[ET Net News Agency, 06 January 2025] Foreign media reported that the People's Bank of China hinted at a rate cut "at the appropriate time" this year, but without clearly increasing expectations for easing, which was insufficient to reverse the New Year's downward trend in the market. The Hang Seng Index opened high by 88 points at 19,848, reaching its highest point in the first half of the day. However, it could not sustain this momentum and began to decline during trading. By midday, it closed at 19,706, down by 53 points or 0.3%, with a turnover exceeding HKD 70.7 billion.
The Hang Seng China Enterprises Index stood at 7,149, down by 10 points or 0.1%. The Hang Seng Tech Index reported 4,402, a decrease of less than 1 point.
"Kingston Lin: Market is likely to wait for Trump's inauguration for changes"
Last week, official New Year greetings from the Mainland China mentioned that China's economy would face significant challenges, triggering market concerns about the future and affecting the performance of the Hong Kong stock market in the New Year. Subsequently, the mainland announced various favourable policies, including expanding the program for exchanging old electronics for new ones and even hinting at a rate cut. While the market conditions slightly stabilized, the rebound lacked strength. Kingston Lin, a director of the Hong Kong Institute of Financial Analysts and Professional Commentators Limited, told ET Net News Agency that the market currently lacks direction. With Trump's official inauguration approaching, the market is inclined to wait and see how the central government responds to Trump's policies before making further decisions. Previously, the market tended to avoid increasing deployments to avoid risks. Therefore, he predicted that there was a low chance of the Hang Seng Index breaking above 20,000 in the short term.
In response to the need for the central government to formulate contingency policies, Kingston Lin believed that the central government was unlikely to announce positive policies before the Lunar New Year. There is a greater chance of announcing favourable policies after the Lunar New Year and before the Two Sessions. During this waiting period, the stock market tends to be soft, with initial support around 19,400, and if breached, it could test the psychological level of 19,000.
"Pressure on MTR Corporation's finances, rumoured to not want to bear the burden alone, hence hinting at the government for assistance"
Last week, reports indicated that the MTR Corporation is facing potential high expenditures of up to HKD 200 billion over the next 10 to 12 years. Currently, the company is studying cost-saving solutions and is considering selling or mortgaging its leased shopping malls to cope with the huge expenses. Market concerns about the long-term income prospects of the MTR Corporation have led to selling pressures on its stock.
A recent column in Ming Pao pointed out that when the MTR Corporation takes on new railway projects in the future, it may not include the cross-border railway line from Qianhai to Hung Shui Kiu, and this section may be taken over by a state-owned enterprise for construction and operation. The column suggested that the reason for this news surfacing is likely related to discussions about the high cost of the Northern Link, as the MTR Corporation and the government have yet to reach a consensus. Legislator James Tien mentioned that due to financial constraints, the government is pressuring the MTR Corporation to proceed with projects such as the Northern Link, leading the MTR Corporation to hint at its financial situation, essentially publicly signalling the government.
In response, the government stated that it has been monitoring the latest situation of the MTR Corporation, reviewing the development and financial arrangements of each railway project, and considering utilizing market forces to drive project development.
"Selling malls at a good price is challenging, issuing bonds is the best option"
Currently, the MTR Corporation is preparing to develop several new lines, including the Northern Link, the extension of the Tung Chung Line, and the western section of the South Island Line. Kingston Lin believed that areas with developments such as the extension of the Tung Chung Line and the western section of the South Island Line have more complete support systems and lower development difficulties. However, the Northern Link project involves the northern metropolitan area and has a longer payback period, indicating that the MTR Corporation's hinting at its financial situation this time could indicate its reluctance to bear the Northern Link project alone, and even the cross-border railway line from Qianhai to Hung Shui Kiu.
In the past, the MTR Corporation relied on real estate projects to subsidize its railway business. However, as the property market declines, Kingston Lin pointed out that this strategy is no longer effective, leading to current financial pressures. It is rumoured that the MTR Corporation may sell or mortgage its shopping malls to meet the high expenses. However, he believed that neither option is ideal. Selling malls could weaken rental income, while mortgaging would require maintaining interest payments. Therefore, the likelihood of the government assisting in issuing bonds is higher. He mentioned that even if the company were to sell the shopping malls amid the current property market decline, it would not fetch a good price, making issuing bonds the best fundraising option.
"Rights issue as a last resort due to lack of consensus, even the government may not be willing"
However, Kingston Lin is not optimistic about the popularity of government bonds. In response to future interest rate cuts, the last infrastructure bond issuance was adjusted to lower the minimum interest rate, resulting in the final issuance falling short of expectations. If the US further reduces interest rates in the future, how attractive the "railway bonds" can be for subscription remains uncertain. This dilemma puts the situation at a standstill. As for whether the MTR Corporation will choose a rights issue for fundraising, Kingston Lin believes that the MTR Corporation will not resort to a rights issue. Even major shareholders may be unwilling, especially since the government, as the largest shareholder holding nearly 75% of the MTR Corporation, believes that unless there is no consensus between the MTR Corporation and the government, forcing the MTR Corporation to proceed with the Northern Link project, it would resort to this last resort. He advised waiting to see if there are any updates on the MTR Corporation in the upcoming budget announcement by the government.
