Market update: HK/China equities search for upward momentum

[MongiIG]

The Hang Seng index’s rebound ran out of steam toward the end of last week; China data released last week showed the economy is yet to witness a solid recovery; outlook for and key levels to watch in the HSI and the CSI 300.

 

Source: Bloomberg

 

Hang Seng Index China Indices Shares Ichimoku Kinkō Hyō Investment

 Manish Jaradi | IG Analyst, Singapore | Publication date: Monday 16 October 2023 07:23

Hang Seng index runs out of steam

The Hang Seng index’s rebound early last week ran out of steam towards the end of the week, suggesting that a meaningful upward momentum is lacking in Hong Kong/China equities despite the support/stimulus measures in recent months. 

Economic data in recent weeks have raised hopes that economic growth in China could be bottoming – the Economic Surprise index has shown steady improvement since July. However, those hopes were dented after data last weeks showed persistent anaemic domestic demand and deflation.

Consensus economic growth for the current year is yet to turn around after being downgraded since Q2-2023.

Chinese policymakers have responded with a string of support/stimulus measures in recent months in an attempt to revive the faltering post-Covid recovery and a weak property sector. Most recently, media reports suggest China is considering creating a state-backed stabilisation fund to shore up confidence in equity markets.

Moreover, the world’s second-largest economy is considering raising its budget deficit for 2023 as the government prepares a fresh round of stimulus to boost the economy.

Hang Seng index monthly chart

 

Source: TradingView

Hang Seng index technical analysis

On technical charts, the Hang Seng index has rebounded in recent sessions, but it is too early to say if this time is different compared to the rebounds since Q2-2023.

At a minimum, the index needs to cross through a vital ceiling at the September high of 18,900, coinciding with the 89-day moving average and the upper edge of the Ichimoku cloud on the daily charts. 

Such a break would reduce the immediate downside risks and clear the way toward the June-July highs of around 20,300. For a reversal of the broader downtrend, it is important for the index to stop making new lows and break above 20,300.

Until then, risks remain toward the downside, initially toward the early-October low of 17,000, followed by the lower edge of a declining channel since early 20,300. 

Hang Seng index daily chart

 

Source: TradingView

CSI 300 technical analysis

From a broader trend perspective, the CSI 300 index continues to be weighed by stiff converged resistance, including the 89-week moving average, coinciding with the upper edge of the Ichimoku cloud on the weekly charts. There is a distinct shift in the trend compared with 2019-2022, where the index was holding above the cloud and the moving average (MA). 

For the immediate downward pressure to fade, the index needs to break above 4,000-4,270, including the February high of 4,270, the cloud and the MA, the bias remains weak. Any break below strong support on a horizontal trendline since 2019 (at about 3,500) could clear the path toward the 2019 low of 2,935. 

CSI 300 index weekly chart

 

Source: TradingView

 

 

 

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