Hang Seng fell 1.0%
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This week, the Hang Seng Index fell by 1.0%, while the Hang Seng Tech Index dropped by 1.9%. After four days of range-bound trading, Hong Kong stocks experienced a “Black Friday” decline, weighing on the week’s overall performance. Several factors may have contributed to the downturn. First, the RMB faced short-term pressure as the U.S. Dollar Index hit its highest level since October 2023, with the offshore RMB against the USD reaching its a new low since August 1 this year. This heightened the risk of capital outflows, putting pressure on the stock market. Second, despite the Ministry of Commerce introducing measures to stabilize foreign trade growth, concerns over potential trade frictions lingered, undermining investor confidence. Furthermore, heightened international tensions exacerbated market risk aversion. The escalation of the Russia-Ukraine conflict stoked fears, while war-related remarks from North Korea’s leader added to regional security concerns. Lastly, Texas Governor’s directive for institutions to divest from Chinese venture investments and halt new investments dealt a blow to U.S.-China economic cooperation, further dampening market sentiment.
As for U.S. stocks, as of Thursday, the S&P 500, Nasdaq, and Dow Jones indexes rose by 1.3%, 1.6%, and 1.0% respectively, all supported by their 21-DMA. In terms of macroeconomic data, data from the U.S. Department of Commerce showed that retail sales in October, not adjusted for inflation, grew by 0.4% m/m, better than expected. The September data was significantly revised up to 0.8%, but the August data was revised down to a decline of 0.1%. Combined with last week’s higher-than-expected CPI and PPI data, these data may prompt the Federal Reserve to be cautious in subsequent interest rate cuts. In terms of the labor market, data from the U.S. Department of Labor showed that the number of first-time applications for unemployment benefits fell by 6,000 to 213,000 in the week ended November 16, the lowest level since April this year, lower than expected and the previous value. However, the number of continuing unemployment claims increased by 36,000 in the week ended November 9, reaching 1.908 million after seasonal adjustment, the highest in three years. Analysts believe that if the U.S. labor market remains strong and inflation progresses slowly, Michael Barr, a member of the Federal Reserve Board and vice chairman for financial regulation, may oppose a rate cut in December. According to the CME Federal Reserve interest rate monitoring tool, as of November 21, U.S. time, the probability of a 25bp rate cut in December has dropped from 72.2% a week ago to 59.4%.
In terms of A-shares, the CSI 300 Index fell 2.6% this week, attempting to break through the 21-DMA but ultimately failing. Trading volume decreased from last week and remained below the 50-day average. The market Condition is an Uptrend Under Pressure, with the support level at the October 18 low of 3765 points and the resistance at the 21-DMA. Last Friday night, the CSRC(China Securities Regulatory Commission) issued and implemented the “Guidelines for the Supervision of Listed Companies No. 10 – Market Capitalization Management,” which emphasizes reflecting investment value based on improving company quality and strictly prohibits illegal actions under the guise of market value management. Meanwhile, the Ministry of Finance and the State Administration of Taxation announced adjustments to the export tax rebate policy, removing rebates for aluminum, copper, and certain chemicals, and reducing the rebate rate for refined oil, photovoltaic, and battery products to 9%, effective from the 1st of next month. The Ministry of Finance’s data showed that China’s general public budget revenue increased by 5.5% y/y in October, with tax revenue up by 1.8%, marking the first positive growth this year. Additionally, the People’s Bank of China, authorized by the National Interbank Funding Center, announced that the 1-year LPR stands at 3.1%, while the 5-year LPR is 3.6%, both unchanged from the previous values. In addition, the Ministry of Commerce issued a set of “Policy Measures for Promoting Stable Growth in Foreign Trade,” which outlines continued efforts to advance the development of overseas smart logistics platforms. It also supports qualified regions in establishing cross-border e-commerce service platforms to help businesses connect with overseas legal, tax, and other related services. Regarding the international situation, the Russia-Ukraine conflict continues to escalate. Ukraine used the UK-supplied “Storm Shadow” cruise missiles to strike Russian targets for the first time. Russia claimed that Ukraine also launched attacks using U.S.-made missiles. Meanwhile, President Putin signed a decree approving a new version of Russia’s nuclear deterrence policy and tested new mid-range hypersonic missiles in its operations against Ukraine.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 1.0% for this week. Our Hong Kong Model Portfolio rose by 1.6% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 550.0% vs. a 5.8% down for the Hang Seng.
The best performer in our Hong Kong 33 was WASION HOLDINGS(03393), it’s a leading supplier of integrated solutions for intelligent metering, intelligent power distribution, and energy efficiency management in China. The stock gained 6.3% this week. EPS rating stands at 98, RS rating of 89, and A/D rating of C+.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, the Hang Seng Index remained under pressure this week, failing to mount a strong rebound against the 50-DMA and experiencing a significant drop on Friday. The support level is at the gap formed by the upward move on September 25, while the 50-DMA serves as a strong resistance overhead. In terms of trading volume, it remained subdued this week, around two-thirds of last week’s volume, and notably below the 50-day average volume. The Southbound inflow via the HK-China Stock Connect continued, with a total of HKD 28.327 billion net inflow, although the scale was slightly lower than last week. Overall, the market faces considerable uncertainty, including exchange rate fluctuations, unclear trade policies, international instability, and geopolitical risks. These factors, interwoven, make market trends difficult to predict, leading to cautious investor sentiment and a rise in risk aversion. Therefore, investors are advised to remain calm and respond rationally to market fluctuations, avoiding blind herd behavior and focusing on stocks with strong performance and solid technical setups that exceed expectations.
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Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
published on November 22, 2024