Shanghai: SSE Composite Index (.SSEC) stocks fall, as loan prime rate cuts weigh on banks and US-Beijing tensions flare up over protests
China and Hong Kong stocks fell Wednesday on investors’ concerns about banks’ profitability amid rate cuts in the mainland and a flare-up in Washington-Beijing tensions over legislation headed to US President Donald Trump in support of Hong Kong protesters.
In the mainland, one-year and five-year loan prime rates (LPR) were both cut by a small 5 basis points, to 4.15 per cent from 4.2 per cent, and 4.8 per cent from 4.85 per cent, respectively. It was the third cut this year for the 1-year rate, but the first for the 5-year rate, which is often used in mortgage lending in China. That weighed down banks.
The Shanghai Composite Index snapped a two-day winning streak, closing down 0.8 per cent at 2,911.05. The loss in the CSI, which tracks blue chips listed on Shanghai and Shenzhen, was bigger, with it declining 1 per cent to 3,907.86.
In the mainland, the driver of the day was the loan prime rate move.
Launched in August, the LPR is the average of the 18 reporting banks’ lending rate to their highest quality borrowers. It is linked to the cost of medium-term lending facility and used to price loans to both individuals and businesses.
China Construction Bank fell 1.1 per cent to 7.11 yuan, China Merchants Bank declined 2.5 per cent to 36.58 yuan, Industrial Bank lost 3.4 per cent to 19.16 yuan, Industrial and Commercial Bank of China lost 0.9 per cent to 5.8 yuan, and the Agricultural Bank of China dropped 0.6 per cent to 3.58 yuan.
In Shenzhen, Ping An Bank also fell 3.4 per cent to 15.85 yuan.
Selective mainland financials also dropped: Ping An Insurance slid 0.5 per cent to HK$91.85, and China Construction Bank slipped 0.3 per cent to HK$6.4.
But capping the losses in the Shenzhen Component Index, which dropped 0.8 per cent at 9,809.05, were selective communication technology stocks.
NavInfo, which develops navigation software, surged to the 10 per cent upside limit to 16.38 yuan, after it announced it will work with Huawei on its autonomous driving testing. Wonders Information, a smart city service provider through using internet, clouding computing and big data, also surged 10 per cent to 17.97 yuan.
In Hong Kong, Chinese developers benefited from the cut in the five-year loan prime rate.
China Resources Land rose 0.73 per cent to HK$34.5, while China Overseas Land & Investment rose 0.4 per cent to HK$26.6.
But leading the index lower was insurer AIA, which declined 2.1 per cent to HK$77.8.
“The Hang Seng Index is taking a breather as the 1.6 per cent gain on Tuesday was overdone. But the sentiment in Hong Kong has actually slightly improved, as news about US president Donald Trump threatening higher tariffs on Chinese goods if no deal is concluded did not cause a big move in the index today,” said Wong of Ample Finance.
The retail offering of Alibaba’s mega US$13 billion IPO finished at noon Wednesday, reducing some downward pressure for the Hang Seng Index caused by investors who cashed out of blue chips to buy Alibaba shares, said Wong.
For this week, Wong expects that the Hang Seng Index will hover between the 27,090 -26,790 level.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 2,938.75.
The projected upper bound is: 2,974.68.
The projected lower bound is: 2,846.66.
The projected closing price is: 2,910.67.
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 27 white candles and 23 black candles for a net of 4 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 76.0930. This is not an overbought or oversold reading. The last signal was a buy 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 43.96. 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 41 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 -46. This is not a topping or bottoming area. The last signal was a buy 2 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 7 period(s) ago.
Rex Takasugi – TD Profile
SSE COMPOSITE closed down -22.937 at 2,911.053. Volume was 16% below average (neutral) and Bollinger Bands were 30% narrower 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: 2,922.84 2,960.65 2,943.87
Volatility: 14 14 23
Volume: 13,659,791,360 16,457,197,568 23,048,142,848
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.
SSE COMPOSITE is currently 1.1% 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 .SSEC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .SSEC and have had this outlook for the last 30 periods.