[ET Net News Agency, 27 May 2025] The outlook for electric vehicles in Mainland China is
pessimistic, causing a market shift. Coupled with disappointing performance forecasts from
major stock Meituan (03690), the Hang Seng Index fell over 100 points this morning.
However, as Meituan's decline stabilised, the index reported 23,241, down 41 points or
0.2%, with a turnover of nearly HKD 111.4 billion. The Hang Seng China Enterprises Index
stood at 8,412, down 25 points or 0.3%. The Hang Seng Tech Index reported 5,127, down 29
points or 0.6%.

"Wong Wai Ho: No actions are expected in the short term from Mainland China; the Hang Seng
Index is likely to find support while moving downwards in the short term"

US markets were closed last night, but US President Trump indicated a delay in the
implementation of a 50% tariff on the EU by about a month. Futures for US indices that
opened during the holiday reflected positive sentiment, rising over 400 points. However,
Hong Kong stocks did not respond as expected, largely influenced by Meituan's weaker
second-quarter outlook. The Hang Seng Index fluctuated, rising before dropping back by 100
points. Wong Wai Ho, the First Vice President of the Yan Yun Family Office (HK) Limited,
told ET Net News Agency that the recent rise in Hong Kong stocks has been hindered by
accumulated gains, with mixed news leading to uncertainty in tariff announcements. This
has made it difficult for the market to move upward.
As for the Mainland China, Wong noted that after recent interest rate cuts and reserve
requirement reductions, no significant actions are expected in the short term. For some
time, there will be a more cautious approach to gauge the effectiveness of these measures,
and the central government will monitor any new developments from the US. Therefore, he
anticipates that the Hang Seng Index will struggle to break through 24,000 points in the
short term, with initial support at the 50-day moving average of 22,800. If that level
fails, the next support to watch will be 22,300.

"Meituan's 'all-out' efforts are unlikely to boost share price; fierce competition is
unavoidable"

Meituan reported a strong first-quarter performance, with adjusted net profit up 46%
year-on-year to RMB 10.949 billion, exceeding the expected RMB 9.73 billion. However,
Chairman Wang Xing shocked investors during the earnings call by forecasting a significant
slowdown in core local business revenue growth for the next quarter, stating that it is
hard to predict how long irrational competition will last, but they will "spare no effort
to win this competition". Meituan's share price opened 5% lower this morning, but buying
interest emerged near the crucial HKD 122 level, narrowing the decline to less than 1% by
midday. Wong admitted that while Meituan showed some recovery potential, the forecast of a
sharp revenue slowdown suggests significant pressure ahead. The aggressive stance raises
concerns that the company might sacrifice profit margins to maintain market leadership,
with expectations of profit pressure over the next two to three quarters.
Even with regulatory inquiries, the fierce competition between Meituan and JD.com is
likely to continue. Wong indicated that market sentiment towards their rivalry is
generally negative. Recent price trends suggest that the market expects competition to
adversely affect the profitability of both companies. He believes whether this competition
escalates depends on how JD.com, as a new competitor, approaches the price war. If JD.com
can exercise restraint, it may benefit both companies. However, there are many variables
in this battle; while JD.com is aggressive, Meituan has a strong foothold in the takeaway
business, making it difficult for JD.com to quickly gain substantial market share.
Nonetheless, JD.com, backed by its e-commerce foundation, has the capability to challenge
Meituan if it decides to go all out.

"In the worst-case scenario, Meituan and JD.com could test the HKD 100 mark"

Recently, Mainland China authorities preemptively interviewed Meituan, JD.com, and
Ele.me, urging fair and orderly competition, signalling a move against internal
competition. Wong believes it's wise to observe how both companies respond under this
premise. If competition escalates and further impacts Meituan's profits, there's a
possibility it may not hold the crucial support at HKD 122. In the worst case, it could
test the HKD 100 mark, at which point the price-to-earnings ratio would drop to about ten
times, reflecting the adverse impacts of competition.
As for JD.com, Wong thinks the company has a determined attitude to compete. Although
its share price held around HKD 120 this morning, if it aggressively pursues market share
at the expense of profits, the stock could test lower levels. Historically, when JD.com
targeted lower-tier markets, it similarly lowered profits to gain market share,
experiencing significant pressure for a time. If JD.com adopts the same strategy this
time, its share price may also be affected, with a potential mid-term drop below HKD 100
and a test of HKD 90 support.