[ET Net News Agency, 23 April 2025] The Hang Seng Index rose significantly as the US
adopted a softer approach in tariff negotiations, increasing the likelihood of US-China
discussions. The index closed at 22,081 at half-day, up 519 points or 2.4%, surpassing the
22,000 mark and reclaiming the 20-day moving average (approximately 22,045), with trading
volume exceeding HKD 147.4 billion. The Hang Seng China Enterprises Index stood at 8,121,
up 171 points or 2.2%. The Hang Seng Tech Index reached 5,051, gaining 152 points or 3.1%.

"Tariff issues remain unclear; pullback possible"

US Treasury Secretary Bessent stated on Tuesday (22nd) during a closed-door meeting in
Washington that the confrontation with China is unsustainable. President Trump, responding
to reporters in the Oval Office, mentioned that relations between the US, China, and other
countries are good, expressing confidence that the tariffs on imported goods from China
will eventually be lower than the current 145%. The Hang Seng Index opened over 500 points
higher, regaining the 22,000 threshold, peaking at 22,107 early on.
Cheung Chi Wai, a joint managing director at Prudential Brokerage Ltd, told ET Net News
Agency that while signs of easing relations between the US and China exist, actual tariff
negotiations have yet to commence. The extent of tariffs the US will impose on Chinese
imports remains uncertain. Even if tariffs were reduced to 100% or even 50%, there would
still be a significant impact on Chinese exports. Additionally, with the Hang Seng Index
having risen for three consecutive days, amounting to a total increase of 2,800 points
from the low of 19,260 earlier this month, some investors may choose to take profits amid
unclear prospects, leading to a dip in the index.
Cheung Chi Wai noted that if both sides continue to release positive news, there may be
a chance for the index to fill the gap from 3 April (approximately 22,638). However, due
to the lack of ongoing tariff negotiations, uncertainty remains in the market, leading him
to maintain a cautious outlook. He believes that prolonged delays in negotiations would
not benefit either side. If conditions worsen, a pullback in the Hang Seng Index cannot be
ruled out, though he expects the likelihood of a drop to the early month's low to be low,
with support around the 20,000 mark.

"Cancellation of 'refund only' policy benefits merchants, Alibaba can challenge Pinduoduo"

Mainland China media reports indicate that several e-commerce platforms in Mainland
China will fully cancel the "refund only" service, allowing merchants to handle refund
requests without requiring returns. This "refund only" policy, first introduced by
Pinduoduo in 2021, was seen as a significant competitive advantage for the platform,
especially in lower-tier markets. Following Pinduoduo's rise in market value above
Alibaba, Taobao introduced a similar feature in 2024, which has since spread to platforms
like JD.com, Douyin, and Kuaishou. The "refund only" service attracted many users,
allowing them to shop without returning items, but led to losses for merchants and
e-commerce platforms alike. During this year's Two Sessions, relevant authorities
signalled strong intentions to address the misuse of the "refund only" rules.
Previously, while e-commerce platforms implemented the "refund only" service, not only
did merchants lose revenue, but the goods could not be recovered, leading to a loss of
quality merchants and commission for the platforms - a clear lose-lose situation. With the
current challenges facing exported goods, the national intervention to abolish the "refund
only" service is beneficial for both e-commerce and merchants. As such, this policy change
is expected to favour platforms like Alibaba (09988) that target a broader audience,
providing positive support for its stock price.
According to past practices, Alibaba is set to announce its final results in May. Cheung
Chi Wai noted that Alibaba's mid-term and third-quarter performances have been strong, and
he anticipates that the annual results will also be solid. However, he remarked that with
market focus shifting to the tariff war, even excellent annual results may not
significantly impact the stock price. Firstly, Alibaba's stock has already risen
considerably this year due to the DeepSeek concept. Therefore, even with the introduction
of an improved version of Tongyi Qianwen and talks of collaboration with Apple, the
potential for stock price catalysis remains limited. While tariffs may not have a direct
large impact on Alibaba, they could significantly affect the economy, with major
institutions previously downgrading China's economic growth target for this year from 5%
to around 4%. In an environment of economic downturn, consumer spending in Mainland China
is likely to decline, potentially reducing demand for Alibaba's products and services.

"BYD's stock split boosts retail investor sentiment, yet fundamentals remain challenging"

BYD (01211) announced that its board has proposed a new profit distribution and capital
reserve conversion scheme. In addition to the existing dividend of RMB 3.974 per share,
shareholders will receive 8 bonus shares for every 10 shares held, and 12 capitalisation
shares based on every 10 shares held, meaning that shareholders will effectively receive
20 shares for every 10 held- a form of "one to three" split.
Cheung Chi Wai believes this "one to three" split lowers the investment threshold from
around HKD 190,000 to over HKD 60,000. For small retail or fund investors, having more
shares can provide a sense of satisfaction. However, he cautioned that the looming tariff
issues may pressure BYD's vehicle exports. Before tariffs, BYD could circumvent entering
the US market by assembling cars in a third country like Mexico, but this approach may no
longer be viable. Furthermore, with potential economic slowdown in Mainland China due to
tariffs, future vehicle sales are also expected to be pressured.