Commentaries & Webinars

Market Commentary - For the week ending 07 October 2022

Hong Kong continues to release positive vibes as government eases social distancing measures. Government Advisor David Hui chips in with “0+0” plan. OPEC+ cuts daily crude oil production by 2 million barrels per day, White House calls it “hostile act”. Credit Suisse under scrutiny.

•    WTI crude oil in biggest weekly jump since Russia started its Special Military Operation.
•    GBPUSD shooting star-lookalike by end-of-week close.
•    XAUUSD back above 52-week low.
•    US Treasury 10 year yields little sign of easing at 3.88%.
•    Rate hike sentiment shifts towards 75 basis point hike by November Fed meeting following NFP data.
 

Hang Seng Index makes another new 52-week low at 16907 but closes week on a positive note at 17740, up 517 points or 3%. Based on observation from the weekly chart, this could place support potentially at 17000 and resistance at 18000 but extending up to previous low of 18235.5 printed in March this year. The index is still trading below its entire basket of moving averages. This setup is associated with further losses. 18235.5 was a prominent level so it’s loss two weeks ago could have prompted short sellers. Should HSI recover back above this level, there could be a short squeeze

HSI weekly chart from 03 January 2022 to 07 October 2022 (Source: DLC.socgen.com)

 

Hang Seng Tech closed the week at 3540, up 90 points or 2.6%. HSTech is flirting with previous 52-week low at 3463 printed back in middle of March. If last week’s price action was not a convincing break, then this week’s positive candlestick did not appear to be a convincing show of support either. HSTech is now trading below all its averages so this is a setup associated with further losses. Moving averages overhead continue to assert resistance.

HSTech weekly chart from 03 January 2022 to 30 September 2022 (Source: DLC.socgen.com)

 

Dow Jones Industrial Average closed at 29297, up 571 points or 1.99%. Nasdaq closed at 11039, up 68 points or 0.62%. Indices made early week gains even when whispers in the grapevine suggested one maybe two top banks were in trouble but closed down sharply on Friday following favorable Non-Farm Payroll data. Market participants are likely to experience cognitive dissonance such as ‘bad is good’ and ‘good is bad’. Conditioned by the Federal Reserve to expect easing whenever the going gets tough and therefore market rallies even when a bank could fail; positive economic data could lead to further rate hikes and therefore market responds by going into risk-off mode.

Fed funds futures on rate hike probability by next Fed meeting on 02 November as at last DLC commentary on 30 Sep:
•    46.8% probability of 50 basis points rate hike | 53.2% probability of 75 basis point hike
Fed funds futures on rate hike probability by next Fed meeting on 02 November at this week’s reading:
•    18.9% probability of 50 basis points rate hike | 81.1% probability of 75 basis point hike
This is a shift in hike expectations towards 75 basis points. Futures last week indicated that rates could reach as high as 5% by December 2023. The same reading for this commentary now places that rate at 5.25%. 

Shanghai and Shenzhen Exchange were closed the whole of this week for China’s National Day Golden Week Holiday.
 

Economic data in coming week:
1. ISM Manufacturing PMI on Monday 03 October 2022.
2. JOLTS Job Openings on Tuesday 04 October 2022.
3. OPEC meetings on Wednesday 05 October 2022; ISM Services PMI on the same day.
4. Non-farm Payroll on Friday 07 October 2022.
5. Core PCE Price Index on Friday 30 September 2022.
 

Economic data in coming week:
1. BOE Governor Bailey to speak, UK GDP on Wednesday 12 October 2022; US PPI on same day.
2. FOMC minutes, US CPI on Thursday 13 October 2022.
3. China’s import-export numbers, CPI and PPI on Friday 14 October 2022.
4. US Retail Sales and Umich Consumer Sentiment on Friday 14 October 2022.


Other news:
•    AAC Tech, AIA, CK Asset, Kingdee International, Tencent, Wuxi Bio and Xiaomi buy back shares.
•    Kingsoft issues profit warning, to make provision for impairment due to Kingsoft Cloud Holdings.
•    Sun Hung Kai, Sunny Optical, Xpeng, Great Wall Motor, Hong Kong Exchange, Tencent, Ganfeng Lithium, China Life Insurance, Ping An Insurance, Kingsoft, Kingdee and China Merchants Bank print new 52-week low.

•    Sun Hung Kai up $3.95 or 4.55%.
•    Anta Sports up $7.55 or 9.07%.
•    Li Ning up $6.70 or 11.15%.
•    Galaxy Entertainment up $2.25 or 4.85%.
•    Sands China up $1.95 or 9.90%.
•    CNOOC up $0.49 or 5.21%.
•    PetroChina up $0.16 or 4.97%.
 

