Budweiser and Alibaba Group Holding Limited (NYSE:BABA) flag Hong Kong dollar oddity

Budweiser and Alibaba Group Holding Limited (NYSE:BABA) flag Hong Kong dollar oddity

Budweiser and Alibaba Group Holding Limited (NYSE:BABA) flag Hong Kong dollar oddity

The boring Hong Kong dollar has been more exciting of late. A couple months after a U.S. hedge fund manager targeted the currency, it is moving sharply. Two giant upcoming stock sales are a major factor, but the recurring phenomenon flags a peculiarity of the system.

Since late May, Hong Kong’s dollar has been on a relative tear for a currency that trades in a narrow band against the U.S. dollar, to which it is pegged. It touched its strongest level in two years last week. The three-month Hong Kong Interbank Offered Rate ticked up to 2.7%, outstripping the equivalent U.S. dollar Libor rate of 2.3%.

At least some of the buzz can be chalked up to brewer Anheuser-Busch InBev’s Asian business seeking to raise nearly $10 billion in Hong Kong. Alibaba is also eyeing a listing on the local exchange that could pull in another $10 billion. Previous share offerings, including China Literature’s heavily subscribed one in 2017, have caused similar rate bounces.

The two mega-deals come during peak dividend season for Hong Kong-listed Chinese companies; they’ll fork out almost $19 billion in July, Morgan Stanley analysts estimate. The upshot is that many of the city’s dollars are being snapped up at once.

It’s a reminder of a local oddity. Issuers descend on the city to flog securities denominated in local dollars to investors who also hail from abroad. When combined with Hong Kong’s outsized financial sector – the $4 trillion total market capitalisation is more than 1,000% of local GDP, compared to about 150% for the United States, according to World Bank data – it means an occasional scramble for the money.

There’s no obvious immediate threat to the peg. The sharp movements do, however, provide a reminder of Joseph Yam’s warning about how Chinese capitals flows could cause volatility to become more pronounced and even dangerous. The former head of Hong Kong’s de facto central bank said it is “unrealistic” to expect a currency designed for a 7-million-person economy to service the international investing needs of more than a billion people. Being a financial gateway has its rewards, but also some potentially mounting risks.

Overall, the bias in prices is: Sideways.

The projected upper bound is: 176.96.

The projected lower bound is: 156.10.

The projected closing price is: 166.53.

Candlesticks

A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

A dark cloud occurred (which indicates that prices moved up strongly on the previous bar, opened higher, but then closed significantly lower). This implies weakness as the momentum appears to be shifting from the bulls to the bears. Note that the lower the close of the black candle (relative to the white candle), the more bearish the dark cloud pattern.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 9.9929. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 19 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.86. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 25 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -48. This is not a topping or bottoming area. The last signal was a sell 3 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -1.870 at 166.930. Volume was 7% below average (neutral) and Bollinger Bands were 13% narrower than normal.

Open High Low Close Volume___
171.040 171.320 166.870 166.930 3,347,761

Technical Outlook
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period     50-period     200-period
Close: 171.20 167.42 163.19
Volatility: 31 39 43
Volume: 3,383,554 4,388,923 3,892,275

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

ALIBABA GRP ADR is currently 2.3% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of BABA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 14 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.

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