[ET Net News Agency, 21 November 2024] At the year-end, Mainland China enters a policy
vacuum period, while the Hong Kong stock market continues its sluggish trend from the
previous day. The Hang Seng Index half-day report stands at 19,680, down 24 points or
0.1%. The main board turnover exceeds HKD 66.4 billion, slightly higher by HKD 6 billion
compared to the previous day. The Hang Seng China Enterprises Index reports 7,071, down 19
points or 0.3%, and the Hang Seng Tech Index reports 4,388, down 25 points or 0.6%.

"Wan Kong Shing: greater chance of downward movement for the HSI in short-term"

The Hang Seng Index maintained a narrow fluctuation after opening lower by several tens
of points today. Wan Kong Shing, the Chief Investment Officer of iFAST Global Markets,
told ET Net News Agency that the current trend of the Hang Seng Index remains sluggish.
The market's response to the local debt policy of RMB 600 billion announced by the central
government has been mediocre. Concerns in the external environment include worries that
the pace of interest rate cuts may slow down due to the high inflation situation in the
United States under Trump's administration. Moreover, the rebound of the U.S. dollar is
unfavourable for corporate profits. Wan believes that there is a greater chance of
downward movement for the short-term Hang Seng Index. It might fill the gap from the end
of September (around 18,426 to 18,500 points). The most optimistic scenario could see it
reaching 21,000 points, but if the central government does not introduce further stimulus
measures, the chances of a significant rebound in the Hang Seng Index are low.

"Nio's performance falls short of expectations, but performance guidance supports stock
price"

Nio (09866) announced that its net loss for the third quarter ending in September
widened year-on-year to RMB 5.14 billion, compared to a net loss of RMB 4.63 billion in
the same period last year, resulting in a loss of RMB 2.5 per share. The adjusted net loss
also increased year-on-year to RMB 4.4 billion from RMB 3.95 billion in the previous year,
while the revenue for the period decreased by 2.1% to RMB 18.67 billion.
Additionally, Nio provided its highest ever quarterly delivery guidance, expecting car
deliveries in the fourth quarter to range between 72,000 to 75,000 vehicles, representing
a year-on-year increase of approximately 43.9% to 49.9%. The total revenue is expected to
be between RMB 19.676 billion to 20.383 billion, showing a year-on-year growth of
approximately 15% to 19.2%. However, based on the quarterly guidance data, it implies a
sequential decline in the average selling price of cars to between RMB 228,000 to 242,000,
lower than the market expectation of RMB 258,000. This suggests that even with discounted
promotions, Nio may struggle to increase sales volume. Wan Kong Shing points out that
Nio's main brand car pricing is awkward, as compared to the pricing of new energy vehicles
in Mainland China generally ranging from 200,000 to 300,000 RMB, which may not attract mid
to high-end users to choose Nio.
Wan Kong Shing is not particularly satisfied with Nio's quarterly performance, warning
investors that Nio's short-term trend may continue to move downward. The short-term
support level is around HKD 34.95, the low point of the 15th November decline, with an
upward target of HKD 38. However, HKD 38 is already the most optimistic scenario. He adds
that although Nio's performance did not meet expectations, the stock price decline was
minimal, mainly due to the confidence given to investors by the fourth-quarter performance
guidance. However, he is not optimistic about Nio, noting that Nio has already dropped by
almost half from its high on 2nd October (HKD 60.7), while the Hang Seng Index has only
dropped by about 20% recently. For investors looking to purchase new energy vehicles
stocks, Wan Kong Shing prefers companies like XPeng (09868), Li Auto (02015), and BYD
(01211).
Following Nio and ONVO, Nio officially named its third brand "Firefly" yesterday,
positioned similarly to BMW MINI. It will be unveiled at Nio Day 2024 on 21 December, with
its first model set for delivery in the first half of 2025. Wan Kong Shing admits that the
launch of a new brand will not significantly impact Nio's ability to turn around its
financial performance. The current release of information is more about soothing investor
sentiment.
Regarding whether poor profitability is a common issue among new energy vehicle brands,
Wan Kong Shing disagrees. He believes that the key to profitability for car manufacturers
lies in cost control and finding the right market for car sales, while Nio's increased
losses are primarily due to large capital expenditures. Nio's sales and administrative
expenses in the last quarter reached RMB 4.11 billion, exceeding market expectations by
over RMB 200 million, mainly from the marketing costs of the new brand ONVO. With the
birth of the third brand Firefly, it is foreseeable that Nio's cash-burning model will
continue.