[ET Net News Agency, 03 October 2025] Overnight, US equities were not visibly affected
by the federal government shutdown, with all three major indices closing higher and the
Philadelphia Semiconductor Index also setting a new record. Most major Asia-Pacific stock
markets performed well this morning, but after three consecutive gains, the Hang Seng
Index pulled back today, ending the morning at 27,049, down 237 points or 0.9%, with main
board turnover exceeding HKD 77.9 billion. The Hang Seng China Enterprises Index closed at
9,624, down 100 points or 1%. The Hang Seng Tech Index finished at 6,586, down 96 points
or 1.4%.

"Yuen Che Hay: Prefer market pullback to guard against sharp corrections; better to stay
on the sidelines before southbound flows return"

Global equities benefited yesterday from a weaker US dollar, with the HSI surging over
400 points. However, after a slight rebound in the dollar last night, Hong Kong shares
faced selling pressure, with the HSI down over 200 points by midday. In previous years,
during the National Day Golden Week when southbound flows paused, if the HSI rallied,
profit-taking often followed once southbound trading resumed. Yuen Che Hay, the
Co-Director of Investment Strategy of Quam Asset Securities, told ET Net News Agency that
there are still a few sessions before southbound flows return, and it remains to be seen
whether the recent rally is simply speculative ahead of southbound investors selling. He
noted that both the broader market and leading tech shares have pulled back slightly
today, while chip stocks and the hotly traded Zijin Mining (02899) are showing signs of
being bid up ahead of profit-taking. As such, he would prefer to see further short-term
corrections in the market and individual stocks to prevent excessive premiums from
building up.
Before southbound flows return, Yuen expects resistance for the HSI at 27,500, but does
not recommend investors aggressively chasing short-term gains before then, as the upside
is limited and there is a risk of a pullback. For those keen on trading in the short term,
he suggests only small, selective positions in single stock warrants, and does not advise
adding aggressively at this stage.

"Hopes of a major breakthrough in talks are purely speculative; not enough for long-term
market support"

US Treasury Secretary Bessent told CNBC on Thursday that the next round of US-China
trade talks "will be our fifth round and should see a significant breakthrough." Yuen
noted that Bessent often talks up the prospect of breakthroughs, but results tend to fall
short. If there is genuine positive news, the market might gain 200-300 points, and an
agreement could spark a 500-point rally. However, he sees such headlines as speculative
drivers rather than factors that will materially improve company earnings, so they are
unlikely to provide lasting support for the market.

"Zijin Gold's rapid inclusion in Stock Connect may be a one-off; rally ahead of inclusion
already overheated"

The Hang Seng Indexes Company announced that Zijin Gold (02259) meets the fast-entry
requirements for the Hang Seng Composite Index and will be included after market close on
15 October, taking effect from 16 October. This means it will be added to Stock Connect
just half a month after listing. Yuen explained that last year's fast-entry rules
generally require criteria such as prior A-share listing or dual primary listing, so
typically only certain stocks qualify. Zijin Gold's very large market cap, almost doubling
in its first three days to around HKD 366 billion, now exceeding its parent Zijin Mining
(02899), is likely why it was fast-tracked for inclusion.
Yuen believes that Zijin Gold's huge market cap enabled this "half-month to Stock
Connect" feat, but in practice, the fast-entry rules are not easy to meet, so it's hard to
predict when another new listing might be added so quickly. With gold prices strong and
the latest inclusion decision, further speculation in new stocks is likely. At present, it
is difficult to call a top for Zijin Gold, and there may be another round of speculation
before official inclusion on the 16th, so investors should be alert and act quickly. He
also noted that although Zijin Gold represents overseas assets for the Zijin group, its
market cap now exceeds the parent, suggesting the rally is getting ahead of itself and
caution is warranted.

"Gold prices unlikely to see major declines; both hot money and safe haven flows at play"

On gold, Yuen believes that given its recent strength, there is unlikely to be
significant downside, with the lower end of the trading range at USD 3,760. However, due
to ongoing demand, this level may not be tested. He pointed out that, on one hand,
investors are increasing gold allocations as a hedge against equity corrections, while on
the other, speculative capital is also chasing the rally. Ultimately, the dominant force
will determine the direction, but as gold is a classic safe haven, he expects defensive
flows to outweigh speculation.