Hong Kong: HANG SENG INDEX (.HSI) shares start with gains

Hong Kong: HANG SENG INDEX (.HSI) shares start with gains

Hong Kong: HANG SENG INDEX (.HSI) shares start with gains

Hong Kong stocks kicked Monday off on a positive note, boosted by hopes that coronavirus infections are beginning to plateau.

The Shayne Heffernan Idea

Low valuations don’t constitute a reason for buying, but extreme low ones may do. “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 I recommend adding Hong Kong stocks in the second quarter.” Shayne Heffernan PhD in Economics

The battered valuation prompted Heffx to describe it as a “golden” buying opportunity.

Why This Matters

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.

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 25,833.28.

The projected lower bound is: 22,887.20.

The projected closing price is: 24,360.24.

Candlesticks

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 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).

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

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 52.4238. This is not an overbought or oversold reading. The last signal was a sell 2 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 52.77. 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 17 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 80. This is not a topping or bottoming area. The last signal was a sell 0 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 buy 15 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed up 41.680 at 24,421.680. Volume was 79% below average (consolidating) and Bollinger Bands were 11% narrower than normal.

Open         High        Low         Close         Volume
24,503.561   24,503.561  24,225.551  24,421.680    444,756,640
Technical Outlook
Short Term:        Overbought
Intermediate Term: Bullish
Long Term:         Bearish
Moving Averages: 10-period         50-period       200-period
Close:           24,089.81         25,092.01       26,593.52
Volatility:      23                40              27
Volume:          1,801,077,248     2,531,269,632   1,812,498,304

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 8.2% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 4 periods.

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