session, successfully maintaining the placement price by
midday. Lee Wai Kit believes that BYD's focus on developing smart driving will indeed
require capital, and with its recent stock price rising to HKD 400, a high-priced
placement seems reasonable.
Many smart driving concept stocks have also announced placements recently, but these
companies are generally smaller, and high capital demands are understandable. However, for
a company of BYD's size, a placement is not strictly necessary. Nevertheless, after
significant price increases, the discounted placement may provide a downward impetus for
the stock price. As BYD has fallen more than 15% from its peak, Lee suggests that those
without shares may consider entering around the placement price of HKD 335 or making an
initial investment. If the price drops to HKD 300, they could add more.

"New entrant NIO face the greatest funding pressure"

The leading BYD's need for a share placement has raised concerns that other car stocks
may also face funding pressures, dragging down the entire automotive sector this morning.
Geely (00175), which launched a new smart driving system, saw its "good news turn bad,"
dropping nearly 7% and becoming the bottom blue-chip stock. Lee notes that the overall
decline in car stocks reflects market concerns; to avoid further placements at high
levels, investors are preemptively selling today. However, whether companies will actually
proceed with placements depends on their actual needs and financial conditions. Based on
this, NIO (09866) may face the most significant funding pressure among Hong Kong stocks,
given its recent poor delivery performance and mediocre results. While a placement may be
possible, it's difficult to estimate without official news. However, he added that after
today's collective decline in car stocks, as BYD has already placed shares first, other
companies may need to wait a bit longer before considering placements.