Hong Kong: HANG SENG INDEX (.HSI) now trading below its net asset value for only the third time in almost 30 years
Hong Kong’s stocks are so beaten down that the Hang Seng Index is now trading below its net asset value for only the third time in almost 30 years.
The 50-member benchmark was valued as low as 0.92 times the book value in March, meaning the stock prices were below the stated values of the constituent companies. It was the third time the metric has dropped below 1, according to Bloomberg data that began to track the valuations in 1993. The Hang Seng last traded at 0.99 times the net asset value.
That is probably an auspicious omen for stocks, if history is any guide. When the Hang Seng’s price-to-book ratio was below 1 in 1998 and 2016, the equity gauge jumped at least 36 per cent in the following year.
The Hang Seng Index, which was developed by the bank of the same name in 1964, is the world’s only major equity benchmark that has dipped below the net asset value, as the coronavirus epidemic has swept through global financial assets. The multiple for the Standard &Poor’s 500 index is 2.89 times and that for the Shanghai Composite Index is 1.36 times.
The battered valuation prompted GF Securities to make a bullish call on the city’s stocks for the second quarter and Guosheng Securities to describe it as a “golden” buying opportunity.
“Low valuations don’t constitute a reason for buying, but extreme low ones may do,” said Liao Ling, an analyst at GF Securities in Shanghai. “The extremely low valuations have already implied pessimism about an overseas crisis scenario and worsening fundamentals. There’s no need to be overly pessimistic and we recommend adding Hong Kong stocks in the second quarter.”
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 25,432.58.
The projected upper bound is: 25,034.37.
The projected lower bound is: 21,954.47.
The projected closing price is: 23,494.42.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.
A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).
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 74.5098. This is not an overbought or oversold reading. The last signal was a sell 1 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 44.35. 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 5 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 54. This is not a topping or bottoming area. The last signal was a buy 5 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 3 period(s) ago.
Rex Takasugi – TD Profile
HANG SENG INDEX closed up 428.371 at 23,603.480. Volume was 39% above average (neutral) and Bollinger Bands were 102% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 22,830.80 25,911.07 26,847.36
Volatility: 64 40 26
Volume: 3,522,110,720 2,533,244,416 1,803,674,624
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.
HANG SENG INDEX is currently 12.1% below its 200-period moving average and is in an downward 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 moderate flows of volume out of .HSI (mildly bearish). Our trend forecasting oscillators are currently bearish on .HSI and have had this outlook for the last 44 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.