[ET Net News Agency, 19 August 2025] External markets were cautious ahead of the
interest rate decision and developments in Russia-Ukraine ceasefire talks. ADRs delivered
a mixed performance overnight. The Hang Seng Index opened slightly higher by 64 points,
but was range-bound in the morning session, closing at 25,224 at midday, up 48 points or
0.2 per cent, with main board turnover close to HKD 135.9 billion. The Hang Seng China
Enterprises Index stood at 9,045, up 11 points or 0.1 per cent. The Hang Seng Tech Index
was at 5,584, up 5 points or less than 0.1 per cent.

"Yuen Che Hay: Cautious tone for funds, but no major outflows; HSI remains comfortable
above 50-day moving average"

During the earnings season, Hong Kong equities have turned more cautious. After rising
and then reversing into losses yesterday, several heavyweight results are due today,
including Xiaomi (01810), XPeng (09868), Pop Mart (09992), and WuXi Bio (02269), with the
HSI trading in a narrow range in the morning. Yuen Che Hay, the Co-Director of Investment
Strategy of Quam Asset Securities, told ET Net News Agency that the market is waiting for
positive earnings surprises to provide momentum. He noted that the previous rebound to the
25,700 level did not count as a breakout, and technically, the HSI has failed to break
through this level at both the end of July and mid-August. The market is therefore wary of
a double top and remains prudent.
However, in terms of fund flows, Yuen Che Hay does not see significant capital outflows,
with sector rotation still ongoing. While certain shares face higher downside risks, such
as those involved in placements, overall, the market is in a phase of digesting earlier
gains and profit-taking. As long as the HSI holds above its 50-day moving average, he
believes the pattern remains one of minor pullbacks in a broader uptrend.
Recently, southbound capital inflows hit a single-day record high, but most of these
purchases were in index ETFs. Yuen Che Hay explained that the preference for ETFs is due
to their strong gains, and that southbound investors also have their own favourite stocks
to trade. Strategically, buying ETFs is more conservative than stock picking, but
conservatism does not equate to bearishness. He sees continued optimism from southbound
investors on the outlook for Hong Kong equities.

"Sino Biopharm has good results but market has bad interpretation, better to revisit after
earnings season"

Sino Biopharm (01177) reported interim net profit for the six months to June up 12 per
cent year-on-year to RMB 3.389 billion. Revenue from continuing operations increased
nearly 11 per cent to RMB 17.575 billion. An interim dividend of HKD 0.05 was declared, up
over 66 per cent year-on-year. However, after the results, its share price dropped sharply
by about 6 per cent at midday, making it the worst-performing blue chip.
A closer look at the results shows that revenue from innovative products, the market's
main focus, rose 27 per cent year-on-year to RMB 7.8 billion. However, a significant part
of Sino Biopharm's profit came not from innovation but from dividend income of
approximately RMB 1.353 billion from its stake in Sinovac. Yuen Che Hay commented that
while Sino Biopharm's profit and revenue met expectations, there had been high hopes for
innovation to become a strong growth driver. As a result, with a large accumulated gain in
share price, the market interpreted the results less favourably.
Yuen Che Hay also noted that after significant rallies, many pharma stocks have
announced placements, further undermining short-term confidence, as seen with Ascletis
(01672) announcing a placement immediately after its results today. This has inevitably
dampened sentiment for Sino Biopharm in the short term. However, he believes the results
are solid and remains positive on a medium- to long-term view, but prefers to watch how
the share performs for now. As for bargain-hunting, he suggests it may be better to wait
until after the earnings season for the price to stabilise before considering a
medium-term position in Sino Biopharm. He also reminded investors that, given Sino
Biopharm's post-results share price drop despite solid numbers, those holding fellow blue
chip pharma stock CSPC Pharma (01093), which is about to report results, should consider
whether to take precautions ahead of its earnings release.