Hang Seng fell 3.0%
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This week, the Hong Kong stock market was closed on Friday due to the typhoon. As of Thursday, the Hang Seng Index had fallen by 3.0%, while the Hang Seng Tech Index dropped by 2.0%, with both indices breaking below their 50-DMA. The overall performance of the Hong Kong stock market this week was weak, primarily driven by a combination of disappointing domestic economic data, pressure on the real estate sector, and volatile international geopolitical developments, resulting in a cautious market sentiment. On the domestic front, China’s August manufacturing PMI came in below expectations, further compounded by rumors that anti-corruption inspection teams have been deployed to certain state-owned enterprises, heightening investor concerns about the prospects of these companies. Meanwhile, data showed that sales for the top 100 real estate companies fell by 38.5% y/y in the first eight months, deepening worries about the outlook for the property sector. Additionally, ongoing discussions regarding the potential implementation of policies allowing mortgage refinancing for existing loans have raised concerns about potential adjustments to mortgage rates in the banking sector, prompting more cautious attitudes among investors toward the banking sector. On the international front, uncertainties surrounding internal U.S. conflicts, rising tensions in the South China Sea, and the ongoing conflict in the Middle East have further eroded market confidence. Moreover, the U.S. August ISM Manufacturing PMI also missed expectations, and shares of tech giant Nvidia plummeted due to an antitrust investigation. These events triggered a ripple effect that ultimately weighed on the Hong Kong stock market, exacerbating its downward pressure.
In the U.S. stock market, trading was halted on Monday due to Labor Day. As of Thursday this week, the S&P 500 has fallen by 2.6%, and the Nasdaq has dropped by 3.3%, both breaking below their 50-DMA. Meanwhile, the Dow Jones Industrial Average has declined by 1.9% and is finding support at the 21-DMA. On the macroeconomic front, data from the Bureau of Economic Analysis (BEA) indicates that the core Personal Consumption Expenditures (PCE) price index for July increased by 2.6% y/y, matching the previous value but slightly missing expectations. On a m/m basis, it rose by 0.2%, in line with both the previous value and expectations. Additionally, the core PCE’s three-month annualized growth rate is 1.7%, the lowest growth rate of the year. The overall PCE price index for July rose by 2.5% y/y, consistent with expectations and the previous value, while the m/m increase was 0.2%, higher than the previous value and in line with expectations. ISM data shows that the U.S. August ISM Manufacturing PMI came in at 47.2, higher than the previous value but below expectations. The ISM Services Index for August stood at 51.5, slightly above both the previous value and expectations. According to Markit, the final reading of the U.S. August Markit Manufacturing PMI is 47.9, lower than both the previous value and expectations. Conversely, the final reading for the Markit Services PMI in August is 55.7, slightly higher than both the previous value and expectations, marking the highest level in two and a half years. On the employment front, the Bureau of Labor Statistics (BLS) reported that the number of job openings (JOLTS) in July was 7.673 million, falling short of both the previous value and expectations. Data from ADP Research Institute and the Stanford Digital Economy Lab indicate that U.S. ADP employment increased by 99,000 in August, the lowest increase since January 2021, falling below both the previous value and expectations. Following the data releases, recession fears have resurfaced, and expectations for a significant rate cut by the Federal Reserve in September have intensified. According to the CME FedWatch Tool, the probability of a 25-basis point rate cut in September has decreased to 55%, while the likelihood of a 50 basis point cut has risen to 45%. Additionally, data from the Department of Labor shows that initial claims for unemployment benefits for the week ending August 31st were 227,000, below both the previous value and expectations. The unadjusted number of initial claims for unemployment benefits is at its lowest level in ten months. The number of continuing claims also dropped to a three-month low of 1.838 million, also below expectations. Nonfarm payroll data for August will be released on Friday evening; close attention is advised.
The CSI 300 fell 2.7% this week on volume below the average and lower than the last week. The market condition was Downtrend. The index continued to fall this week. Support is back to the February 2 low of 3108. Resistance remains at the 21DMA. The official manufacturing PMI came in at 49.1 in August, lower than both the previous reading and expectations and unchanged from February, which is the lowest level in 2024. The Caixin manufacturing PMI came in at 50.4, higher than the previous reading of 49.8, and back in expansion. Caixin manufacturing PMI was 50.4, higher than the previous value of 49.8, back to the expansion. It is recommended to pay attention to the U.S. non-farm payrolls data this Friday, or provide an important reference for the Fed’s path of interest rate cuts. Currently the market sentiment is low, investors are advised to take a cautious approach. The daily northbound inflow/outflow data from August 19th onwards will not be published.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 2.0% for this week. Our Hong Kong Model Portfolio fell by 2.2% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 518.4% vs. a 14.5% down for the Hang Seng.
The best performer in our Hong Kong 33 was CONANT OPTICAL(02276), it’s a leading manufacturer of resin eyeglass lenses in China. The stock gained 5.4% this week. EPS rating stands at 75, RS rating of 97, 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 fallen for four consecutive days this week. On Tuesday, it broke below the previous upward trendline, and on Wednesday, it gapped down and dropped below the 50-DMA support. In the short term, the market may enter a technical correction phase, with the next key support level at the 200-DMA. In terms of the Southbound inflow via the HK-China Stock Connect, the net inflow for the week totaled HKD 9.265 billion, a significant increase compared to last week. It’s worth noting that the Hong Kong stock market was closed on Friday due to the typhoon, while the A-share market showed a high open but closed lower. If there is a lack of positive news over the weekend, the Hong Kong market may face downward pressure at the beginning of next week. In the short term, the Hong Kong market may experience some downward pressure, and investors should remain calm, avoid following the crowd blindly, 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 6, 2024