Hong Kong: HANG SENG INDEX (.HSI) Index to underperform China-linked equity benchmarks next year

Hong Kong: HANG SENG INDEX (.HSI) Index to underperform China-linked equity benchmarks next year

Hong Kong: HANG SENG INDEX (.HSI) Index to underperform China-linked equity benchmarks next year

Hong Kong’s Hang Seng Index is likely to underperform any other key gauge tracking China’s onshore and offshore stocks in 2020, as the fallout from the months-long political unrest hits growth and corporate earnings, according to Morgan Stanley.

The benchmark of 50 stocks trading in the city may finish next year at 27,500, analysts led by Jonathan Garner at the US investment bank wrote in their 2020 strategy report for Asia’s emerging markets. That implies a 1.5 per cent gain from its close on Tuesday. In comparison, the year-end targets for the CSI 300 Index of mainland-traded stocks, the MSCI China Index of Chinese companies trading on both onshore and offshore markets and the Hang Seng China Enterprises Index will see gains of at least 6 per cent from current levels.

“Key sectors in Hang Seng with sizeable exposure to Hong Kong’s local economy such as financials and properties will also continue to suffer in 2020,” the report said.

In a bear-case scenario, the Hang Seng Index may trade below a five-year low of 9 times estimated earnings for the following 12 months, against the current valuation of 10.1 times, the report added.

Morgan Stanley recommends retailers and transport companies, betting the industries will benefit from the early stages of a recovery in China’s economy, while avoiding utility and property sectors.

China’s growth will probably rebound to 6.1 per cent by the end of next year from a low of 5.8 per cent in the first quarter of 2020, as the current level of finished goods inventories suggests restocking is in the offing, which will improve manufacturing activities based on historical data, the investment bank said.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 27,847.19.

The projected lower bound is: 26,356.53.

The projected closing price is: 27,101.86.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

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 51.0156. This is not an overbought or oversold reading. The last signal was a buy 0 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 54.11. 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 sell 7 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 -23. This is not a topping or bottoming area. The last signal was a buy 1 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 4 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed up 412.711 at 27,093.801. Volume was 4% below average (neutral) and Bollinger Bands were 12% narrower than normal.

Open     High      Low     Close     Volume___
26,671.32027,093.80126,605.63127,093.8011,542,578,816
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 27,017.55 26,664.08 27,737.42
Volatility: 24 18 19
Volume: 1,479,123,456 1,543,485,056 1,763,242,624

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

HANG SENG INDEX is currently 2.3% below its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .HSI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .HSI and have had this outlook for the last 13 periods.

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