Jump to content

Can the Hang Seng extend its re-opening recovery?

Recommended Posts

As China’s rapid relaxation of its Covid Zero strategy continues, the recent market changes have caught analysts by surprise, however, the key question is: can the recovery be extended and what can we expect from the Hang Seng?

1670995869413.jpgSource: Bloomberg

 Tony Sycamore | Market Analyst, Australia | Publication date: Wednesday 14 December 2022 

China’s rapid and dramatic relaxation of its long-stated Covid Zero strategy in recent weeks has caught many by surprise.

The most significant is the ten easing measures announced last week that include dropping PCR tests for internal public transport and air travel. Along with home quarantines and an accelerated vaccination rollout for the elderly, the measures announced have effectively reopened the mainland economy.

Local observers report that international border controls are also being relaxed, adding to the positive story around Chinese facing equities. However, before getting too carried away, it would be prudent to warn that tomorrow, another round of dire Chinese activity data is set to be released.

What is excpected?

Industrial Production and Retail Sales are expected to fall in November, and Fixed Asset investment is expected to print flat. All of this points to growth in the Chinese economy falling to a sluggish 2.5% (4Q/4Q).

However, from this low base, there is enormous potential for growth to rebound back above 5% in 2023 if the re-opening is managed well. The bulk of next year’s growth rebound will come in the second half of 2023 as the re-opening gains traction.

Having witnessed first-hand the challenges that a pandemic reopening can present, it is understandable that some may prefer to wait on the sidelines and remain underweight in the Hang Seng and other Chinese-facing equity markets.

The peak period for infections is expected around the China New Year in late January. Combined with a low immunity rate and the possibility of an overwhelmed healthcare system, the likelihood of a bumpy re-opening cannot be discounted.

From its October, 14615 low, the Hang Seng index has bounced over 36% to its high today above 20,000 as investors continue to embrace the prospects of an economic re-opening in China aided by the tailwinds of government support for the property sector and monetary stimulus.

The break above the downtrend resistance coming from the July 2021 29,333 high, indicates that the Hang Seng is attempting to extend its move higher towards the next upside target, the June 22,423 high - over 13% away.

Hang Seng daily chart

1670995731108.pngSource: TradingView

Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 27/01/23 19:31
  • Posts

    • I am a beginner, and I must say, there are a lot of rules to the trading game that one must abide by if they want to be successful.   Here, the writer mentions several basic rules for day vs swing trading.  However, I find that often times, the reasoning for these rules is not as  obvious for a beginner as it may be for an expert.   The 'why' factor if I may. For example, why must you have a large capital to trade with as a day trader? Because your positions must be large so that a small change in price will be augmented and turned into a large profit. Also, with such high risk, the margin will be specially high, given the trader is taking up large positions at a time.  Without a large amount of capital, positions may be forced to close due to funds being below margin requirements.  When this happens, you can expect to lose tons of cash, fast.  I learned the hard way. All the best, David Franco      
    • USDJPY has been regaining ground this week, but inflation differentials and a three-month trend signal the potential for another turn lower Source: Bloomberg      Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 27 January 2023  USDJPY set for third monthly decline The USDJPY pair has been on the slide since its October high, with the historical 147.63 resistance level ultimately marking the end of the dramatic 21-month rally that saw the pair gain almost 50%. Much of that came through a period that saw US inflation soar as Japanese prices remain subdued. That disparity remains, but the direction of travel has certainly shifted as US CPI declines and Japanese price growth gradually ticks up. The overnight 4.3% figure for Tokyo core CPI represents a four-decade high, with the nationwide figures likely to follow on. The chart below highlights how USDJPY has been heavily correlated with the now tightening gap between US and Japanese inflation. However, it is more evident when shifting that inflation differential forward by seven-months. That close correlation highlights the potential for further downside as long as prices continue to trend in a similar manner. Source: ProRealTime Looking at the daily chart, the recent rebound has taken price up towards the top-end of a descending channel and Fibonacci resistance. This highlights the bearish pattern that has been playing out, with lower highs and lower lows in place in recent months. Unless we see price rise through trendline and 134.77 resistance, another turn lower looks likely for this pair. Source: ProRealTime
    • @MongiIG Hi - You recently covered Long NICKEL Trading the Trend and A. Rudolf did this morning but I see it is Closing only. Please clarify, Thanks D600
  • Create New...