The Market Continued Its Upward Momentum, Achieving a Fourth Consecutive Weekly Gain

Hang Seng raised 2.1%

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This week, the Hang Seng Index rose by 2.1%, and the Hang Seng Tech Index increased by 2.6%. The market continued its upward momentum, achieving a fourth consecutive weekly gain. In terms of news, last Friday, Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Symposium suggested a possible rate cut in September. With the expectation of a U.S. rate cut, there is potential for capital from Chinese companies’ overseas investments to flow back to China, positively impacting the Hong Kong stock market. Additionally, a major rumor on Friday reignited the real estate sector, causing property stocks to surge. At the same time, some prominent companies reported better-than-expected Q2 earnings, such as Meituan, and Apple’s strong order forecasts for the iPhone 16 boosted related stocks in the supply chain, further bolstering market confidence. Although some pullback occurred on Wednesday due to international political tensions, disappointing earnings from individual companies (e.g., Shanxi Fenjiu), and concerns over a sluggish consumer market, the overall rebound trend remains robust.

U.S. Stock Market, as of this Thursday, the S&P 500 index declined by 0.8%, while the Nasdaq dropped 2.0%, falling below its 50-DMA. In contrast, the Dow Jones Industrial Average rose by 0.4%, reaching a new all-time high. Last Friday, Federal Reserve Chairman Jerome Powell delivered a significant speech at the Jackson Hole Economic Symposium, stating unequivocally that “the time for policy adjustments has arrived. The policy direction is clear, and the timing and pace of rate cuts will depend on forthcoming data, changes in the economic outlook, and the balance of risks.” This statement has largely solidified market expectations for a rate cut in September. Although Powell’s remarks were somewhat dovish, providing short-term clarity to financial markets, they offered little guidance on the Fed’s course of action after the September meeting. The U.S. Department of Commerce released revised data showing that the annualized q/q growth rate of U.S. GDP for Q2 was 3%, exceeding both the initial estimate and prior figures. The overall PCE price index for Q2 was revised down slightly to 2.5% annualized, while the core PCE price index was also revised down slightly to 2.8%, coming in below expectations. However, the overall PCE index was significantly revised up from an initial estimate of 2.3% to 2.9%, far surpassing market expectations. Data from the U.S. Department of Labor showed that initial jobless claims for the week ending August 24th stood at 231,000, lower than both market expectations and the previous week’s figure. However, continuing claims for the week ending August 17th increased slightly to 1.868 million, reaching their highest level since November 2021.

The CSI 300 fell 0.2% this week on volume above the average and higher than the last week. The market condition was Downtrend. This week’s index pulled up strongly on Friday, reaching the 21DMA and volume zoomed significantly. Support is at Thursday’s low of 3277.7. Resistance is still at the 21DMA. The medium-term lending facility (MLF) was left unchanged at 2.3% in August. Industrial corporate profits rose 3.6% year-on-year in January-July, higher than the previous value. Investors are advised to take a cautious approach. The daily northbound inflow/outflow data from August 19th onwards will not be published.

Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 fell by 1.4% for this week. Our Hong Kong Model Portfolio rose by 0.7% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 531.2% vs. a 11.8% down for the Hang Seng.

The best performer in our Hong Kong 33 was CHINA TAIPING(00966), it’s is an investment holding company primarily engaged in the insurance business. The stock gained 19.5% this week. EPS rating stands at 68, RS rating of 93, and A/D rating of A.

Our Hong Kong Market Status are on a Confirmed Uptrend. 

From a technical perspective, the Hang Seng Index has established an upward trend, rising for four consecutive weeks. This trend has led the Hang Seng Index to break through key moving averages, including the 5-D, 21-D, 50-D, and 200-D MA, and it is approaching the 18,000-point mark. In terms of trading volume, there was a slight increase in volume on Thursday, with a significant surge on Friday. However, the trading volume on the other three days was below the 50-D average level. Overall, the volume performance was better than in previous weeks but still somewhat insufficient. Regarding the Southbound inflow via the HK-China Stock Connect, there was a net inflow of HKD 4.949 billion this week, which is relatively low for a weekly net inflow. Next week’s release of the August Caixin Manufacturing PMI data could potentially impact the market, depending on whether it returns to above the neutral line. Additionally, a rebound in late April this year also experienced a pullback after four consecutive weeks of gains. Currently, the market shows some weakness in trading volume, but the moving averages are performing well. It is essential to closely monitor market trends going forward, as a breach below the 50-DMA could signal the end of this rebound. Therefore, we should remain calm, avoid blind speculation, and focus on stocks with strong earnings surprises and robust technical performance.

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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 August 30, 2024

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