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Will HSI finish strong for Q2?
已更新
2 weeks ago we discussed why the HSI rebound rally would be slowed by profit takers (tradingview.com/chart/HSI/TtkJ3jZJ-HSI-rebound-rally-will-be-slowed-by-profit-taker/). The choppiness in the index we saw for the past 2 weeks was also due to the discrepancy between the China and US equity market. While the SSE Composite 
000001 still held above 3300 level, the US equity indexes all broke through the 2022-May low due to the increasing worries of inflation and recession risk. Hong Kong as a market sitting in between the east and the west taking different messages from each side, fluctuation is inevitable in such a situation.
Strong rebound in the US equity market last Friday
In the recent Friday session (Jun-24), the US equity markets showed a strong rebound and paired back most of the losses from the past 2 weeks and stood above the May-2022 low again. That means the breakout to the downside we saw last week is likely to be a false breakout. While the main direction of the US equity market is still downward, it could take a break at this price level (to accumulate more energy before diving further). This break also means alignment between the US and China markets, which create the necessary condition for Hong Kong HSI to continue the rally to the upside.
Xi Jinping is joining the HKSAR 25th anniversary event
Next Friday, July-1 is the 25th Anniversary of the establishment of the HKSAR (also known as reunification with China). Last week Xi Jinping has confirmed that he will physically attend the anniversary event, which marks the first time for Xi to step out of mainland China since Covid outbreak in 2020. This gesture re-emphasizes the importance of Hong Kong to China.
Reopen to revive Hong Kong Economy
Back in early June the Liaison Office of Central People’s Government (LOCPG, Beijing’s main body overseeing Hong Kong) had hosted a meeting with foreign business chambers to collect “suggestion” and “advice” on how to revive the Hong Kong business environment. All chambers had expressed that the existing quarantine measure is the biggest roadblock for local business. With the new chief executive of Hong Kong, John Lee coming onboard next month, all eyes will be on him to iron out the reopening details of Hong Kong with mainland China and the rest of the world. Personally I am optimistic about the relaxation of quarantine measures as soon as the coming Q3. Reopening of Hong Kong is actually a one-stone-two-birds move for China. First, it can serve as a welcoming gift for John Lee from China, to help him rebuild trust between the government and the people in the city. Second, reviving Hong Kong economy, especially its financial market, is one of the crucial steps for China to save its downturning economy. I believe the announcement of the reopening would be one of the major events in Q3 that send the Hong Kong HSI Index to the upside.
Technical Discussion
HSI index retested the 20 days and 50 days moving average without going through, reconfirming the support at these levels. The strength also pulled the 20 days moving average above the 50 days creating a bullish technical signal. If we follow the upside rally narrative, below are the levels the index must break through to confirm the sustainability of the trend:
However, one needs to be extra cautious if the index drops below the low of the choppy zone at 20697 again, as this would mean the rally narrative discussed above is still premature. Long positions in the index as well as other Hong Kong listed stocks should be trimmed partially for risk management.
HSI rebound rally would be slowed by profit takers (tradingview.com/chart/HSI/TtkJ3jZJ-HSI-rebound-rally-will-be-slowed-by-profit-taker/). The choppiness in the index we saw for the past 2 weeks was also due to the discrepancy between the China and US equity market. While the SSE Composite 000001 still held above 3300 level, the US equity indexes all broke through the 2022-May low due to the increasing worries of inflation and recession risk. Hong Kong as a market sitting in between the east and the west taking different messages from each side, fluctuation is inevitable in such a situation.Strong rebound in the US equity market last Friday
In the recent Friday session (Jun-24), the US equity markets showed a strong rebound and paired back most of the losses from the past 2 weeks and stood above the May-2022 low again. That means the breakout to the downside we saw last week is likely to be a false breakout. While the main direction of the US equity market is still downward, it could take a break at this price level (to accumulate more energy before diving further). This break also means alignment between the US and China markets, which create the necessary condition for Hong Kong HSI to continue the rally to the upside.
Xi Jinping is joining the HKSAR 25th anniversary event
Next Friday, July-1 is the 25th Anniversary of the establishment of the HKSAR (also known as reunification with China). Last week Xi Jinping has confirmed that he will physically attend the anniversary event, which marks the first time for Xi to step out of mainland China since Covid outbreak in 2020. This gesture re-emphasizes the importance of Hong Kong to China.
Reopen to revive Hong Kong Economy
Back in early June the Liaison Office of Central People’s Government (LOCPG, Beijing’s main body overseeing Hong Kong) had hosted a meeting with foreign business chambers to collect “suggestion” and “advice” on how to revive the Hong Kong business environment. All chambers had expressed that the existing quarantine measure is the biggest roadblock for local business. With the new chief executive of Hong Kong, John Lee coming onboard next month, all eyes will be on him to iron out the reopening details of Hong Kong with mainland China and the rest of the world. Personally I am optimistic about the relaxation of quarantine measures as soon as the coming Q3. Reopening of Hong Kong is actually a one-stone-two-birds move for China. First, it can serve as a welcoming gift for John Lee from China, to help him rebuild trust between the government and the people in the city. Second, reviving Hong Kong economy, especially its financial market, is one of the crucial steps for China to save its downturning economy. I believe the announcement of the reopening would be one of the major events in Q3 that send the Hong Kong HSI Index to the upside.
Technical Discussion
HSI index retested the 20 days and 50 days moving average without going through, reconfirming the support at these levels. The strength also pulled the 20 days moving average above the 50 days creating a bullish technical signal. If we follow the upside rally narrative, below are the levels the index must break through to confirm the sustainability of the trend:
- 22142: 09-Jun, choppy zone peak
- 22523: 04-Apr, rebound peak from market plummet in Mar-2022
However, one needs to be extra cautious if the index drops below the low of the choppy zone at 20697 again, as this would mean the rally narrative discussed above is still premature. Long positions in the index as well as other Hong Kong listed stocks should be trimmed partially for risk management.
註釋
Today the Chinese Health authorities announced that they will halve the quarantine for overseas visitors from 14+7 to 7+3. Travel related stocks sharply break to the upside- 9961 Trip.com
- 780 Tongcheng Travel
- 293 Cathay Pacific
The index also moving toward the upside as the news break. The remaining 2 trading days of the month will be interesting to watch if the index can close above the major resistance at 22500
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