Hang Seng fell 4.8%
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This week, the Hang Seng Index dropped sharply by 4.8%, while the Hang Seng Tech Index plunged 6.5%. The declines this week were primarily driven by drops on Tuesday and Friday. On Tuesday, the uncertainty surrounding an important meeting led to cautious sentiment and a dominant short-selling trend. Friday’s drop was influenced by multiple factors, including a significant decline in U.S. stocks, which affected major global equity markets and heightened investor risk aversion. Additionally, falling oil price expectations caused a broad decline in the ‘Big Three’ oil companies, while weakness in property stocks, gold stocks, the fruit supply chain, and coal stocks collectively contributed to a market sentiment that plummeted to its lowest point.
In the U.S. stock market, as of this Thursday, the S&P 500 index fell 0.8% after reaching a record high on Tuesday. The Nasdaq index underwent a significant adjustment this week, dropping 2.9%. The Dow Jones index performed strongly in the first three days of the week, repeatedly hitting record highs, but it saw a pullback after setting a new high on Thursday, ending the week with a cumulative gain of 1.7%. On the macroeconomic front, U.S. retail sales for June were flat month-over-month, better than expected; core retail sales rose 0.4%, marking the largest increase in three months and meeting expectations. According to the Federal Reserve’s Beige Book, most regions experienced modest to moderate economic growth recently, with seven districts reporting some increase in economic activity, while five districts noted stable or declining activity. Due to uncertainties related to the upcoming election, domestic policies, geopolitical conflicts, and inflation, economic growth is expected to slow over the next six months. Additionally, Federal Reserve Chairman Jerome Powell stated that rate cuts would not wait until inflation fully reaches the 2% target, which has further boosted expectations for a rate cut in September. The CME FedWatch Tool shows a 93.3% probability of a 25 basis point rate cut in September, and a 6.7% probability of a 50 basis point cut. On the employment front, initial jobless claims in the U.S. rose sharply to 243,000 last week, marking the largest increase since early May. Continuing claims for the week ending July 6 reached 1.867 million, the highest level since November 2021.
The CSI 300 rose 1.9% this week on volume below the average and lower than the last week. The market condition was Rally Attempt. The index continued to rally this week, regaining the 21DMA and 200DMA in quick succession. Resistance was at 50DMA and 100DMA. 2Q24 GDP rose 4.7% y/y, below both prior and expectations. Value added of above-scale industry in June rose 5.3% y/y, below the previous but above expectations. Fixed asset investment rose 3.9% y/y in January-June, below the previous but above expectations. Total retail sales of consumer goods rose 2.0% y/y in June, well below expectations of 4.0% and the prior value of 3.7%.Consumer data in June once again showed weakness. The twentieth session of the Third Plenary Session focused on deepening economic transformation. U.S. presidential candidate Donald Trump was boosted in morale after he successfully escaped assassination at a campaign rally in Pennsylvania on 13th June. The probability of Trump winning the presidential election can be greatly improved. Export concept stocks are under pressure due to fears of more aggressive tariff policies after he takes office. Market sectors are rotating rapidly. With earnings season underway, investors are advised to focus on stocks with good performance and technicals. Northbound outflow via the HK-China Stock Connect was RMB19.3B.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 4.2% for this week. Our Hong Kong Model Portfolio fell by 2.4% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 538.0% vs. a 14.6% down for the Hang Seng.
The best performer in our Hong Kong 33 was POWER ASSETS(00006), it’s an international energy investment company. The stock gained 4.0% this week. EPS rating stands at 74, RS rating of 82, and A/D rating of B+.
Our Hong Kong Market Status are on an Uptrend Under Pressure.
From a technical perspective, the Hang Seng Index failed to extend last week’s confirmed uptrend and did not attempt to break through the 50-DMA, entering a downward phase starting Monday. Trading volume increased compared to the previous week and slightly exceeded the 50-D average volume, with the market shifting from last week’s confirmed uptrend to an uptrend under pressure. Regarding the Southbound inflow via the HK-China Stock Connect, the net inflow trend remains strong, with net inflows continuing for 23 consecutive weeks. Additionally, as the market declines, the buying power of Southbound funds intensifies. This week, the total net inflow reached HKD 19.201 billion, more than double the amount of the previous week. Given the market uncertainties, investors should remain calm and avoid following trends blindly. It is also advisable to focus on stocks with performance exceeding expectations and strong technical indicators.
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published on July 19, 2024