[ET Net News Agency, 08 April 2025] The Hang Seng Index plummeted by over 3,000 points
yesterday, setting a historical record in terms of points. Despite US President Trump
insisting on maintaining the equivalent tariff policy and threatening an additional 50%
tariff on China, the Hang Seng Index rebounded this morning due to positive factors such
as central bank assurances to stabilise the market, state-owned enterprises collectively
supporting stock prices, and increased expectations of interest rate cuts by the Federal
Reserve. The index opened above the 20,000 mark and maintained this level until the
half-day close, currently up by 312 points or 1.6%, with main board turnover nearing HKD
226.6 billion. Southbound capital continued to buy, with a net inflow of HKD 8.36 billion
through the Stock Connect.
The Hang Seng China Enterprises Index is reported at 7,387, up 124 points or 1.7%. The
Hang Seng Tech Index stands at 4,547, up 145 points or 3.3%.

"Jaseper Tsang: If a 50% tariff is implemented, the Hang Seng Index may test 19,000"

As the trade war escalates, following China's announcement of a 34% retaliatory tariff
on the US, President Trump warned that if China does not withdraw its counter-tariffs, an
additional 50% tariff will be imposed. After the 3,000-point drop in the Hong Kong market
yesterday, a technical rebound occurred, with the index rising nearly 600 points at one
point, and technology stocks generally recovering. Jaseper Tsang, the investment director
of Rafter Capital, told ET Net News Agency that the future direction of the market will
depend on tariff developments; if a 50% tariff is realised, it could lead to a deeper
decline in the Hang Seng Index, potentially falling below the 250-day moving average and
testing the 19,000 level.
He added that there are currently many hopes in the market, including whether the
central government will introduce new bold policies, particularly cash incentives similar
to earlier measures to boost birth rates, which would benefit the market. Furthermore,
rumours of an emergency closed-door meeting by the Federal Reserve have sparked market
optimism; in the past, during the Greenspan era, the Fed had previously intervened to
stabilise the market, and if such news materialises, it could support the market.

"Trump aims to cause global asset volatility with tariffs, forcing capital inflows and
strengthening US bonds"

Regarding tariff policies, Jaseper Tsang believes that despite facing significant
pressure, Trump will not back down. He argues that the primary reason behind Trump's
initiation of the trade war is not solely about taxation. He explains that the countries
subjected to the highest tariffs do not necessarily have significant import volumes, yet
the announcement of substantial tariffs has triggered global market turmoil, causing
significant fluctuations in all asset markets, including oil and gold, with only the US
bond market remaining stable during this period. He hypothesizes that Trump is using
tariffs as a weapon, but his real aim is to draw capital into the US bond market to
strengthen the bond system.
Jaseper Tsang explains that since taking office, Trump has consistently sought to
address the US fiscal deficit, including initiatives like DOGE. The increase in tariffs
will provide immediate revenue for the US, but the Trump administration likely hopes to
use high tariffs to pressure other countries into negotiations, subsequently encouraging
them to use reserves to purchase US long-term bonds, thereby reducing the risk of a US
economic recession. Although China has retaliated with counter-tariffs, Jaseper Tsang
believes that political factors will prevent the Chinese government from conceding in
negotiations as the US desires, resulting in heightened tariff tensions and market
volatility.

"Foreign capital has been forced to exit; in a volatile market, choose stocks with on
foreign trade"

Jaseper Tsang expects that due to the ongoing tariff struggle between the US and China,
the market will remain volatile in the short term. He notes that many foreign investors
who had previously anticipated benefits from DeepSeek have already exited the market
following yesterday's drop, fully retracing the gains made in the first quarter. He
believes this means the Hang Seng Index is reverting to around the 19,000 level, with no
current factors suggesting a further drop. Under the current circumstances, stock
selection should revert to fundamentals, focusing on companies that rely solely on
domestic demand and are not indirectly affected by foreign trade. He adds that many
factories are currently suspending operations to observe developments and avoid
accumulating inventory.
He anticipates that the impact of tariffs will become evident at least within this
quarter, with global trade contraction likely reflected in upcoming economic data. Thus,
stock selection should adhere to these principles, with his top pick being China Mobile
(00941), which focuses on pure domestic demand and is unaffected by foreign trade. He
suggests that if the stock price falls to around HKD 78.35 to 78.80, it would be a good
opportunity for medium to long-term investment. Additionally, he recommends the food stock
Tingyi (00322), noting that not only does it offer a good dividend yield, but its main
business in instant noodles aligns with China's consumption trends, making it worthwhile
to buy if it drops below HKD 12.