Market Commentary - For the week ending 8 September 2023

Market Commentary (Hong Kong)

For the week ending 08 September 2023

Dollar Index DXY closed at six-months high at 105.56. Both Brent Crude and WTI closed at new year-to-date highs after Russia and Saudi Arabia decided to extend their oil production cut. Apple’s stock price is under pressure after China reportedly banned government officials from using iPhones.

●    Personal Savings Rate in the US fell to 3.5% in July this year versus 4.3% the month before.
●    Transactions in real estate heats up in China’s first tier cities after Guangzhou and Shenzhen take the lead with relaxed “ first-time homebuyers” criteria for preferential mortgage rates.
●    Country Garden Holding made a coupon payment on a Ringgit-denominated bond that was due.
●    Huawei launched its new Mate 60 pro handphone during Raimondo’s trip to China; proponents say its entire production chain is ‘made-in-China’ and could be outside US sanctions.
●    According to a PwC report titled ‘Chinese Unicorn CEO Survey 2023’, over 60% of Chinese unicorns predict revenue growth at 30% or higher this year.
●    The US Department of Commerce said it is investigating the 7nm chip found in the new Huawei Mate 60 Pro.
●    According to data by China Passenger Car Association (CPCA), China’s passenger car sales returned to growth in August yoy while Tesla nearly doubled its share of the EV market.
 

Hang Seng Index closed this week at 18202, down 180 points or 0.98%. Good news from Huawei and Country Garden pushed the index to the 50-Day SMA on Monday but that optimism faded quickly. HSI closed the week below its entire basket of moving average indicators. This is a setup associated with further losses. 18000 is a potential support but further observation is required.

HSI weekly chart from 03 January 2022 to 07 September 2023 (Source: DLC.socgen.com)

Hang Seng Tech closed the week at 4092, down 88 points or 2.10%. Until Wednesday 06 September, HSTech still managed to close above its entire basket of moving averages. This is a setup associated with further gains and is a bullish divergence compared to the HSI. It was a single bearish Thursday that closed HSTech into a bearish engulfing pattern for the week (Friday was non-trading day due to black rainstorm signal from the weather service). However, the 3800-4000 support zone that was in place since March this year is still intact. It could act as potential support.

HSTech weekly chart from 03 January 2022 to 07 September 2023 (Source: DLC.socgen.com)

Dow Jones Industrial Average closed at 34577, down 261 points or 0.75%. Nasdaq closed at 15280, down 211 points or 1.36%. The Dow closed below its 20 and 50-Day SMA and could enter into a period of volatility. Nasdaq closed above its entire basket of moving average indicators. This is a setup associated with further gains.

The next FOMC meeting is scheduled on 20 September 2023.

Fed funds futures on rate hike probability by next Fed meeting as at this week’s close:

●    92.0% probability of no change |8.0% probability of 25 basis points hike

Fed funds futures on rate hike probability by next Fed meeting based on last week’s close:

●    94.0% probability of no change |6.0% probability of 25 basis points hike

Data indicates a potential peak rate of 6.00% until July 2024. A rate cut could appear as early as this December.

Shanghai Composite closed the week at 3117, down 17 points or 0.53%. Shenzhen closed at 10282, down 182 points or 1.74%. Shenzhen closed below its entire basket of moving average indicators. This is a setup that is associated with further losses. Shanghai on the other hand closed just above its 10-Day SMA. This price action could be a reaction to the indicator which could signal potential support. 3000 and 3100 are potential support levels.

Economic data in coming week:

1.    Wednesday 13 September 2023 UK reports GDP mom.
2.    Wednesday 13 September 2023 US reports CPI numbers.
3.    Thursday 14 September 2023 ECB monetary policy rate and press conference.
4.    Friday 15 September 2023 China reports industrial production yoy.
5.    Friday 15 September 2023 US reports Empire State Manufacturing Index and preliminary UoM Consumer Sentiment.
 

Other news:

●    AIA, Cosco Ship Holding, Tencent and Xiaomi bought back shares.
●    BYD Electronic, CNOOC and PetroChina printed new 52-week highs; CK Asset printed a new 52-week low.
●    Tencent said that it will unveil its AI large model at its global digital ecosystem summit.
●    According to headlines, Xiaomi started automobile production trials in China and plans to produce 50 units per week.

Technical observations

HKEX 388.hk resisted by multiple elements, also printed a potential triple bottom.

Note chart features:

1. At a glance, HKEX is capped overhead by a pair of descending trendlines as well as its 100 and 150-Day SMAs (red and  yellow). Price action these two weeks in the form of Dojis highlight the possibility of reaction to these resisting elements. These may appear to be a setup associated with further losses but could also happen when price is consolidating or even reversing since long moving averages are well known laggards.

2. Closer inspection reveals HKEX has crossed up its 10 and 20-Day SMAs already twice early this year and that the third bullish cross appeared this week. In conjunction with three swing lows one each in May, July and August this year, this combination could point to a triple bottom. Notably price also closed above its 50-Day SMA which is a slightly rarer but more valuable signal.

3. In other words, while HKEX’s setup appears bearish in the current mood, there is also a silver lining that has been moving into place since May.

HKEX 388.hk weekly chart from 04 July 2022 to 07 September 2023 (Source: DLC.socgen.com)