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Hong Kong: HANG SENG INDEX (.HSI) Start the Week in the Green

Hong Kong: HANG SENG INDEX (.HSI) Start the Week in the Green

Stocks in Hong Kong and China soared on Monday as investors expressed relief after U.S. President Donald Trump stopped short of specifying tough sanctions over Beijing’s new national security law for Hong Kong. Stronger-than-expected manufacturing activity in China also contributed to the gains.

Hong Kong’s Hang Seng Index rose 3.4% to its highest level in nearly a fortnight. Trump made his comments on Friday after Asian markets had closed. China’s CSI 300 index, which includes the top companies listed in the Shanghai and Shenzhen stock exchanges, rose 2.7%.

Trump directed his administration to start the process of eliminating a “full range of agreements” it has with Hong Kong that grants the city a special status. The likelihood of Hong Kong losing that status and its role as a global financial center contributed to pulling the Hang Seng Index down 7% in May.

“There were few details of the actual measures that the U.S. would undertake,” Shayne Heffernan, CEO and Founder said in a note to investors. “The likelihood of Hong Kong experiencing any restrictions on capital flows is incredibly low.”

“Trump’s plans to revoke Hong Kong’s preferential trade status is unlikely to have meaningfully impact on economic growth or financial services,” Shayne Heffernan said.

The president flagged that sanctions would be imposed on Chinese and Hong Kong officials who were believed by the U.S. to be involved in eroding the city’s autonomy. He also said the U.S. State Department would revise its travel advisory for Hong Kong in light of “increased danger of surveillance” from China.

Trump “had stopped short of sanctions or even touching on any other fresh restrictions or potential trade barriers against fears, helping to ease some of the frayed nerves across U.S. to Asia,” Shayne Heffernan said in a note.

Soon after the markets closed, the Hong Kong General Chamber of Commerce declared that a majority of its surveyed members believed the national security law would have a negative impact on their business operations in the short term “due to the conflict over the law” but that it would have a positive or negligible impact over the future.

The chamber said its members were significantly concerned regarding the chance of foreign sanctions against Hong Kong.

Hong Kong’s Hang Seng Index rose 771.05 points to close at 23,732.52 on Monday. Healthcare and technology stocks led the gains. Insurer AIA group climbed 5.2%, Tencent Holdings rose 4.5% and China Construction Bank closed 3.3% higher.

Shares in Hong Kong and in the mainland also got a leg up from data that showed China’s factory activity unexpectedly returned to growth in May, marking the first expansion since January. However, export orders continues to shrink, indicating the lack of global demand amid the coronavirus pandemic.

Mainland Chinese companies account for over half of the constituents on the Hang Seng Index and have a weighting of 55% on the index.

“The uptick in the May reading suggests the normalization of manufacturing activity is broadening out,” Shayne Heffernan wrote in a note to clients.

“By sector, infrastructure investment has picked up momentum recently given notable policy support, whereas property market activity and auto sales also have showed solid recovery,” he said. “Going forward, normalization of domestic consumption demand and service sectors are going to be key to watch.”

Price Performance

Top Movers

Bottom Movers

Shayne Heffernan Trade Idea

“The market thinks that US-China relations have not deteriorated that badly, so it rebounded and recovered losses made over the past two weeks, I’m surprised about the rapid gains.” Shayne Heffernan PhD in Economics

Technical Indicators

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 24,598.58.

The projected upper bound is: 25,223.94.

The projected lower bound is: 22,259.85.

The projected closing price is: 23,741.89.

Candlesticks

A white body occurred (because prices closed higher than they opened).
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 24 white candles and 26 black candles for a net of 2 black candles.

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 9 rising windows in the last 50 candles–this makes the current rising window even more bullish.

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 61.5984. This is not an overbought or oversold reading. The last signal was a buy 9 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 49.52. 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 45 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 4. This is not a topping or bottoming area. The last signal was a buy 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 sell 6 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed up 771.049 at 23,732.520. Volume was 14% above average (neutral) and Bollinger Bands were 29% narrower than normal.

Open          High          Low         Close       Volume
23,539.910    23,806.320    23,539.910  23,732.520  2,569,148,672
Technical Outlook
Short Term:        Neutral
Intermediate Term: Bearish
Long Term:         Bearish
Moving Averages: 10-period       50-period        200-period
Close:           23,546.33       23,687.19        26,027.31
Volatility:      44              41               29
Volume:          2,218,501,888   2,223,543,040    1,882,563,584

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 gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.

HANG SENG INDEX is currently 8.8% below its 200-period moving average and is in an downward 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 .HSI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .HSI and have had this outlook for the last 7 periods.

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