The Hang Seng Index fell, with net outflow of over HKD 3.4 billion from northbound trading, and gambling stocks faced selling pressure

The Hang Seng Index rose and then fell today. The Dow Jones Industrial Average dropped 20 points or 0.04% last Friday, and the Nasdaq also fell by 0.1%. At the time of writing, the yield on the U.S. 2-year Treasury bond fell to 3.477%, and the yield on the U.S. 10-year Treasury bond dropped to 4.114%. The U.S. dollar index fell to 97.98. Dow futures were down 50 points or 0.1%, and Nasdaq futures were down 123 points or 0.5%. The minutes from the Bank of Japan's December monetary policy meeting showed that some members stated that current interest rates are still quite far from neutral levels, suggesting that the central bank should raise rates every few months. The dollar fell 0.13% against the yen to 156.37. The onshore yuan closed down 13 basis points at 7.0098 against the dollar. The Shanghai Composite Index rose 1 point or 0.04% to close at 3,965 points, while the Shenzhen Component Index fell nearly 0.5%. The total trading volume in the Shanghai and Shenzhen markets was 2.14 trillion yuan. Additionally, Tesla (TSLA.US) CEO Elon Musk recently expressed concerns about rising silver costs and supply shortages, which could pose a risk of production halts. Silver prices historically broke the $80 mark this morning (29th) during the Asian session, with the March silver contract rising 7% to $82.67 before falling back. Spot silver recently declined 5.1% to $75.1 per ounce (having reached a high of $83.987 and a low of $74.297 today).

After opening 109 points higher, the Hang Seng Index once rose 264 points to surpass the 26,000 mark, reaching a high of 26,082 points. However, the upward momentum weakened in the afternoon, leading to a drop of 188 points to a low of 25,630 points. The index closed at 25,635 points, down 183 points or 0.7%. The Hang Seng China Enterprises Index fell 23 points or 0.26% to close at 8,891 points, while the Hang Seng Tech Index dropped 16 points or 0.3% to close at 5,483 points. The total market turnover was 224.508 billion yuan. The total turnover of northbound trading was 115.158 billion yuan, while southbound funds recorded a net outflow of 3.414 billion yuan today (with a net outflow of 1.175 billion yuan on December 24th (half-day market)), marking the second consecutive trading day of net outflow.

Tencent (00700.HK) saw its stock price drop 1.1% for the day, Alibaba-W (09988.HK) fell 1.8%, and Xiaomi-W (01810.HK) co-founder Lin Bin plans to sell up to $2 billion worth of shares in the future, with the stock price declining 1.6% to close at 38.58 yuan. CK Hutchison (00001.HK) saw its stock price decrease by 3.3%.

【Automobile stocks rise, UBTECH surges】

Automobile stocks performed well against the market trend, with Geely (00175.HK) rising 3.4% to close at 17.5 yuan, Li Auto-W (02015.HK) up 1.6%, and Nio-SW (09866.HK) increasing by 4.9%. The Ministry of Finance indicated that next year it will continue to implement a more proactive fiscal policy, expand fiscal spending, and support the replacement of old consumer goods with new ones. Additionally, the National Development and Reform Commission is promoting comprehensive rectification of "involution" competition in industries such as new energy vehicles and other "new three categories." Car stocks are on the rise, BYD (01211.HK) saw its stock price rise by 3.7% for the best-performing blue-chip stock, with the group denying plans to launch flying cars. XPeng-W (09868.HK) increased by 3.9%, as the group entered the Qatari market and reached a strategic cooperation with partners in Mauritius. Leapmotor (09863.HK) issued domestic shares to FAW at a premium of 10.7%, involving over 4.1 billion yuan, with its stock price closing up 0.9%. UBTECH (09880.HK) invested over 1.66 billion yuan in Fenglong Co., Ltd. (002931.SZ) for a 43% stake, with UBTECH's stock price rising 9.1% for the day.

【Over 1,200 stocks fell, MGM plunged sharply】

The Hong Kong stock market weakened, with the rise and fall ratio of main board stocks at 20 to 31 (compared to 22 to 22 the previous day), with 1,291 stocks declining (a drop of 2.7%). Today, 22 constituent stocks of the Hang Seng Index rose, while 67 fell, with a rise and fall ratio of 25 to 75 (previously 45 to 49). The market recorded short selling of 32.269 billion yuan, accounting for 15.672% of the total turnover of shortable stocks at 205.901 billion yuan.

MGM China (02282.HK) saw its stock price drop over 17.1% to close at 12.91 yuan, with Morgan Stanley indicating that the licensing fees paid to the parent company next year will double year-on-year. Other gaming stocks also faced selling pressure, with Sands China (01928.HK) falling 4.5%, making it the worst-performing blue-chip stock. Wynn (01128.HK) and Melco International (00200.HK) fell by 4% and 5.3%, respectively, while Galaxy Entertainment (00027.HK) dropped 2.9%.

Morgan Stanley released a report indicating that changes in licensing fees for some gaming stocks would significantly impact EBITDA forecasts for related companies, thereby affecting target prices and ratings. After updating their model forecasts, they decided to downgrade MGM China's investment rating from "Overweight" to "Market Perform," lowering the target price from 19 yuan to 16.5 yuan, while upgrading Galaxy Entertainment's rating from "Market Perform" to "Overweight," with the target price raised from 43 yuan to 44 yuan.

Morgan Stanley stated that Wynn Macau and MGM China will pay approximately 14% to 15% of their EBITDA to the parent company as licensing fees, while Sands China will pay 5%, Melco International (MLCO.US) 2%, and Galaxy Entertainment 0%. The firm indicated a 7% reduction in MGM China's EBITDA forecasts for 2026 and 2027 to account for higher licensing fees paid to the parent company MGM Resorts, estimating that licensing fees will account for 15% of its EBITDA, doubling compared to 2023 to 2025, and significantly higher than peers. According to the latest forecast, Morgan Stanley expects MGM China's EBITDA to decline by 5% year-on-year in 2026, with a profit margin decrease of 220 basis points. In contrast, other Macau gaming operators are expected to achieve EBITDA growth in 2026