The Hang Seng China Enterprises Index stood at 7,149, down by 10 points or 0.1%. The Hang Seng Tech Index reported 4,402, a decrease of less than 1 point.
"Kingston Lin: Market is likely to wait for Trump's inauguration for changes"
Last week, official New Year greetings from the Mainland China mentioned that China's economy would face significant challenges, triggering market concerns about the future and affecting the performance of the Hong Kong stock market in the New Year. Subsequently, the mainland announced various favourable policies, including expanding the program for exchanging old electronics for new ones and even hinting at a rate cut. While the market conditions slightly stabilized, the rebound lacked strength. Kingston Lin, a director of the Hong Kong Institute of Financial Analysts and Professional Commentators Limited, told ET Net News Agency that the market currently lacks direction. With Trump's official inauguration approaching, the market is inclined to wait and see how the central government responds to Trump's policies before making further decisions. Previously, the market tended to avoid increasing deployments to avoid risks. Therefore, he predicted that there was a low chance of the Hang Seng Index breaking above 20,000 in the short term.
In response to the need for the central government to formulate contingency policies, Kingston Lin believed that the central government was unlikely to announce positive policies before the Lunar New Year. There is a greater chance of announcing favourable policies after the Lunar New Year and before the Two Sessions. During this waiting period, the stock market tends to be soft, with initial support around 19,400, and if breached, it could test the psychological level of 19,000.
"Pressure on MTR Corporation's finances, rumoured to not want to bear the burden alone, hence hinting at the government for assistance"
Last week, reports indicated that the MTR Corporation is facing potential high expenditures of up to HKD 200 billion over the next 10 to 12 years. Currently, the company is studying cost-saving solutions and is considering selling or mortgaging its leased shopping malls to cope with the huge expenses. Market concerns about the long-term income prospects of the MTR Corporation have led to selling pressures on its stock.
A recent column in Ming Pao pointed out that when the MTR Corporation takes on new railway projects in the future, it may not include the cross-border railway line from Qianhai to Hung Shui Kiu, and this section may be taken over by a state-owned enterprise for construction and operation. The column suggested that the reason for this news surfacing is likely related to discussions about the high cost of the Northern Link, as the MTR Corporation and the government have yet to reach a consensus. Legislator James Tien mentioned that due to financial constraints, the government is pressuring the MTR Corporation to proceed with projects such as the Northern Link, leading the MTR Corporation to hint at its financial situation, essentially publicly signalling the government.
In response, the government stated that it has been monitoring the latest situation of the MTR Corporation, reviewing the development and financial arrangements of each railway project, and considering utilizing market forces to drive project development.
"Selling malls at a good price is challenging, issuing bonds is the best option"
Currently, the MTR Corporation is preparing to develop several new lines, including the Northern Link, the extension of the Tung Chung Line, and the western section of the South Island Line. Kingston Lin believed that areas with developments such as the extension of the Tung Chung Line and the western section of the South Island Line have more complete support systems and lower development difficulties. However, the Northern Link project involves the northern metropolitan area and has a longer payback period, indicating that the MTR Corporation's hinting at its financial situation this time could indicate its reluctance to bear the Northern Link project alone, and even the cross-border railway line from Qianhai to Hung Shui Kiu.
In the past, the MTR Corporation relied on real estate projects to subsidize its railway business. However, as the property market declines, Kingston Lin pointed out that this strategy is no longer effective, leading to current financial pressures. It is rumoured that the MTR Corporation may sell or mortgage its shopping malls to meet the high expenses. However, he believed that neither option is ideal. Selling malls could weaken rental income, while mortgaging would require maintaining interest payments. Therefore, the likelihood of the government assisting in issuing bonds is higher. He mentioned that even if the company were to sell the shopping malls amid the current property market decline, it would not fetch a good price, making issuing bonds the best fundraising option.
"Rights issue as a last resort due to lack of consensus, even the government may not be willing"
However, Kingston Lin is not optimistic about the popularity of government bonds. In response to future interest rate cuts, the last infrastructure bond issuance was adjusted to lower the minimum interest rate, resulting in the final issuance falling short of expectations. If the US further reduces interest rates in the future, how attractive the "railway bonds" can be for subscription remains uncertain. This dilemma puts the situation at a standstill. As for whether the MTR Corporation will choose a rights issue for fundraising, Kingston Lin believes that the MTR Corporation will not resort to a rights issue. Even major shareholders may be unwilling, especially since the government, as the largest shareholder holding nearly 75% of the MTR Corporation, believes that unless there is no consensus between the MTR Corporation and the government, forcing the MTR Corporation to proceed with the Northern Link project, it would resort to this last resort. He advised waiting to see if there are any updates on the MTR Corporation in the upcoming budget announcement by the government.