A dark cloud cover has formed on the candlestick chart, which may lead to a few sessions of consolidation. This chart pattern occurs when the index opens higher and closes below the 50% mark of the previous session. Based on the trading pattern of March 27 and 28, the STI needed to close above 3,975, but it closed at 3,972 on March 28. Support appears at 3,950.
A sign that the move above 4,000 wasn’t sustainable was because volume did not expand on March 28. A breakout requires a notable increase in volume. On the other hand, quarterly and annual momentum are both in rising mode, suggesting that a successful breakout above 4,000 is set for the second quarter.
The FTSE REIT Index ended the first quarter at 634, a level that coincides with the several-times-tested resistance at 633. A break above this level should still materialise as short- and medium-term indicators remain supportive of a breakout.
See also: S-REITs could finally rally as corrective phase sets in for mainland stocks
Equity fund-raising pressures HSTECH
The corrective phase of the Hang Seng Tech Index, currently at 5,506, is likely to continue. Support appears initially at 5,400. This index may remain pressured by further equity fund-raising among its component stocks.
On March 3, BYD had an equity fund-raising exercise through a placement of 129.8 million shares priced at HK$335.2 per share, raising the equivalent of US$5.6 billion H-shares. The transaction attracted participation from long-only, sovereign wealth funds, and Middle East strategic investors including the Al-Futtaim Family Office, BYD said in a press release.
See also: Attention stays with mainland stocks as they rotate to consumer plays and financials
Morningstar says the new H-shares, subject to a 90-day lock-up, represent approximately 4.5% of the total issued shares before the placement and approximately 4.3% of the total enlarged shares. The HK$3.5 billion (US$ 5.6 billion) raised will be used to upgrade t its intelligent driving technological capacity and accelerate overseas production in Southeast Asia and Europe. “We believe the placement, which coincides with a five-year share price high, may bring short-term pressure to BYD’s shares,” Morningstar says.
On March 28, Nio proposed to offer up to 136.8 million new Class A ordinary shares at an offer price of HKD29.46 per share. It plans to use the proceeds from the placement for smart vehicle technology research, new model development and to further strengthen its balance sheet.
“The share placement is not a surprise to us as we have modeled a 167 million share sale in 2025. However, we believe Nio's share price will still come under pressure in the near term, as investors lack confidence in Nio’s execution capability in increasing sales and narrowing losses,” Morningstar says.
Nio’s management is guiding that that vehicle margin will further expand from the second quarter of 2025 as economies of scale kick in and expenses begin to taper off. “While Nio kept its breakeven target for the fourth quarter of 2025, we are less optimistic. Therefore, we cannot rule out additional share sales if business does not progress as the company plans. Our base case has Nio making a loss of RMB4.5 billion in 2026 and turning profitable in 2027, later than what management has guided,” Morningstar says.
