Hang Seng fell 2.3%
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This week, the Hang Seng Index fell by 2.3%, losing its 200-DMA, while the Hang Seng Tech Index dropped by 2.6%. Despite a brief rebound on Monday, fueled by the news of an interest rate cut by the central bank, this boost failed to sustain the market. Subsequently, the Hong Kong stock market declined in response to several negative factors, including disappointing second-quarter earnings reports from major U.S. tech companies, a sluggish global economy, and heightened geopolitical tensions. Although the government later introduced policies to support initiatives such as trade-in programs, vehicle scrappage, and new energy vehicles, which led to gains in those sectors, the overall performance of the Hang Seng Index remained lackluster. Next week, the release of China’s July Manufacturing PMI data will be closely watched to see if it meets expectations.
As of this Thursday, in the U.S. stock market, the S&P 500 index fell by 1.9%, and the Nasdaq index plummeted by 3.1%, both breaking below their 50-DMA. Meanwhile, the Dow Jones index dropped by 0.9% but found some support at its 21-DMA. On the macroeconomic front, data from the U.S. Bureau of Economic Analysis show that the initial estimate for Q2 real GDP grew at an annualized rate of 2.8%, significantly above the expected 2% and the previous quarter’s 1.4%. The Q2 core PCE price index increased at an annualized rate of 2.9%, surpassing the forecasted 2.7% but decelerating from the previous quarter’s 3.7%. Detailed data indicate that the main drivers of Q2 GDP growth were consumer spending, private inventory investment, and non-residential fixed investment. In June, U.S. durable goods orders unexpectedly fell sharply, with total orders down 6.6% m/m, well below expectations. This marked the first decline after four consecutive months of increases. Regarding employment, data from the U.S. Department of Labor show that initial jobless claims for the week ending July 20 were 235,000, lower than both the expected number and the previous week’s figure. However, despite the decrease, claims remained elevated, exceeding 220,000 for the ninth consecutive week. The four-week moving average of continuing claims rose to 1.8535 million, the highest level since December 2021.
The CSI 300 fell 3.7% this week on volume above the average and higher than the last week. The market condition was Rally Attempt. The index fell in quick succession this week, breaking below the July 9 low of 3,385 during the session. The next support turned to the February 2 low of 3,108. It now sits below all key moving averages. On July 22, the one-year and five-year Loan Prime Rates (LPR) were reduced by 10 basis points each. The five-year LPR was cut from 3.95 percent to 3.85 percent and the one-year LPR was cut from 3.45 percent to 3.35 percent. U.S. local time on July 21, incumbent U.S. President Joe Biden announced that he was withdrawing from the 2024 presidential election, instead supporting Vice President Harris as the Democratic presidential candidate. There are still many variables in the U.S. presidential election. Market sentiment is fragile and investors are advised to adopt a defensive strategy. Northbound outflow via the HK-China Stock Connect was RMB11.4B.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 1.0% for this week. Our Hong Kong Model Portfolio fell by 2.7% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 531.5% vs. a 16.6% 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 4.8% this week. EPS rating stands at 74, RS rating of 86, and A/D rating of A-.
Our Hong Kong Market Status are on a Downtrend.
From a technical perspective, the Hang Seng Index has broken below the crucial support level of the 200-DMA, with trading volume further shrinking compared to last week. The continued decline has shifted the market from an Uptrend Under Pressure to a Downtrend. Regarding the Southbound inflow via the HK-China Stock Connect, the trend of net inflows remains intact, marking 24 consecutive weeks of net inflows. This week, the net inflow totaled HKD 7.823 billion, a significant drop from the previous week. Amid market uncertainty, investors should remain calm and avoid following the crowd blindly. It is advisable to focus on stocks that have outperformed expectations and exhibit strong 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 July 26, 2024