[ET Net News Agency, 11 November 2024] After the meeting of the Standing Committee of
the National People's Congress, the Mainland China government proposed a massive debt
reduction plan. The amount reached RMB 10 trillion. However, the actual scale of debt
relief was only RMB 6 trillion, and it also lacked support for the real economy and
residents' consumption needs. The market was obviously disappointed. The Hang Seng Index
opened 470 points or 2.3% lower at the opening of the market. A large number of bullish
stocks died immediately. Domestic demand, domestic real estate and Chinese financial
stocks that are sensitive to national policies all fell. The Hang Seng Index fell by 577
points at most in half a day. It saw 20,151 points, but the short-term 20,000 level still
found support. As a result, it closed at 20,288 for half a day, down 439 points or 2.1%,
and once again crossed the 10-day moving average (about 20,598 points) and the 20-day
moving average (about 20,544 points).
Half-day main board transaction volume exceeded HKD 113.9 billion. The Hang Seng China
Enterprises Index reported at 7,302, down 158 points or 2.1%. The Hang Seng Tech Index
reported at 4,597, down 71 points or 1.5%.

"Jaseper Tsang: after Trump won the election, the market further looked forward to the
implementation of 12 trillion plan, but they were ultimately disappointed"

After the rescue plan was introduced, external U.S. stocks first reflected
disappointment last Friday. The Nasdaq China Golden Dragon Index fell 4.74%. Hong Kong
stocks also opened nearly 500 points lower this morning. Mainland China banking, domestic
insurance, brokerage, domestic real estate and domestic demand sectors all fell.
In response to the disappointing market performance of Hong Kong stocks, Jaseper Tsang,
the investment director of Rafter Capital, told ET Net News Agency that 10 trillion has
never been the number officially mentioned by the central government. It was an optimistic
situation estimated by foreign media based on news releases etc. Previously, the market
expected the amount of debt to be about 6 trillion to 10 trillion. After Trump's victory,
the market even speculated that the amount might be increased to 12 trillion. However, in
the end, only 6 trillion of the debt limit was implemented, which was significantly weaker
than expected.

"The hidden debt of local governments is expected to reach 80 trillion, and the central
government tries to maintain credit ratings by issuing bonds"

6 trillion plus 800 billion per year, a total of 10 trillion will be used to replace the
existing hidden debt. Jaseper Tsang explained that the reason for market disappointment is
not only that the amount of money is less than expected, but more importantly, this policy
only targets local debt problems and does not have direct stimulus to the property market
and domestic demand. Originally, the market expected that more than half of the amount
would be used to support the property market and domestic demand. However, it is currently
limited to debt repayment and can only be driven by improving confidence and atmosphere.
It does not address the stock market's expectations, which also caused today's drop.
However, Jaseper Tsang believes that the central government's full effort to propose a
10 trillion plan for local government hidden debts this time reflects the central
government's belief that the local debt problem has reached a critical point. He mentioned
that the previous incidents such as the explosion of the Zhongzhi series had caused the
market to have hidden concerns about Chinese-style shadow banking fund-raising activities.
At present, although the hidden debts of local governments are not issued in the name of
local governments, they are all issued in the name of government guarantee. International
rating agencies generally expect that China's local government's implicit debt is expected
to reach 70 to 80 trillion. Even if the central government sets a debt limit of 10
trillion this time, it will only be a drop in the bucket.
More importantly, Jaseper Tsang believes that the central government regards resolving
local debt as a top priority, mainly because the above-mentioned local government implicit
debts are guaranteed by the government. If a debt default occurs, it will endanger the
credit rating of the local government and even the rating of the People's Bank of China.
If the People's Bank of China and state-owned enterprises need to issue bonds later, their
credit ratings may be lowered, making it more difficult to issue bonds. The Mainland China
is currently at an important moment for bond issuance and financing, and current policies
have a significant and far-reaching impact on maintaining China's credit rating.

"The Central Economic Work Conference has revived expectations, and Trump's government in
January may lead to new measures"

The Hang Seng Index opened nearly 500 points lower this morning and maintained a drop of
more than 400 points for half a day. Jaseper Tsang believes that although the market is
disappointed, it has not fallen below 20,000 in the morning market, mainly because after
the National People's Congress Standing Committee meeting, the market is now waiting to
see next month's meeting., which is the Central Economic Work Conference. The market hopes
that more targeted policies will be implemented than this time, especially in terms of
domestic demand and the property market. The Hong Kong stock market still has the "Ah Q
spirit" and is expected to remain positive in November.
He believes that the current maximum psychological level of the Hang Seng Index is still
20,000, but the more important technical level is 19,800 to 19,900. This is the level of
0.5 times the gold correction ratio of the Hang Seng Index's earlier rise, and it should
not be lost in the short and medium term. He made it clear that after this policy, it is
difficult to speculate on other themes, especially in infrastructure. The current debt
situation reflects the inability of local governments to make any investment, and there is
no indication that central funds will be the crux of the problem in the future. On the
contrary, in the short term, it is advisable to wait and see the performance of large
technology stocks. Tencent (00700) will be the most promising stock in the short term.
In addition, Jaseper Tsang also mentioned that the current market interpretation is that
Trump is going to officially make a comeback in January next year. The central government
may first see how Trump will act before taking targeted measures. Therefore, the current
market expectations are not a complete loss, short-term market sentiment is not completely
pessimistic.