[ET Net News Agency, 24 March 2025] US stocks rose against the trend last week, while
Hong Kong stocks fell for the third consecutive trading day. Meituan (03690) reported
quarterly results that did not meet expectations, and the performances of several central
enterprises varied. The Hang Seng Index, facing earnings season and quarterly settlements,
displayed a tug-of-war between bulls and bears, closing at 23,662, down 27 points or 0.1%,
with a main board turnover of nearly HKD 127.5 billion. The Hang Seng China Enterprises
Index was at 8,740, down 1 point or less than 0.1%. The Hang Seng Tech Index stood at
5,627, down 12 points or 0.2%.

"Cheung Chi Wai: The upward trend of the HSI has changed; it may test 23,100 points"

The Hang Seng Index struggles to shake off its downward trend. After closing below the
20-day moving average (23,769 points) on the previous trading day, it failed to rebound in
the morning session and remained range-bound below this level. Cheung Chi Wai, a joint
managing director at Prudential Brokerage Ltd, told ET Net News Agency that since the Hang
Seng Index fell below the 20-day line last Friday, the technical pattern has weakened, and
it may test the 13 March low (around 23,100 points) in the short term. He noted that the
index has experienced two adjustments since its upward trend began, one of 1,500 points
and another of 1,400 points, but it had never fallen below the 20-day line until now,
which is a clear sign of weakening. Additionally, he mentioned that the US is set to
announce core inflation data (PCE) this week, which could indicate the Federal Reserve's
intentions regarding interest rate hikes or cuts, influencing market movements. As a
result, investors are currently in a wait-and-see mode, leading to a subdued market
atmosphere, and the Hang Seng Index's trajectory may become clearer after the relevant
news is released.

"Both demand and supply are under pressure; avoid the oil sector"

Sinopec (00386) reported a net profit attributable to shareholders of RMB 50.313 billion
for the year ending 31 December, a decrease of 16.78%. Earnings per share stood at RMB
0.415, and the company proposed a final dividend of RMB 0.14 per share, a reduction of 30%
compared to the previous year's final dividend of RMB 0.20. Sinopec's disappointing
performance affected its share price, which opened lower with a gap down, and its H-shares
fell by about 3.5%.
Sinopec attributed its results to the fluctuating international crude oil prices,
accelerated substitution by new energy in the domestic transportation sector, and the
continuous release of new chemical market capacities, leading to significantly narrowed
gross margins. Cheung Chi Wai noted that he had previously advised investors to avoid the
oil sector, including the other "two barrels of oil" - CNOOC (00883) and PetroChina
(00857). He continued that Sinopec's underperformance was anticipated, as Trump advocated
for increased domestic oil and gas production and pressured OPEC and other oil-producing
countries to raise output to lower prices. OPEC has announced gradual production increases
this year, resulting in a significant rise in oil supply and repeated declines in oil
prices. On the demand side, the pace of economic recovery is slow, and the emergence of
new energy alternatives is decreasing oil demand. Oil businesses are difficult to manage.
Currently, Sinopec's share price is at a low level, but Cheung Chi Wai stressed that
investors should not be tempted to buy in at what seems like a bargain. As a dividend
stock, a 30% reduction in the final dividend makes the yield unattractive. Moreover, the
company's operational outlook is unclear, and it remains uncertain whether further
dividend cuts will occur.
The company also mentioned a target capital expenditure of RMB 164.3 billion, primarily
directed towards high-quality exploration and development, refining business
transformation, the construction of integrated charging station networks, and green
environmental projects in new energy and materials. Cheung Chi Wai stated that it is
uncertain how much the returns from these investments can offset losses from falling oil
prices, and the level of uncertainty is too high for investors to justify taking the risk.