[ET Net News Agency, 22 January 2025] US President Trump announced that due to fentanyl
issues, the U.S. government is discussing imposing a 10% tariff on goods imported from
China starting from 1 February. Additionally, Trump threatened that if China does not
approve the agreement reached with TikTok, there could be potential tariffs imposed on
China. The hopes for a quick restoration of relations between China and the U.S. were
shattered. The Hang Seng Index plunged below the 20,000 mark from the opening, and the
decline quickly expanded to over 200 points. The index fell below the 19,800 level midday,
closing at 19,836, down 270 points or 1.3%, with multiple key moving averages forming a
defensive line below. The turnover on the main board exceeded HKD 78.3 billion.
The Hang Seng China Enterprises Index reported 7,204, down 116 points or 1.6%. The Hang
Seng Tech Index reported 4,601, down 92 points or 2%, with only 20% of the constituents
rising.

"Lee Wai Kit: Hang Seng Index adjusts with momentum, expected support near 19,600"

The Hang Seng Index opened lower by over a hundred points this morning, and the downward
trend gradually expanded. Lee Wai Kit, a director of the Brokerage Department of TF
International Securities, told ET Net News Agency that today's decline in the Hang Seng
Index is mainly influenced by the potential impact of the U.S. possibly imposing tariffs
on China. Although Trump proposed tariffs on China as high as 60% during his campaign, the
current tariff rate is relatively moderate. However, since Trump was sworn in as U.S.
President and positive information emerged following the phone call between the U.S. and
Chinese leaders, the market had initially anticipated an easing of tensions between the
two countries. Now with news of tariffs, coupled with a significant market rally, today's
adjustment is reasonable and the scale of the adjustment is also appropriate.
Lee Wai Kit mentioned that due to the market's optimism, there is limited downside for
the Hang Seng Index. It is expected that if the index falls to around last Friday's
closing level (approximately 19,584), it will find initial support, which is also close to
several moving averages. However, a prerequisite is that negotiations between China and
the U.S. on tariffs and TikTok do not encounter significant obstacles. Additionally, Japan
is expected to hold a policy meeting this Friday, with a higher chance of a rate hike
anticipated. He cautioned that a rate hike in Japan last year led to market fluctuations,
and therefore the decision on Japanese rates should not be taken lightly.

"New Oriental's second quarter performance falls short of expectations, stock price once
dropped by 30%"

New Oriental (09901) announced its performance for the first half of the 2025 fiscal
year ending on 30 November, with a year-on-year increase in net profit of 41.9% to USD 277
million; net revenue was approximately USD 2.474 billion, up by 25.6% year-on-year.
However, the net profit for the second quarter only rose by 6.2% year-on-year to USD 31.93
million; net revenue increased by 19.4% year-on-year to USD 1.04 billion. Furthermore,
revenue guidance for the third quarter is estimated to be between USD 1.01 billion and
1.03 billion, significantly lower than the market's estimate of USD 1.32 billion.
Following the announcement of its performance, the stock experienced a sharp decline
today, with a maximum intraday drop of 31.9%.
Lee Wai Kit stated that New Oriental's performance for the second quarter fell short of
market expectations, primarily due to the strong post-pandemic demand for education,
making it difficult to maintain high growth rates given the high base. Additionally, the
peak exam coverage and peak summer holiday season in the first quarter made it challenging
to compare with the previous quarter. Furthermore, changes in the post-pandemic education
model with increasing online education led to higher capital investment and costs,
impacting profit performance. However, with the stock price plummeting by 30% today,
indicating a strong market response, Lee Wai Kit noted that negative performance typically
affects stock prices for about three days. Following a significant drop today, the
performance in the next few days is expected to be relatively stable, with a projected
fluctuation near today's low level (around HKD 31.8). The American Depositary Receipt
(ADR) equals to HKD 36 overnight in the U.S. market, higher than in the Hong Kong market.
Lee Wai Kit suggested observing the performance of the U.S. ADR over the next two days, as
the U.S. market dominates market trends.
East Buy (01797), which New Oriental holds a 57.17% stake, also announced a net loss of
RMB 96.79 million for the mid-term period ending on 30 November 2024, compared to a net
profit of RMB 249 million in the same period last year. Lee Wai Kit pointed out that the
main reason for the shift from profit to loss was the significant one-time expenditure due
to popular presenter Dong Yuhui's departure to start his own venture, resulting in a major
expense related to the programme "Travelling with Yuhui." Additionally, following the
departure of an important pillar and intensifying competition among Mainland China
e-commerce platforms, there was a significant loss of business. However, as the impact of
Dong Yuhui's departure is gradually absorbed, the future business of East Buy is expected
to stabilize. The stock experienced a moderate decline today, currently down by about 2%.
Lee Wai Kit predicted that the stock's dual bottom support is near HKD 13.6. Currently,
the stock is around HKD 15.6, indicating that there is still downside risk for the stock.