Commentaries & Webinars

Market Commentary - For the week ending 4 November 2022

China and Hong Kong stocks are up on speculation that China will open by March 2023.  Positive sentiment could also be driven by state visits by German Chancellor Scholz this weekend and Japanese PM Kishida mid-November, making China the go-to place for deal making.

●    Market goes risk-on following Non-Farm Payrolls; Dollar dives, offshore RMB gains 1576 points or 2.15%.
●    Federal Reserve hikes 75 basis points at November meeting.
●    Bank of England hikes 75 basis points, says UK in recession; Pound trashed.
●    US Crude WTI builds base, rebounds from previous 52-week high at $85.40; OPEC+ production cut takes effect.
●    Singapore MAS raw record inflow of $448 billion in 2021.
●    US Treasury Yellen discusses buyback to boost bond liquidity; market watchers suggest this could be a form of QE.
 

Hang Seng Index makes another new low at 14597 but closes the week at 16161, up 1298 points or 8.73%. Significantly, the weekly chart presents a bullish engulfing candle which could signal a temporary bottom. For confirmation, look for follow through. Because of the high trading volumes involved this week and last, gains could be driven by short covering. It is also possible for the index to see some retracement, to find support at 5 Day SMA or even around last week’s high between 15900 – 16000. Bear in mind that long term indicators are still pointing down, that HSI is still trading below its previous 52-week low.  

HSI weekly chart from 03 January 2022 to 04 November 2022 (Source: DLC.socgen.com)

 

Hang Seng Tech Index closed the week at 3264, up 441 points or 15.63%. HSTech also printed a bullish engulfing candlestick pattern that could signal a temporary bottom or swing low. Crucially this index is back above 3000 so we could be seeing seller’s remorse. With the bullish candlestick pattern in mind as well as the high volumes involved this week and last, there could be some more gains powered in part by short covering. It could be possible for some retracement to 3000. In fact base building could attract more bulls for stronger gains. Note that HSTech is still trading below its previous 52-week low, long term indicators are still pointing downwards.

HSTech weekly chart from 03 January 2022 to 04 November 2022 (Source: DLC.socgen.com)

 

Dow Jones Industrial Average and Nasdaq 100 diverge as Tech visibly weaker. DJIA is trading above its entire basket of moving averages while Nasdaq is trading below. Dow Jones Industrial Average closed at 32403, down 459 points or 1.4%. Nasdaq closed at 10857, down 689 points or 5.97%. Nasdaq’s setup is clearly associated with further losses. We are likely seeing DJIA in a bear rally but the complex of moving averages underneath provides a clear obstacle for bears.

Fed funds futures on rate hike probability by next Fed meeting on 14 December 2022:
●    52.0% probability of 50 basis points rate hike | 48.0% probability of 75 basis point hike

Rate expectations for end December 2023 is 5.75%. The Fed could start easing at the December 2023 meeting although this is a miniscule  0.01% based on market expectations.


Shanghai Composite closed the week at 3071, up 155 points or 5.31%. Shenzhen Index closed the week at 11187, up 786 points or 7.55%. Both indices printed bullish engulfing candlesticks. On the weekly chart, such patterns are significant. It would be too early to declare that both indices are bottoming or reversing. However their bullishness this week, closing back above Q3 low and closing back above swing low in May this year, means there is plenty of technical support for both indices. Note that both indices are still below their 100 and 150-Day SMA so their setups are still associated with further losses. Look for Shanghai Composite support at 3000 and Shenzhen Index support at around 10800.


Economic data in coming week:

1.    China to report CPI, PPI on Wednesday 09 November 2022.
2.    US to report CPI on Thursday 10 November 2022.
3.    US to report University of Michigan Consumer Sentiment on Friday 11 November 2022.

Other news:
●    AIA, CK Asset, CNOOC, Hysan Dev, Greatwall Motor, and Sinopec buy back shares.
●    HKEX, BYD, Baidu, Bilibili, SHK Properties, Anta Sports, Sunny Optical, Li Ning, Wuxi Biologics, Galaxy Entertainment, Ping An Insurance, Xpeng, China Merchants Bank, Sands China, Geely Automobile, China Life Insurance and China Construction Bank make new 52-weeks low.
●    Xiaomi reportedly unveiled a patent for a smartphone with a rotating camera module.
●    Canada ordered three Chinese firms to withdraw their investments in critical minerals companies.
●    US Officials reportedly finished the first round of onsite audit of Chinese ADRs ahead of schedule. 
 


Technical observations

Meituan 3690.hk bullish engulfing pattern, divergence reveals hidden strength.

1. Previous 52-weeks low at $183.20 printed in August 2021. Until this level is recovered, Meituan’s setup is associated with further losses. 
2. Meituan closed this week’s session with a bullish engulfing pattern. Combined with the previous swing low printed in March this year, it is likely Meituan has found support for now. Based on extreme ends, support comes as low as $103.50. Based on week close (preferred), support comes at around $135. Resistance based on observation of swing high in between suggests around $201.
3. With the bullish engulfing candle, there should be follow through gains to confirm this week’s observation. It is possible for the price to retrace to $135. Based building could attract stronger bulls leading to more gains.
4. Note that Meituan’s swing lows coincide with HSI’s lows i.e. one in March this year and the second one this week. HSI’ s second low this week punched through its March low by over 3600 points or nearly 20%. Meituan’s two lows came in horizontally at around the same level. By not following the HSI to a new low, this is a bullish divergence that suggests resilience in the stock. Should sentiment improve, it is conceivable that Meituan could outperform the index.

Meituan 3690.hk weekly chart from 05 July 2021 to 04 November 2022 

 

Sino Biopharm 1177.hk ‘double’ bullish divergence could lead the way.

Note chart features: 
1. Sino Biopharm has two bullish divergences compared to HSI. The first divergence is price action between March this year to present. During this period, HSI made a new low with over 3600 points or near 20% loss. Over the same period, Sino Biopharm remained flat. In the second divergence, HSI appears to be making a potential swing low this week. Yet Sino Biopharmed bottomed 6 weeks ago and is up over 18 % against that low printed in the last week of September. Sino Biopharm qualifies as a gain leader versus the index.
2. Moving averages are converging. This is a sign that downward momentum is slowing. Reversal or sideway ranging are also possible. For the moment, 100 Day (yellow) and 150 Day SMA (red) could become resistance.
3. Previous swing lows and highs suggest potential resistance now at around $4.25-4.30 region (see high of May, June this year). Next resistance could come in between $4.90 (minor swing high late-March) and $5.25 (see early July).

Sino Biopharm 1177.hk weekly chart from 03 January 2022 to 04 November 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%)
Meituan (3690.HK) +1.45% DAVW (+7.52%) DOVW (-3.91%)
Sino Biopharmaceutical Limited (1177.HK) +0.61% DHUW (+3.69%)

 

Brought to you by SG DLC Team

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