[ET Net News Agency, 10 June 2025] China-US trade negotiations will continue on Tuesday.
According to reports, US Treasury Secretary Bessent described the talks as positive, while
Commerce Secretary Lutnick said the meeting was fruitful. Meanwhile, Beijing signalled
through state media that the Mainland China side is sincere but also principled. Buoyed by
hopes of progress, the Hang Seng Index rose by 79 points or 0.3% at midday to 24,261,
marking a new high since 20 Mar. Turnover on the main board exceeded HKD 127 billion. The
Hang Seng China Enterprises Index was at 8,809, up 29 points or 0.3%. The Hang Seng Tech
Index was at 5,415, down 17 points or 0.3%.

"Mak Ka Ka: Short-term challenge at 24,874; Hong Kong stocks remain undervalued and may
find support"

China-US talks are ongoing, but after the meeting, US officials struck an optimistic
tone, with foreign media reporting that the US side may ease technology export controls in
exchange for Mainland China relaxing restrictions on rare earth exports. Hong Kong stocks
extended their gains from the previous day, with the Hang Seng Index climbing by several
dozen points at midday. Smaller-weighted sectors, including pharmaceuticals, Mainland
China property, and domestic demand stocks, were active. Mak Ka Ka, Head of Financial
Products Trading and Research Department of SinoPac Securities (Asia), told ET Net News
Agency that the market is mainly watching the China-US negotiations, and in the absence of
much news, sentiment remains positive. After breaking above the downtrend since February
last week, the market has continued to rise. Having breached the 24,000 level, the next
short-term resistance is at the previous high of 24,874, with immediate support at 23,900
and the 20-day moving average providing a stronger support level.
Regarding recent hopes for progress on chips and rare earths, Mak noted that it took a
year to reach the first consensus in China-US negotiations seven years ago, so the timing
of the implementation of the above trade conditions remains to be discussed. Even if there
is a market pullback, she pointed out that the current Hang Seng's price-earnings ratio is
about 10.68 times, which is still at a discount compared to the five-year average of about
10.85 times and March's 11.05 times this year. This may help support Hong Kong stocks
should the market correct, and there remains room for recovery.

"VIP room recovery is key for the longer term; otherwise, gaming stocks may struggle for
sustained investment"

The three-year grace period for Macao's satellite casinos is about to end. As of
yesterday, major casino operators announced their follow-up arrangements. SJM Holdings
(00880), which operates nine satellite casinos, announced the closure of seven of them but
expressed interest in acquiring the L'Arc and Ponte 16 Casino. SJM shares rose by over 6%
at midday, while Success Universe (00487), which operates Ponte 16, surged 160%. Mak said
SJM's move to directly operate two casinos will be a short-term positive for its share
price and could boost earnings growth, but overall, the news is only a brief catalyst and
the gaming sector as a whole has yet to see a real turnaround. Sustained capital inflows
in the mid-to-long term will depend on a recovery in VIP room revenues; otherwise, a
revival will be difficult.
She also noted that the closure of satellite casinos will have a greater impact on
certain smaller-cap stocks and may affect sentiment in other gaming stocks in the short
term, so bottom-fishing is not advised for now. In the mid-to-long term, investors could
focus on companies with more non-gaming business, such as MGM China (02282), which has
more entertainment facilities and is expected to be more resilient during industry
adjustments. The medium- to long-term outlook remains neutral.