[ET Net News Agency, 08 January 2026] US President Donald Trump's assertive policy moves
have driven a rebound in the US dollar, prompting weakness in the renminbi and creating
headwinds for A-shares, which lost momentum alongside Hong Kong stocks. After falling more
than 250 points in the previous session, the Hang Seng Index was pressured again this
morning amid reports that Mainland China authorities are inclined not to import Nvidia's
H200 chips, weighing on technology shares and deepening the market pullback. The HSI
closed the morning at 26,136, down 322 points or 1.2 per cent, with main board turnover
exceeding HKD 130.6 billion. The China Enterprises Index lost 103 points or 1.1 per cent
to 9,034, while the Tech Index dropped 64 points or 1.1 per cent to 5,673.

"Lee Wai Kit: HSI pullback at high levels is normal, consolidation around 26,000 expected"

US stocks were mixed overnight; after hitting record highs, both the Dow and S&P 500
slipped. The Hang Seng Index opened over 100 points lower this morning, reaching a low of
26,154 and marking a second consecutive day of declines. Lee Wai Kit, a financial
commentator of TF International, told ET Net News Agency that after three straight days of
gains and a cumulative rise of over 1,200 points at the start of 2026, the current
pullback, retracing about half that advance, is a normal adjustment. Additionally, the
upcoming shareholder vote on HSBC's (00005) proposed privatisation of Hang Seng Bank
(00011) has weighed on Hang Seng's share price, dragging the index lower. Tech stocks have
also lost momentum recently, lagging during the HSI's earlier rally. After such gains, a
period of consolidation is to be expected. Looking ahead, Lee said that the main factor
will be the appetite for southbound capital flows. As long as net inflows remain steady,
the HSI is likely to consolidate around the 26,000 level. While major new Mainland China
policy initiatives may not be imminent, targeted support measures for specific sectors are
possible, which could spark selective rallies. However, Lee cautioned that with A-shares
already having rallied strongly, the Shanghai Composite has surpassed 4,000, any
correction in A-shares or deterioration in geopolitics could trigger further downside in
Hong Kong stocks, potentially pushing the HSI back toward the 25,000-25,100 area.

"High probability of Hang Seng privatisation passing, HSBC share price already reflects
outcome"

On 9 October last year, HSBC and Hang Seng Bank jointly announced a proposal for HSBC to
privatize Hang Seng via a scheme of arrangement, offering HKD 155 per share, representing
a 33.1 per cent premium over Hang Seng's average closing price of HKD 116.49 for the 30
trading days prior to the joint announcement. The cash consideration totals HKD 106.156
billion, and HSBC management has made it clear there will be no adjustment to the offer
price.
Hang Seng held a court meeting and shareholder meeting at 10:30 am today, with results
to be announced later in the day. The court meeting requires approval by 75 per cent of
independent shareholders present and voting, with objections capped at 10 per cent, while
the general meeting also requires a 75 per cent approval rate. If passed, Hang Seng will
be delisted.
Lee Wai Kit believes there is a high probability the privatisation will be approved
today. Even if successful, however, HSBC intends to retain Hang Seng's independent
operations in the short term, so immediate synergies may be limited. Over the medium to
long term, some integration of operations or structures cannot be ruled out.
Post-privatisation, profits previously distributed as dividends by Hang Seng would accrue
directly to the parent, boosting HSBC's earnings, a positive for future results. However,
since the privatisation proposal has been in play for several months, these factors are
already reflected in HSBC's share price. On the day of the announcement (9 October), HSBC
shares fell 6 per cent and have since consolidated near the HKD 100 level. With US rate
cuts and Hong Kong holding steady, HSBC's net interest margin pressure has eased.
Recently, HSBC shares rallied strongly, hitting a post-adjustment high of HKD 129.5 on 6
January, but the relative strength index (RSI) has risen to 79.2, indicating overbought
conditions. Investor caution around the vote has also contributed to today's price
pullback.
Lee added that HSBC is known for its high dividend yield, which attracts investors.
While the current yield has dropped to 4.1 per cent, with forecasts at 4.5 per cent, below
the major Chinese banks (the "Big Four"), Agricultural Bank of China (01288) still offers
a 4.9 per cent yield, and the other three banks offer up to 5.6 per cent. However, after
factoring in China's 10 per cent dividend tax, the net yield gap narrows. For
yield-seeking investors, the Big Four remain attractive, but HSBC's Greater China focus
continues to provide stability, making it appealing even with a lower yield. Given its
current elevated price, however, HSBC may see further downside toward the 20-day moving
average, around HKD 120.