Commentaries & Webinars

Market Commentary - For the week ending 14 October 2022

Total Social Financing expands for second consecutive month in September, sparks China stock rally. USDJPY makes a new 52-week high.
●    DJIA made over 800 points in a single-day post-CPI rally on Thursday 13 October 2022.
●    Japanese PM Fumio Kishisda voiced support for BOJ’s ultra-loose monetary policy; USDJPY nears 149.
●    China sticks to zero-COVID strategy.
●    Hong Kong weighs a temporary lift of 15% stamp duty for home purchasing by non-PRs, and relaxes visa restrictions.
●    Russia foils terrorist attack on TurkStream.
●    US Core CPI extended year on year growth to 6.6% in September.
●    HSI and HSTech make new 52-week low.
●    Hong Kong declines US order to seize yacht of Russian oligarch, says not bound by non-UN sanctions.
●    UK PM Truss fires Finance Minister Kwasi Kwarteng, Jeremy Hunt new chancellor.
 

Hang Seng Index makes another new 52-week low at 16389, closes week at 15588, down 1152 points or 6.5%. The index is trading below its entire basket of moving averages. This setup is associated with further losses. If price observation over the past two weeks suggested that 17000 could be a price support, this is squashed by this week’s close. Scrolling further back on the chart, Hang Seng Index corrected over 35% between November 2010 and October 2011. 16170 is the lowest point printed on 04 October 2011. Keep an eye on price action at this level.

HSI weekly chart from 03 January 2022 to 14 October 2022 (Source: DLC.socgen.com)

 

Hang Seng Tech made a new 52-week low at 3156. It closed the week at 3207, down 333 points or 9.41%. Index is set up for further losses as it is trading below its entire basket of moving averages. Keep an eye on the previous swing low at 3463 printed in the middle of March this year. If price pops back above this level, there could be a short squeeze.

HSTech weekly chart from 03 January 2022 to 14 October 2022 (Source: DLC.socgen.com)

 

Dow Jones Industrial Average closed at 29635, up 338 points or 1.15%. Nasdaq closed at 10692, down 347 points or 3.15%. Reason for divergence between these two indices appear to be outperformance by Financial and Healthcare segments in the Dow. (Healthcare stocks are also in the Nasdaq but have a smaller footprint.) Both indices made new 52-week low and both are trading below their basket of moving averages. These are both setups for further losses. 

Fed funds futures on rate hike probability by next Fed meeting on 02 November as at last DLC commentary on 07 Oct:
●    18.9% probability of 50 basis points rate hike | 81.1% 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:
●    2.8% probability of 50 basis points rate hike | 97.2% 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 5.25% by December 2023. The same reading for this commentary now places that rate at 5.5%. 

Shanghai Composite closed the week at 3072, up 48 points or 1.57%. Shenzhen Index closed the week at 11122, up 343 points or 3.18%. Both present Hammer lookalike candlestick patterns at low which could suggest potential bottom buying. Further observation is necessary to look out for follow through. Observation of swing bottoms on weekly charts suggests that support for Shanghai Composite is at 3000 and support for Shenzhen Index comes in at around 10800.

Economic data in coming week:
1. China to announce GDP, Retail Sales on Tuesday 18 October 2022.
2. China 20th National Congress from 16 – 22 October 2022.
3. US Empire State Manufacturing Index on Monday 17 October 2022; Philly Fed Manufacturing Index on Thursday 20 October 2022.


Other news:
●    AIA, CK Asset, Kingsoft, Sinopec, Stanchart, Tencent, Wuxi Biologics and Xiaomi buy back shares.
●    Sinopec could revive the spinoff listing for Sinopec Marketing.
●    BYD reportedly plans to expand the Shanghai battery plant, could supply Lenovo, Samsung and Apple; the company also announced it would enter India’s passenger vehicle market, to build a factory.

●    Tencent was the highest grossing Chinese mobile game developer on App Store and Google Play for September 2022, followed by Netease.
●    Stanchart has the highest number of new accounts in pilot Southbound Wealth Management Connect among foreign banks in Shenzhen.

●    CK Asset applied to renovate Harbour Plaza Resort City into a residential building.
●    Ali Health, Bilibili, China Life Insurance, China Merchants Bank, Ganfeng Lithium, Great Wall Motor, HKEX, Kingdee International, Kingsoft, Kuaishou Technology, Lenovo, Ping An Health,  Sunny Optical, Tencent, Xiaomi and Xpeng make new 52-weeks low.
 

Technical observations

BYD 1211.hk could see possible support but still in downtrend mode.

Note chart features: 
1. BYD is below its entire complex of moving averages so this setup is associated with further losses.
2. $212 is a previous 52-week high printed in November 2020. Broken below, the level could act as resistance.
3. Inspection of the weekly chart shows a number of swing highs and lows turning at a zone between 212 and 194. This makes it likely to be a support/resistance zone. The downside is that this zone is too wide which does not provide precision nor clarity. As a number of parallel channels drawn from previous tops and bottoms, BYD could be at or near a potential bottom. A support at around $194 if present, could reinforce the channel.
4. Support at $194 if any combined with the lower trendline of a channel could raise the likelihood of a short term bounce.

BYD 1211.hk weekly chart from 06 July 2020 to 14 October 2022 (Source: DLC.socgen.com)

 

JD.com 9618.hk breaks 6-month support.

Note chart features:
1.JD.com is trading below its previous 52-week low of $236.40 printed in August 2021  as well as its entire complex of moving averages. This is a double setup associated with further losses.
2. Based on price action on the weekly chart, there is a support zone between around $200 to $215. This observation is made based on the end-of-week close of swing lows from March this year to present. Based on the closing price this week, it is highly like that the support zone was broken. Any pullback to the $200 to $215 zone is likely to encounter resistance.

JD.com 9618.hk weekly chart from 05 July 2021 to 14 October 2022 (Source: 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%)
BYD Company (1211.HK) +2.58% DLGW (+13.34%) DMMW (-8.58%)
JD.com (9618.HK) +2.44% DNVW (+12.26%) DQSW (-8.62%)

 

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