Hong Kong: HANG SENG INDEX (.HSI) stock market index must be relevant
A proposal to include some of the largest Hong Kong-listed mainland companies on the Hang Seng Index is timely and should be welcomed. Companies such as smartphone maker Xiaomi and technology behemoth Alibaba have market capitalisation and high daily trading volumes that require their inclusion to keep the stock index relevant as a benchmark for investors. Even so, the planned overhaul is not without controversy and is currently under consultation.
The so-called blue chips represented on the index traditionally have their primary listing in Hong Kong and have equal voting rights, or “one share, one vote”. Yet, many big tech firms such as Alibaba – parent of the Post – are already listed overseas, usually in New York, and/or have unequal voting rights for different classes of shares. In fact, Alibaba was only allowed to list in Hong Kong in November, five years after its US$25 billion IPO in New York, after the index rewrote the listing rules for companies with unequal voting rights.
Alibaba, Xiaomi and Meituan-Dianping, the group-buying and discounts service company, together command almost HK$5.3 trillion (US$679 billion) in market value, which is equivalent to 56 per cent of the total market capitalisation of the Hang Seng Index’s 50 constituent members. The local stock index is already dominated by mainland firms, which account for 60 per cent of listings, 70 per cent of capitalisation and 80 per cent of trading volume.
The concerns raised in the consultation do not really affect retail investors, but rather professional fund managers who may want to have a say as large shareholders in a company. Unequal voting rights will rob them of the ability to make their voices heard. Yet some funds, especially passive index-tracking ones, are bound by their mandate to buy shares listed on benchmark indexes such as the Hang Seng. Also, activist managers, including some hedge funds, sometimes amass large positions in a company to take on its management, precisely the kind of intervention unequal share structures are set up to prevent.
There are good arguments supporting both sides, but the Hang Seng Index managers will have to bite the bullet and make a decision. It is simply not practical to exclude those large and heavily traded companies from a representative benchmark.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 27,646.16.
The projected upper bound is: 28,882.42.
The projected lower bound is: 27,093.76.
The projected closing price is: 27,988.09.
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 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.
A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 7 falling windows in the last 50 candles–this makes the current falling window even more bearish.
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 27.1394. This is not an overbought or oversold reading. The last signal was a sell 4 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 46.87. 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 12 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 -111.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 1 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 sell 0 period(s) ago.
Rex Takasugi – TD Profile
HANG SENG INDEX closed down -810.580 at 27,985.330. Volume was 47% above average (neutral) and Bollinger Bands were 21% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 28,662.15 27,482.86 27,533.61
Volatility: 23 21 19
Volume: 1,653,502,336 1,507,936,768 1,677,893,888
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 gapped down today (bearish) 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 1.6% above 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 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 23 periods.
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