[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.