[ET Net News Agency, 23 January 2025] Yesterday, the Central Financial Office and other
departments jointly issued the "Implementation Plan for Promoting the Entry of Medium and
Long-term Funds into the Market" after the A-share market closed. Today, they held a press
conference to interpret the relevant policies. Expectations for insurance funds entering
the market caused the Shanghai Composite Index to rise by 1% at midday, with many stocks
in Hong Kong starting with 'China' leading the way. However, the market is cautious about
the future developments of Trump's tariff policies, the plan's uplifting effect on the
Hong Kong stock market is limited. The Hang Seng Index reported 19,826 at midday, up 47
points or 0.2%, with turnover on the main board reaching nearly HKD 74.6 billion.
The Hang Seng China Enterprises Index reported 7,209, up 32 points or 0.5%. The Hang
Seng Tech Index reported 4,585, up 4 points or less than 0.1%.

"Cheung Chi Wai: Lingering cloud of U.S. tariff threats"

Influenced by the recent threat of the U.S. to impose a 10% import tariff on Chinese
goods, the Hang Seng Index fell by over 300 points yesterday. Today, Mainland China market
stimulation policies helped the Hang Seng Index rebound. Cheung Chi Wai, a joint managing
director at Prudential Brokerage Ltd, told ET Net News Agency that theoretically, the news
about the entry of medium and long-term funds into the market should have boosted the Hang
Seng Index by hundreds of points. However, after the high opening this morning, the
index's gains continued to narrow in the morning session, indicating that the lingering
cloud of U.S. tariff threats has not dissipated, and the market is still concerned about
the trade war. Additionally, apart from tariffs, there are risks in various sectors such
as automobiles, chips, trade, and pharmaceuticals that Trump may target to sanction China.
In the past two days, the Hang Seng Index has found support around the 50-day and
100-day moving averages (around 19,680 points). Cheung Chi Wai believes that this support
level is not strong, and in the short term, the Hang Seng Index is likely to test the
20-day moving average (around 19,620 points) and hover around that level. If positive news
emerges, there is a chance to test the upper line of the Bollinger Bands channel (around
20,300 points). However, he also cautioned that since December last year, the Hang Seng
Index has attempted to surpass the 20,000 mark multiple times but has failed to stay above
it, indicating pessimism in the market due to the overarching trend of the U.S. targeting
China, leading to profit-taking whenever it approaches the 20,000 level.

"Stocks starting with 'China' are being used for speculative trading"

The "Implementation Plan for Promoting the Entry of Medium and Long-term Funds into the
Market" sets hard targets for medium and long-term funds entering the market: public
funds' market value holding A-shares must increase by at least 10% annually in the next
three years. For commercial insurance funds, the aim is for large state-owned insurance
companies to invest 30% of additional premiums annually in A-shares from 2025 onwards.
Moreover, it is explicitly stated that comprehensive long-term assessments will be fully
implemented for medium and long-term funds; the second batch of long-term stock investment
pilot projects for insurance funds will be launched in the first half of 2025, with a fund
scale of not less than RMB 100 billion.
Citi predicts that for every 1 percentage point increase in A-share allocation by
insurance and other four institutional categories, the stock market could see an
additional RMB 432 billion in buying funds, benefiting high-weighted and high
dividend-yielding bank stocks, as well as brokerage stocks. Insurance stocks strengthened
during trading, with China Life (02628) rising by 3.6% to close at HKD 14.2, and Ping An
(02318) increasing by 2.7% to close at HKD 43.1. However, Cheung Chi Wai believes that
from the market's performance perspective, this is more of a speculative trading scenario
on the news. These stocks do not have ideal fundamentals, and this morning, the Shanghai
Composite Index only rose by 1%, while the Shenzhen Component Index rose by 0.4%,
indicating that the market perceives the actual effectiveness of this policy to be
limited.
He further pointed out that against the backdrop of U.S. tariffs on China, corporate
earnings this year may significantly shrink. If the U.S. imposes a 25%-30% tariff on
China, a large number of enterprises may face closure. The severe economic situation makes
it challenging for medium and long-term funds to enter the market effectively. Currently,
he has not seen any sector or profit benefitting from this policy. Insurance stocks and
brokerage stocks are simply experiencing a short-term surge due to speculative trading.
The future trend is still worrisome. He emphasized that investors should not be rashly
influenced by speculative trading on this news and enter the market blindly.