Hong Kong: HANG SENG INDEX (.HSI) worries are still hanging over the city after its economy plunged into recession
After a year framed by local unrest and the U.S.-China trade war, investors in Hong Kong’s financial markets are more sanguine going into 2020.
The city’s Hang Seng Index has rallied 7.1% in December, among the world’s top major benchmarks. Elevated local borrowing costs have put the Hong Kong dollar on pace for its best month since 2003 even as some analysts doubt the strength will stick.
Worries are still hanging over the city after its economy plunged into recession, and as protests continue following a landslide for pro-democracy candidates in November. But for Hong Kong markets, helping sentiment this month was an initial trade agreement between Washington and Beijing which helped power a return to risk assets globally and sent the S&P 500 to new all-time highs in the U.S.
The Hang Seng Index lost 0.4% on Tuesday on volume that was 21% lower than the 30-day average.
“It’s been a worse-than-expected year for Hong Kong’s financial markets due to the political events,” said Sam Chi Yung, a Hong Kong-based strategist with Springwaters Financial Group Co. “Since the city’s tension has eased recently and more trade deals are expected to be signed next year, the market is set for a good start in 2020. Yung is expecting a “good rebound” for the Hang Seng in the first half.
Despite the December rally, the Hong Kong benchmark is still trailing most major stock indexes around the world this year. After the Hang Seng’s strong start to 2019, occurring as mainland equities surged, markets were hit by inflamed trade tensions, an extended drop in the yuan and worsening economic data in China. Chinese firms account for more than half the market value of Hang Seng components.
Here’s What Analysts Say About Hong Kong Stocks for 2020
While there’s anticipation the year-end rally for equities can persist, some market watchers believe the Hong Kong dollar’s 0.5% gain for December will prove short-lived. That as the currency is about to end a year in the strong half of its trading band for the first time since 2016.
Longest Hong Kong Dollar Rally in Eight Years Is Burning Shorts
Local interbank lending rates have been elevated since November, triggered by what many consider a transitory surge in demand for cash, such as banks hoarding funds for regulatory checks at the end of the year. The higher rates helped outstrip the income a trader can expect from U.S. dollars, undermining the so-called carry trade. Investors selling the city’s dollars and buying greenbacks has been a profitable move for years.
“The Hong Kong dollar should weaken past the year-end, as local interest rates should soften,” said Stephen Chiu, an Asia foreign-exchange and rates strategist at Bloomberg Intelligence. “A more sustained retreat in Hong Kong rates and the city’s currency could come after” the Lunar New Year holiday in late January, he added. Then, too, typically sees a seasonal increase for cash.
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 27,251.25.
The projected upper bound is: 29,021.15.
The projected lower bound is: 27,417.16.
The projected closing price is: 28,219.15.
A black body occurred (because prices closed lower 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 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 82.2708. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 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 66.61. 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 88. This is not a topping or bottoming area. The last signal was a sell 0 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 11 period(s) ago.
Rex Takasugi – TD Profile
HANG SENG INDEX closed down -129.641 at 28,189.750. Volume was 44% below average (neutral) and Bollinger Bands were 63% 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: 27,941.30 27,052.84 27,560.88
Volatility: 12 19 19
Volume: 1,353,669,376 1,464,737,664 1,690,034,816
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 2.3% above 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 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 9 periods.
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