[ET Net News Agency, 28 May 2025] US stocks saw significant gains after the holiday on
Tuesday, with all three major indices closing near their daily highs. However, the Hong
Kong market has already digested news of the easing tariff war. While two major new
economy stocks rose after earnings, automotive stocks continued to decline. Previously
popular sectors like pharmaceuticals and semiconductors also saw a pullback, and the
decline of e-commerce giants dragged the Hang Seng Index down by 127 points or 0.5% to
23,254, with turnover exceeding HKD 999 billion. The Hang Seng China Enterprises Index
reported 8,438, down 31 points or 0.4%. The Hang Seng Tech Index stood at 5,162, down 19
points or 0.4%.

"Market direction lacks clarity; Hang Seng Index is expected to trade narrowly"

The Hang Seng Index fluctuated in a narrow range during the early session, briefly
rising nearly 100 points but lacking support at higher levels, leading to a reversal. The
index had a trading range of about 200 points. Nip Chun Pong, the Chief Strategist at
Blackwell Global Securities, told ET Net News Agency that on 7 April, the Hang Seng Index
dropped over 3,000 points due to the trade war. With the easing of the China-US trade
tensions, the index has recovered some ground. However, the market currently lacks
positive news and remains directionless. The National Development and Reform Commission
previously indicated that economic stabilization policies would be implemented by the end
of June, but these announcements are not expected until mid to late June, leaving the
market in a wait-and-see mode.
The recent return of the Hong Kong dollar to a weaker position is also a factor limiting
the Hang Seng Index's rise. The Hong Kong dollar showed signs of strengthening on 4 and 5
May when the USD/HKD was around 7.75. However, in less than a month, the situation has
reversed, with the USD/HKD now rising to about 7.84. Nip Chun Pong predicts that the Hang
Seng Index will continue to trade between 23,000 and 23,800.

"Optimism about Xiaomi's outlook overcomes previous negative reports"

Xiaomi (01810) reported a first-quarter net profit of RMB 10.92 billion, a year-on-year
increase of 161%. Adjusted net profit was 10.68 billion, up 64.5%, exceeding expectations.
Revenue for the period grew 47.4% year-on-year to 111.3 billion, also surpassing
forecasts, with a gross margin of 22.8%, up 0.5 percentage points year-on-year.
Xiaomi's first-quarter revenues from its smartphone business, IoT and lifestyle
products, smart electric vehicles, and AI innovation segments all rose. The gross margin
for the smart electric vehicle and AI sectors was 23.2%, a quarterly increase of 2.8
percentage points. Additionally, the operational loss for the smart electric vehicle and
AI segments was 500 million, narrowing from a 700 million loss in the previous quarter.
Nip Chun Pong noted that Xiaomi's first-quarter performance satisfied the market. Thus,
even as the broader market declines, Xiaomi's stock price has risen against the trend.
Recent product launches, including the Xuanjie O1 chip, new smartphones, and the new car
YU7, have generated positive market sentiment toward Xiaomi's outlook. Despite earlier
concerns about the safety of the Xiaomi SU7 electric vehicle following a fatal traffic
accident, along with negative reports regarding its electric vehicle technology, Xiaomi's
stock price came under pressure. However, Nip Chun Pong believes that the stock price has
largely already reflected these negative sentiments. In March, Xiaomi's stock price nearly
reached HKD 60, but subsequently saw a decline, with the current price showing some
correction from its highs. Currently, market optimism about Xiaomi's future developments
has overshadowed earlier negative reports about the SU7. The recently launched 3nm chip is
among the best in the industry, and although there are no sales figures available yet, it
is expected to become a new growth driver for the company.
However, Nip Chun Pong cautioned that despite Xiaomi's technological breakthroughs in
chip production, it still faces challenges from overseas suppliers. If Xiaomi continues to
be targeted by the US, its ability to enter overseas markets may be affected. The stock
price is expected to fluctuate between HKD 50 and 55, and investors interested in Xiaomi
may consider buying below HKD 52.