Hang Seng raised 5.1%
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This week, the Hang Seng Index rose by 5.1%, while the Hang Seng Tech Index gained 6.4%. Due to the Mid-Autumn Festival, the market was closed on Wednesday, with the remaining four trading days all posting gains. The biggest positive this week was the Federal Reserve’s announcement of a 50 basis point rate cut. Since Hong Kong operates under a linked exchange rate system, it is expected to follow the Fed in lowering interest rates, which will in turn reduce local financing costs and provide a positive boost to the Hong Kong stock market, particularly the real estate sector. Additionally, during the Mid-Autumn holiday, the surge in tourism and the significant growth in express delivery volumes are likely to enhance the earnings outlook for related industries, supporting further market gains.
In the U.S. stock markets, as of this Thursday, both the S&P 500 and Dow Jones reached all-time highs, rising by 1.6% and 1.5% respectively, while the Nasdaq gained 1.9%. On Wednesday, the Federal Reserve announced after its FOMC meeting that the target range for the federal funds rate would be lowered from 5.25%-5.50% to 4.75%-5.0%, marking the first rate cut since the current tightening cycle began in March 2022, with a reduction of 50 basis points. From March 2022 to July of last year, the Fed raised rates 11 times in total, increasing by 525 basis points. Since July of last year, rates have remained at their highest level since 2001. During the press conference that followed, Fed Chair Jerome Powell emphasized that despite this 50-basis-point rate cut, the Fed would not continue cutting rates at this pace in the future, and investors should not interpret this as a new policy norm. His remarks triggered market volatility, causing the three major indices to reverse gains, U.S. Treasury yields to regain their losses, and gold to spike before pulling back. On the employment front, data from the U.S. Department of Labor showed that initial jobless claims for the week ending September 14 totaled 219,000, the lowest since May and below expectations. For the week ending September 7, continuing jobless claims fell to 1.83 million, a decrease of 14,000, primarily due to Minnesota allowing non-teaching staff to apply for unemployment benefits during the summer. Although labor demand has softened, jobless claims remain at low levels, indicating a healthy labor market.
There are only three trading days this week. The CSI 300 rose 1.3% this week on volume below the average and lower than the last week. The market condition was Rally Attempt. The index rebounded quickly after hitting a new recent low during the session on Wednesday. Support turned to Wednesday’s new low of 3146 and resistance remains at the 21DMA. Both the one-year and five-year Loan Prime Rates (LPRs) remained unchanged in September. On Wednesday afternoon, the Federal Reserve announced an interest rate cut of 50 basis points for the first time since March 2020, lowering the target range for the federal funds rate to 4.75%-5%, marking the start of a new U.S. interest rate cut cycle. Tensions in the Middle East intensified again this week with a succession of BP and walkie-talkie bombing terrorist attacks in Lebanon. Investors are advised to exercise caution and wait to take the index back up to the 21DMA.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 3.3% for this week. Our Hong Kong Model Portfolio rose by 3.9% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 533.2% vs. a 10.5% down for the Hang Seng.
The best performer in our Hong Kong 33 was TECHTRONIC IND(00669), it’s an investment holding company mainly engaged in the business of electric tool products. The stock gained 11.2% this week. EPS rating stands at 96, RS rating of 91, and A/D rating of B+.
Our Hong Kong Market Status are on an Confirmed Uptrend.
From a technical perspective, this week the Hang Seng Index not only broke above the 50-day moving average but also surged, reclaiming the 18,000-point level. It is now above all key moving averages, which are displaying a bullish alignment. In terms of trading volume, due to the suspension of Southbound trading on Monday and Tuesday, there was a slight volume contraction, but Thursday and Friday saw a significant increase in volume, with both price and volume rising together. The consecutive gains have shifted the Hong Kong stock market into an uptrend. Regarding Southbound funds, trading was only open on Thursday and Friday this week, with a total net inflow of HKD 6.003 billion. Overall, market sentiment has improved, boosted by positive catalysts. However, with the U.S. about to release the PCE data, which could have a potential impact on the market, investors should remain calm and rational, avoid blindly following trends, and focus on stocks with strong technical performance and better-than-expected earnings.
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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 September 20, 2024