The trend of the Hong Kong stock market last month was horrible. The latest article stated that the weakness of the Hang Seng index came true. It should not be too aggressive if it has not been confirmed to rise above the bottom of the 26,878 – 27,222 gap in one day. As a result, it saw a high of 26,560 points in early September, and later, it turned down and fell below the 24,000-point mark to a low of 23,771 points. The Shanghai Composite Index also returned to near 3,600 points. This trend seems to be related to the debt crisis of Evergrande Real Estate (3333) and the multiple policies of the mainland government that rectify different industries. But it happens due to the poor economic downturn in the mainland. As a country mainly weights on import and export trade and manufacturing, the epidemic has lasted for nearly two years and come along with several problems:  

1. The declination of the market purchasing power and consumer desire; resources mainly used for epidemic prevention which cannot stimulate consumption. 

2. Home isolation and city lockdown shrink the living circle and reduce population flow are not conducive to economic operation. 

3. the supply chain problem directly raises costs and reduces productivity.  

Among the three factors, the last one impact most. It directly increases transaction costs, and countries move their production lines back to China, which has a particularly significant negative impact on China as a producer. Therefore, the short-term outlook is still difficult to be too optimistic. The resistance at 25,500 points near the 20MA is strong. I expect the market may be low to 23,771 points. If to rebound, it needs to depend on whether it can break through 24,827 points. 

At the end of last month, foreign media reported that Beijing required local real estate developers to use their resources and influences to support Beijing. The government will no longer tolerate land hoarding and monopolistic behaviour. They will also help to stabilize the housing shortages. There are even rumours that the annual housing construction target is 100,000. Many are worried that the similar situation of the Tung Chee-Hwa's "85,000" policy will happen again, but the author thinks that is not yet being so pessimistic. It is easy to implement 100,000 houses in a year, but if we need to build 100,000 every year, which is more than double the current long-term goal of the Hong Kong government. The limited land supply in Hong Kong and Hong Kong government is highly dependent on land price income, then a large number of housing supplies will impact the Hong Kong government. Therefore, together with the negative impact of the current epidemic and social atmosphere, it would be hard to apply. The author boldly believes that it is inevitable that individual developers will take the initiative to hand over part of the land, or the government will cooperate with some of the business partners by directly collecting the share. In any case, it is bad news to those developers with more land reserves (especially agricultural land), such as Henderson (0012) and Sun Hung Kai (0016). Even if the current valuation is very low, it is best not to touch it in the short to medium term. 

In Macau, its gambling business has also been "shared”. The local government asked for a consultation, the Six gambling licenses with a validity period of 20 years will expire in the coming year. The Macau government take this opportunity to consult and strengthen regulations in nine general directions to control the gambling industry. It claimed to maintain proper industry development, but in reality, it pinpointed to the foreign powers and turning them into bargaining power in the international negotiations. In terms of timing, it is not the right time to talk about regulation. Many casinos are facing a reduction in their revenues and even fell into a loss. Unless you want the casinos to withdraw from this, or else it will not have an outcome from this consultation. The best way is to extend the license for a few years and postpone the renewal review, to have more buffering time for the market. Things will always fail if that is forced to happen, so the author boldly expects that the results of this consultation will be very limited. 

Expect the gambling stocks in October will stabilize in the short term after experiencing the sharp decline of the previous month. There are still 40 days for the consultation to last. While waiting for the results, there should be no more major negative news during this period. However, if there are many visitors in mid-autumn and the National Day holiday give us a surprise, then there is a chance to get a slight rebound on the stock price trend. As for choosing among the gambling stocks, GEG (0027) is the choice. Its leading position with its favourable local shareholder background and having the largest amount of cash on hand in the industry. It is good enough for GEG to have the advantage in its transformation. Even if the market rebounds, it will only give priority to strong stocks. The current stock price shows defensive power at the 40-yuan position, first looking up to the 50 MA position at 45.95 yuan if reaching higher will filling the falling gap for the top 48.8 yuan. However, this market condition is more suitable for short-term speculation, and it is better to be able to flexible turn.

Kay Ho (CE No.: ANV293)

Acer King Capital Hong Kong Limited

Statement: The author is a licensee of the 1st, 4th, and 9th types of licenses of Securities and Futures Commission, SFC. Acer King securities Limited and Acer King Capital Hong Kong Limited are affiliated companies of Hantec Group and were invited to contribute articles in Hantec Group's monthly newsletter. The writing does not represent the position of Hantec Group. As the author does not personally hold the above-mentioned shares, investors should exercise caution when buying or selling relevant securities and investment instruments.