[ET Net News Agency, 28 April 2025] This week, the US enters a critical data week,
including the release of the first quarter GDP, the March PCE price index, and March's
non-farm payroll figures. With the Labour Day holiday approaching, cross-border capital
flows are expected to be restricted, leading to a cautious sentiment in the Hong Kong
stock market. The Hang Seng Index displayed mixed performance, struggling to break through
the 22,000 mark, closing at 21,997, up 16 points or less than 0.1%, with turnover
exceeding HKD 96.6 billion. The Hang Seng China Enterprises Index was at 8,082, up 2
points or less than 0.1%. The Hang Seng Tech Index was at 5,007, up 24 points or 0.5%.

"Nip Chun Pong: If the index closes above 21,800 points before the holiday, it may
continue to rise"

After opening nearly 100 points higher, the Hang Seng Index quickly turned downwards,
showing a narrow decline in early trading. Nip Chun Pong, the Chief Strategist at
Blackwell Global Securities, told ET Net News Agency that recent conflicting statements
from China and the US regarding tariff negotiations have led to cautious market reactions,
leaving Hong Kong stocks in a relatively balanced wait-and-see state, thus lacking a clear
direction. He noted that after the Hang Seng Index dropped by 3,000 points on 7 April, it
fell to nearly 19,200 points by 9 April, before rebounding to about 22,000 points - a gain
of over 10% of 2,000 points in ten trading days, which is a reasonable consolidation.
Regarding the future performance of the Hang Seng Index, Nip Chun Pong believes that as
the Labour Day holiday approaches, the index is likely to show narrow fluctuations. If the
index can close above 21,800 points in the next two trading days, it may potentially fill
the gap from 3 April at around 22,600 points after the holiday. Otherwise, the index could
fall back to around 21,500 points to seek support.

"Coal stocks are expected to continue declining, but current prices are attractive for
dividends"

The three major coal companies in Hong Kong have reported first-quarter results, showing
pressure on earnings. China Shenhua (01088) announced a net profit of approximately RMB
13.374 billion for the first quarter ending 31 March, down 19%, with earnings per share of
67.3 cents. Revenue for the period was RMB 69.585 billion, a decrease of 21.1%, due to
coal sales of 99.3 million tonnes, down 15.3%, and an average price of RMB 506 per tonne,
down 11.5%, leading to a decline in coal sales revenue. Additionally, electricity sales of
47.47 billion kWh fell by 10.7%, with a decrease in average electricity prices also
contributing to reduced revenue.
China Coal (01898) reported a net profit of approximately RMB 3.977 billion for the
first quarter ending 31 March, down 20%, with earnings per share of 30 cents. After
excluding non-recurring gains and losses, the net profit was RMB 3.9 billion, down 19.4%.
Operating revenue for the period was RMB 38.4 billion, down 15.4%.
Yankuang Energy (01171) announced a net profit of approximately RMB 2.71 billion for the
first quarter, down 27.89%, due to declining sales prices of coal and other major
products, with earnings per share of 27 cents. After excluding non-recurring gains and
losses, the net profit was RMB 2.73 billion, down 25%. Operating revenue for the period
was RMB 30.3 billion, down 23%, with coal sales of 31.43 million tonnes, a decrease of
8.1%, and coal business sales revenue of RMB 17.322 billion, down 30.3%. It produced 36.8
million tonnes of marketable coal, an increase of 6.3%.
Nip Chun Pong stated that the poor performance of coal stocks reflects the weak
macroeconomic conditions in Mainland China. He noted that although the tariff war broke
out in early April, the first-quarter results for coal stocks were already under
significant pressure, indicating that economic activity was weak before the tariff war
began. Furthermore, after the two sessions in early March, industrial activity was
expected to increase, but there has been no significant uptick in coal demand. Therefore,
the market remains cautious about the economic outlook. He expects that coal stocks will
continue to decline in the second quarter under the pressure of the tariff war.
The companies attributed their revenue declines to falling coal prices and volumes, with
some analysts suggesting that price pressures may ease in the second quarter. Nip Chun
Pong mentioned that even if coal prices stabilise in the second quarter, they would still
be at low levels, limiting the potential for performance improvement. Unless there is a
significant increase in coal demand, merely stabilising prices will not effectively boost
company revenues.
Despite the poor performance of coal stocks, Nip Chun Pong believes that current prices
are even lower than the lows seen on 7 April. For investors holding multiple stocks, it
may be worth buying China Shenhua in anticipation of increased industrial activity and a
rebound in performance in the second half of the year. Additionally, the attractive
dividends of coal stocks present an opportunity for dividends. Aggressive investors can
buy at current prices, while conservative investors may consider buying at HKD 28 to 29,
with a target of HKD 33 to 35 for the year.
For traditional energy, the rise of renewable energy has deterred investors. Nip Chun
Pong noted that renewable energy is unlikely to have a significant impact on traditional
coal energy in the current year, particularly given the uncertain economic environment and
the high costs of renewable power generation. Companies will still prioritise coal power
generation to reduce costs and enhance efficiency.