Technical observations

Li Ning 2331.hk up 11.15%, undoes past two weeks’ losses.

Note chart features:
1. Li Ning flips from trading below its entire complex of averages last week, a sign associated with further losses, to close this week above the same complex, pointing to possibility of further gains. As this complex of moving averages are now nearly flat while some of them have just done a bullish cross recently, such as the 100 Day SMA and 150 Day SMA (red and yellow), this could be a sign of moving from a downtrending mode to a sideway range.
2. $53.30 is a previous 52-week high, printed on 31 December 2020. Stock price made new 52-week highs every year from 2016 to 2021. $53.30 could be a potential support.
3. Based on price action on weekly chart, $59.80 to $60 was a swing level. It was a swing low throughout April this year, then acted as swing high mid-May. Last week’s close at $60.10 gives additional reinforcement to this observation.
4. Overhead swing high is around $72.50. This observation is based on swing low in January this year, followed by swing high from late-June to early-July and then again in August. This swing high at $72.50 could act as resistance.

Li Ning 2331.hk weekly chart from 05 October 2020 to 07 October 2022 (Source: DLC.socgen.com)

 

CNOOC 883.hk swing levels, price channel could tell a bullish story.

Note chart features: 
1. CNOOC moving averages are turning down and price is trading below the entire complex. Usually this setup is associated with the start of a downtrend and subsequent losses. On the other hand, observation of moving averages over the duration of Y2021 indicates that CNOOC price action was prone to wide gyrations. Apart from short term 10 and 20 Day SMA (blue and green) which appeared reliable, other moving averages were sending belated or wrong signals.
2. Price made a new 52-week high of $12.54 this year on the back of energy distortions caused by Western sanctions imposed on Russia. Viewed from this angle, it is possible that CNOOC could gain further if impact from those sanctions persist.
3. $9.30 and $9.20 are Q3 ‘21 and Q4 ‘21 highs respectively. Observe that since breaking above these swing highs in January this year, CNOOC has not returned back below these levels. They have become current supports/swing lows. Parallel channels connecting swing highs and December ‘21 low indicate that price could be nearing support on an upward trajectory. 
4. Some sources suggest White House could be aiming for an energy correction like the one that happened in 2020 because of Covid-19. This could reduce some of the inflation that is hitting the US right now. OPEC+ agreed on 2 million barrels per day cut which the White House called “hostile” and is now plotting “response options”. Energy could become contested so market participants could look forward to plenty of price fluctuation.

CNOOC 883.hk weekly chart from 04 January 2021 to 07 October 2022 (Source: DLC.socgen.com)

 

[Newly Launched DLCs]

Launch of 5X Long & Short DLCs on Dow Jones Industrial Average Index

Daily Leverage Certificates (DLCs) tracking the Dow Jones Industrial Average Index (DJIA) have since commenced trading from 13 September 2022 with 5x leverage on both Long and Short directions. Note that the US indices DLCs can be trade during SGX market hours only when US markets are closed. SocGen will provide bid/offer quotes that are closely linked to the e-mini futures during SGX market hours.

DLC Name

Stock Code

Type

Leverage

Issue Price (S$)

Listing Date

Expiry Date

DJIA 5xLongSG250911

CUJW

Long

5x

1.20

2022-09-13

2025-09-11

DJIA 5xShortSG250911

CVFW

Short

-5x

1.20

2022-09-13

2025-09-11

DJIA 5xLongSG250911A

CWIW

Long

5x

0.40

2022-09-13

2025-09-11

DJIA 5xShortSG250911A

CUMW

Short

-5x

0.40

2022-09-13

2025-09-11

Source: Societe Generale (DLC.socgen.com)

SG DLCs

Underlying Index/Stock

Underlying Chg (%)1

Long DLC (Bid Change%2)

Short DLC (Bid Change%2)

Hang Seng Index (HSI) +0.54% CZHW (+1.81%) CXQW (0.00%)
Li Ning Co Ltd (2331.HK) +1.57% DNKW (+8.91%)
CNOOC (0883.HK) +1.39% DMFW (+7.63%) DLHW (-4.79%)

 

Brought to you by SG DLC Team

This advertisement has not been reviewed by the Monetary Authority of Singapore. This advertisement is distributed by Société Générale, Singapore Branch. This advertisement does not form part of any offer or invitation to buy or sell any daily leverage certificates (the “DLCs”), and nothing herein should be considered as financial advice or recommendation. The price may rise and fall in value rapidly and holders may lose all of their investment. Any past performance is not indicative of future performance. Investments in DLCs carry significant risks, please see dlc.socgen.com for further information and relevant risks. The DLCs are for specified investment products (SIP) qualified investors only.

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