Hang Seng fell 1.0%
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This week, the Hang Seng Index fell by 1.0%, and the Hang Seng Tech Index declined by 1.4%. Although last Friday brought positive news and signs of improving liquidity, foreign investors in Hong Kong stocks generally believe that these favorable factors are already priced in. Meanwhile, a buoyant sentiment in the U.S. stock market has attracted significant capital inflows, leaving less funding returning to Hong Kong stocks than expected. Additionally, geopolitical tensions in regions like the Middle East, eastern Ukraine, and the Korean Peninsula have heightened capital insecurity, contributing to Monday’s drop in the Hong Kong market. The market saw some recovery as positive developments emerged, including improvements in China-India relations, favorable policies for automobile consumption, and supportive measures from the National Development and Reform Commission. However, renewed volatility was triggered by uncertainties surrounding the U.S. presidential election, the continued strength of the U.S. dollar index, and the lack of major positive news from the BRICS leaders’ summit.
On the U.S. stock market,as of this Thursday, the S&P 500 index fell by 0.9%, the Nasdaq index rose by 0.8%, and the Dow Jones index dropped by 2.1%. According to official data from the U.S. government, the fiscal deficit for 2024 reached $1.8 trillion, the third highest in history, only behind the two years during the pandemic, with the deficit exceeding 6% of GDP for two consecutive years. High interest rate policies have become the main driver of the rising deficit, with the government’s interest expenses on debt in fiscal year 2024 increasing by $254 billion year-on-year, reaching $1.1 trillion, the highest share of GDP since 1998. As the U.S. election approaches, according to the latest poll data from The New York Times as of the 24th, Harris has a 49% approval rating, while Trump has 48%. On the macroeconomic front, data released by S&P Global showed that the preliminary Markit Manufacturing PMI for October was 47.8, the Services PMI was 55.3, and the Composite PMI was 54.3, all reaching two-month highs and exceeding expectations. Regarding rate cuts, several Federal Reserve officials expressed support for gradual rate cuts this Monday, believing that caution and flexibility should be maintained during the process to adapt to the changing economic environment. According to the CME’s “FedWatch” tool, the market currently expects a 95.3% chance that the Federal Reserve will cut rates by 25 basis points at the next meeting. In the labor market, data from the U.S. Department of Labor showed that the number of initial jobless claims for the week ending October 19 was 227,000, lower than expected and previous figures, while the number of continuing claims increased to nearly 1.9 million, the highest level in nearly three years.
The CSI 300 rose 0.8% this week on volume above the average but lower than the last week. The market condition was Confirmed Uptrend. The index was relatively flat this week. Support is at the Oct. 18 low of 3,765 and resistance is at the Oct. 8 high of 4,450. The one-year and five-year Loan Prime Rates (LPRs) were reduced by 25 basis points each, with the five-year LPR reduced from 3.85 percent to 3.6 percent and the one-year LPR reduced from 3.35 percent to 3.1 percent. Investors can keep an eye on the U.S. presidential election as it approaches. At the same time, we recommend investors to pay attention to the third quarter earnings reports, and pick stocks with good technicals and fundamentals.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.8% for this week. Our Hong Kong Model Portfolio fell by 1.2% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 599.0% vs. a 0.9% up for the Hang Seng.
The best performer in our Hong Kong 33 was GEELY AUTO(00175), it’s a leading Chinese automobile manufacturer. The stock gained 19.4% this week. EPS rating stands at 94, RS rating of 95, and A/D rating of A+.
Our Hong Kong Market Status are on an Confirmed Uptrend.
From a technical perspective, the Hang Seng Index failed to hold above the 21-DMA this week, and trading volume further declined compared to last week. Regarding the Southbound inflow via the HK-China Stock Connect, net inflows reached HK$36.468 billion this week, significantly higher than last week, continuing the previous trend of sustained net inflows and providing critical liquidity support to the Hong Kong market. Monthly data also show consecutive months of net buying via Southbound flows. Next week, the release of China’s October PMI data will be a focal point as it serves as the first key economic indicator following recent government stimulus measures. Its results, especially if indicating economic improvement, could substantially impact market sentiment. Overall, the market currently faces substantial uncertainty, with a complex and rapidly shifting external environment. Given these factors, market trends are difficult to predict. Thus, it is advisable for investors to remain calm and rational, avoid impulsive decisions, and focus on stocks with earnings that exceed expectations and strong technical setups.
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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 October 25, 2024