[ET Net News Agency, 25 March 2025] The Hong Kong stock market struggles to breach
24,000, with capital players considering profit-taking. Following BYD (01211), Xiaomi
(01810) has initiated a large-scale placement, while Wang Xing has cashed out from Li Auto
(02015), earning HKD 700 million. This has led to an arbitrage wave in the Hong Kong
market. Even with over HKD 10 billion of net buying from southbound funds, the downward
trend continues. The Hang Seng Index closed at HKD 23,387, down 517 points or 2.2%, with
the main board turnover nearing HKD 184.5 billion. The Hang Seng China Enterprises Index
is at HKD 8,634, down 216 points or 2.4%. The Hang Seng Tech Index reports HKD 5,534, down
202 points or 3.5%.

"Lee Wai Kit: Funds may shift towards consumer stocks and Chinese characteristics stocks"

After a slight rebound, Hong Kong stocks failed to maintain upward momentum. Today, the
market was pressured by poor performances from several blue-chip companies and Xiaomi's
placement, which saw it fall below the 20-day moving average (HKD 23,802) as the loss
widened to over 500 points, dropping below the crucial HKD 23,500 threshold and hovering
near the 10-day moving average (HKD 23,988). Lee Wai Kit, a director of the Brokerage
Department of TF International Securities, told ET Net News Agency that the Hang Seng
Index is at a high level and requires a short-term adjustment, which is a normal
performance. It cannot yet be determined if the upward trend has ended. On one hand,
previous policy benefits have been largely absorbed; on the other hand, with earnings
season upon us, investors are either waiting to see the results of significant stocks or
choosing to take profits, placing further adjustment pressure on the index. In the short
term, the Hang Seng Index is likely to consolidate, with support levels around HKD 22,800
to HKD 23,000.
Xiaomi's placement may trigger a profit-taking wave during earnings season. Lee Wai Kit
noted that the placement has negatively impacted market sentiment, leading to a strong
sense of pessimism. However, he believes that if trading volume remains high and there are
favourable news releases from the Mainland China, like the recent increase in personal
consumption loans, it could still support the market. Nonetheless, funds may shift from
tech stocks to consumer shares and Chinese characteristics stocks. He further stated that
it is currently difficult to predict if there will be a wave of placements, suggesting
investors monitor whether the capital expenditure costs of related companies increase, as
this could incentivise further placements.

"Funding needs for Xiaomi's entry into AI are reasonable"

Xiaomi plans to conduct its placement in a "new shares after old" manner. The company's
controlling shareholder, Lei Jun, will sell 800 million shares held by Smart Mobile to no
fewer than six subscribers, representing approximately 3.1% of the enlarged issued share
capital and about 1.2% of voting rights, at a placement price of HKD 53.25 per share, a
discount of about 6.6% from the previous closing price of HKD 57. Smart Mobile will also
purchase 800 million new shares at the same price. The net proceeds are expected to reach
HKD 42.5 billion, which will be used to accelerate business expansion, increase research
and development investment to enhance technological capabilities, and support other
general corporate purposes.
Lee Wai Kit stated that after the placement news is released, the market is bound to
experience fluctuations, but fundraising through placements is inherently part of a
company's listing goals. As long as the funds from this placement are used for
market-recognised development directions, pessimism may be alleviated. Considering
Xiaomi's fundamentals, which include a broad business scope and its entry into AI, the
funding needs are reasonable.
Previously, BYD's (01211) placement also caused its stock price to fall, but after
consolidation, it reached a historical high. Lee Wai Kit believes BYD's new highs were
driven by news of rapid charging. Regarding Xiaomi's trend, it will depend on whether
there are positive catalysts after the placement; otherwise, it may consolidate for the
next one to two weeks. For investors who do not hold shares, he recommends buying at the
previous low of HKD 49, provided the stock can find support around the placement price of
HKD 53.2.
Additionally, data from the Stock Exchange show that Wang Xing, who is a non-executive
director of Li Auto, sold shares over four consecutive trading days from last Tuesday to
Friday (18th to 21st), offloading 1.5 million, 1.5 million, 2 million and 1.5 million
shares at average prices of HKD 110.9737, HKD 109.1931, HKD 107.1994, and HKD 102.1508,
realising HKD 698 million and reducing his stake from 21.3% to 20.94%. Lee Wai Kit
believes Wang Xing's actions may reflect his personal investment stance. Li Auto's
fundamentals are solid, with a leading position in new car sales, although last year's
models like the MEGA impacted its strategic direction. However, with new models like the
L8 launched this year, market expectations remain high. He suggests that investors without
shares consider buying around the HKD 97 mark, near the 100-day moving average.