Hong Kong: HANG SENG INDEX (.HSI) markets slump amid rising US-Iran tensions in the Middle East
Most regional equity markets fell sharply yesterday, tracking the global slump on Friday as tensions between the US and Iran escalated following the killing of one of the Islamic republic’s top generals in Baghdad.
Qassem Suleimani, the head of the Islamic Revolutionary Guard Corps’ foreign operations branch, the Quds Force, was killed in a rocket strike ordered by US President Donald Trump. The incident pulled US and most European and Asian markets lower. Oil prices shot up with the rise in geopolitical risks and gold rose sharply to a four-month high as investors swapped riskier equities with haven commodities assets in their portfolios.
In Kuwait, the main index declined 4.1 per cent, paring a rally which made it the best-performing Gulf index last year. Dubai Financial Market General Index, the main benchmark for the emirate’s equities, plunged 3.1 per cent, Abu Dhabi Securities Exchange slipped 1.4 per cent, Bahrain’s index slumped 2.26 per cent and Muscat Securities Market fell 0.3 per cent at the end of the trade yesterday. Saudi Arabia’s and Egypt’s main bourses dropped 2.4 per cent and 4.4 per cent, respectively.
“Not surprising, the Gulf markets are reacting negatively given we are in the middle of all the geopolitics action. We fear this can be an overhang over the next few months and not just a one-day or week thing,” said Vrajesh Bhandari, senior portfolio manager at Al Mal Capital.
Companies that have direct exposure to Iran and Iraq or stocks with a high percentage of foreign ownership would be most vulnerable to price changes, he said. “We would also see rotation into cash & defensive companies with strong cash flows and dividends.”
Equity losses in Dubai were led by UAE shipping company Gulf Navigation, which ended the day’s trading session with an almost 10 per cent decline. Dubai-headquartered investment bank Shuaa Capital slipped 9.6 per cent and Amanat Holdings closed down 8.9 per cent.
Saudi Arabia’s Tadawul, the biggest Arab bourse, was dragged down by Saudi Aramco, the world’s biggest oil exporting company, which slipped 1.7 per cent. Al Rajhi Bank, the biggest retail lender in the kingdom, tumbled 2.1 per cent and Sabic, the top petrochemicals producer in the Middle East, lost 1.5 per cent.
In Kuwait, the index was dragged down by a 6.3 per cent drop in Gulf Bank’s shares, while National Industries fell 6.2 per cent.
“The outlook for major Middle Eastern indexes remain extremely grim as the ongoing tension between arch-rivals US and Iran is unlikely to die down any time soon,” said Vijay Valecha, chief investment officer at Century Financial in Dubai.
“Over the entire medium to long-term horizon, earnings are likely to get impacted … especially in sectors such as real estate and banking.”
However, should the oil price rally that began on Friday continue, stocks of Aramco and petchems producers are likely to rise in values.
On Friday, global stocks were lower with the S&P 500, the main equities benchmark in the US, dropping 0.7 per cent, its biggest loss in a month. The Dow Jones Industrial Average fell 233.92 points, or 0.81 per cent. The Nasdaq Composite index also dropped 71.42 points, or 0.8 per cent.
Most Asian stocks also closed lower with Hong Kong’s Hang Seng Index down 0.3 per cent.
The Japanese yen, traditionally considered a safe haven currency, rose 0.5 a per cent against the dollar to a two-month high, while in commodities gold prices climbed, racing past the key $1,550 an ounce level, as investors swapped looked for safer bets.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 27,348.20.
The projected upper bound is: 29,299.90.
The projected lower bound is: 27,669.71.
The projected closing price is: 28,484.81.
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 26 white candles and 24 black candles for a net of 2 white candles.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 70.7594. This is not an overbought or oversold reading. The last signal was a sell 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 68.42. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 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 149.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 13 period(s) ago.
Rex Takasugi – TD Profile
HANG SENG INDEX closed down -92.020 at 28,451.500. Volume was 16% above average (neutral) and Bollinger Bands were 69% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 28,105.63 27,122.50 27,557.21
Volatility: 11 19 19
Volume: 1,324,969,472 1,475,110,400 1,689,649,280
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.
HANG SENG INDEX is currently 3.2% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into .HSI (mildly bullish). Our trend forecasting oscillators are currently bullish on .HSI and have had this outlook for the last 11 periods.
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