Commentaries & Webinars

Market Commentary - For the week ending 28 October 2022

RMB weakened right from market open while Hang Seng Index dropped over 700 points on Monday session (24 Oct 2022) alone. News channels weaved a tale of capital outflow caused by poor reception to China’s new leadership lineup. Economic numbers are positive.

●    Dollar Index DXY closes at 110.66, perched on 50 Day SMA.
●    China’s foreign trade was up 8.3% y-on-y in September.
●    China’s Q3 GDP exceeded expectations at 3.9%.
●    According to BloombergNEF, Guangdong Province of China has three times more EV chargers than the whole of the US.
●    ECB hikes 75 basis points.
●    Credit Suisse plunges after unveiling restructuring plan.
●    US GDP grows 2.6% in Q3 driven by exports.
●    Germany, the world's fourth largest economy, enters recession.
●    Largest chemical company in the world BASF downsizes permanently in Europe, moves to China.
 

Hang Seng Index makes another new 52-week low at 14770. It closed the week at 14863, down 1348 points or 8.32%. The index is below its complex of moving averages. This setup is associated with further losses. Next significant turning point is 10676 printed in October 2008.

HSI weekly chart from 03 January 2022 to 28 October 2022 (Source: DLC.socgen.com)

 

Hang Seng Tech Index made a new 52-week low at 2720. It closed the week at 2823, down 278 points or 8.98%. HSTech is set up for further losses as it is trading below its entire basket of moving averages. 

HSTech weekly chart from 03 January 2022 to 28 October 2022 (Source: DLC.socgen.com)

 

Dow Jones Industrial Average closed at 32862, up 1779 points or 5.72%. Nasdaq closed at 11546, up 236 points or 2.09%. Dow’s strong performance takes it above its entire complex of moving averages. 50, 100 and 150 Day SMA are still in down trend mode so it is possible that Dow is merely retracing, not reversing. There is a precedent: see Dow’s upswing from 17 June 2022 to 16 August 2022 which took it above all its moving averages followed by a crash to new low.

Fed funds futures on rate hike probability by next Fed meeting on 02 November as at last DLC commentary on 21 Oct:
●    5.0% probability of 50 basis points rate hike | 95% 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:
●    18.7% probability of 50 basis points rate hike | 81.3% probability of 75 basis point hike

This is a slight retreat in hike expectations away from 75 basis points. Futures last week indicated that rates could reach as high as 5.5% by December 2023. Rate expectations now extend to 5.75%. Higher rate expectations set up the stock market for deeper losses.

Shanghai Composite closed the week at 2916, down 123 points or 4.05%. Shenzhen Index closed the week at 10402, down 517 points or 4.74%. If there was a tiny ray of positiveness last week with both indices above their 10 Day SMA, this is now totally shredded as both indices drop below their entire complex of moving averages, setting up for further losses.


Economic data in coming week:

1.    China to report PMI numbers on Monday and Tuesday 31 October – 01 November 2022.
2.    US to report ISM Manufacturing PMI, JOLTS Job Openings on Tuesday 01 November 2022.
3.    US to report ADP Non-Farm Employment Change on Wednesday 02 November 2022.
4.    FOMC Monetary Policy Statement and press conference on Thursday 03 November 2022.
5.    BOE Monetary Policy Report on Thursday 03 November 2022; Governor to speak.
6.    US to report ISM Services PMI on Thursday 03 November 2022.
7.    US Non-Farm Payrolls on Friday 04 November 2022.
 

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.


Technical observations

BYD 1211.hk breaks support on high volume.

Note chart features:
1. Previous support for BYD was around $194 – 195 based on inspection of swing lows in March and September this year. This zone was contested for a while as price traded there for three weeks in a set of Dojis through October. This support was clearly broken this week on significant volume. 
2. There is another potential support based on an earlier set of swing lows. This is around the $174-175 level. See November 2020 and March 2021. It is possible that this zone could be skipped entirely. Next potential support is around $144-145. See swing low in May 2021.

BYD 1211.hk weekly chart from 06 July 2020 to 28 October 2022 (Source: DLC.socgen.com)

 

BYD Electronics 285.hk retracing into past support.

Note chart features: 
1. BYD Electronics previous 52-week low is $22.10 printed on 01 November 2021. Until this level is recovered, the stock is set up for further losses.
2. Moving averages are congested. This is a sign momentum for price trending down is slowing, that price could be transiting to a sideway ranging mode. At this moment however, the entire cluster of moving averages form a resistance zone that must be overcome.
3. BYD Electronics traded in a small range from July to September this year (shaded gray in chart). Swing high was around $25. Swing low was around $20.50-21.00. Based on recent week price action, support at $20.50 was broken and has likely become resistance. Price action this week pulled back to the $20 region and its end-of-week close is a nod to $20.50 as resistance. Should the price turn South significantly, pullback could be over.

BYD Electronics 285.hk weekly chart from 05 July 2021 to 28 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%)
BYD Electronic (International) Co Ltd (0285.HK) +0.18% DOYW (+1.73%) DRMW (+2.21%)

 

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