Market Commentary - For the week ending 15 September 2023

Market Commentary (Hong Kong)

For the week ending 15 September 2023

The ECB hiked its policy rate by another 25 basis points, announced that fighting inflation took precedence over the economy. WTI and Brent Crude rocket to new year-to-date highs, the former closing at 90.77 and the latter at 93.93.

●    China’s CPI turned around in August in line with expectations; air ticket, hotel and tourism products registered double digit growth driven by summer holidaymaking.
●    Malaysian PM Anwar announced that the country will develop a policy to ban exports of rare earth; the industry could contribute RM9.5 billion to GDP in 2025 as well as 7000 jobs.
●    Putin says that BRICS and SCO do not need a common currency but need to unify payment systems.
●    Japan's PM Kishida reshuffled his cabinet, changing 13 out of 19 ministers. 
●    France banned sales of iPhone 12 over high radiation emission.
●    The EU launched an anti-subsidy investigation on China’s electric car industry.
●    Gold is selling for around Y10000 per gram in Japan, driven by the Yen’s weakness. It is up 18% year-to-date.
●    PBOC announced that it would cut RRR by 25 basis points on Friday 15 Sep 2023 which would release 500 billion yuan into the economy.
●    Evergrande Life Insurance will be acquired by New China Life Insurance including its liabilities.
●    According to Civil Aviation Administration of China data, air passenger trips in August increased by 98% yoy and 4.5% compared to 2019.
●    The G77+China representing 134 countries meet in a summit in Havana, Cuba; in Vladivostok, Putin declares that the Far East is Russia’s strategic priority for this century.
●    Singapore’s Temasek sees attractive opportunities in China while GIC is doubling down on selected sectors.

Hang Seng Index closed this week at 18183, down 19 points or 0.11%. For the second time in four weeks, HSI closed with a positive weekly candle hinting that there might be support at 18000. The index closed below its entire complex of moving averages. This is a setup that is associated with further losses. Therefore there could be a contest here until there is a complete surrender of one direction or another. The USDHKD pair hit a four-week low in favor of HKD strength. This currency setup could contribute a HSI-positive flow although there could also be a time lag.

HSI weekly chart from 03 January 2022 to 15 September 2023 (Source: DLC.socgen.com)

Hang Seng Tech closed the week at 4078, down 14 points or 0.34%. Like the HSI, HSTech also printed a second positive end-of-week candle in four weeks. This price action hints at potential support from 4000. Do note that 4000 is a recurring support over several durations going back to 2022. Also there has not been an end-of-week close below 4000 since the middle of July this year. HSTech closed above its 100 Day SMA (red) although the rest are stacked overhead and could act as potential resistance.

HSTech weekly chart from 03 January 2022 to 15 September 2023 (Source: DLC.socgen.com)

Dow Jones Industrial Average closed at 34618, up 42 points or 0.12%. Nasdaq closed at 15202, down 78 points or 0.51%. The Dow closed in uncertainty in the form of a Doji while Nasdaq is down for the second week and closed below its 10, 20 and 50 Day SMAs. There is a big gap below Nasdaq until the 100 Day SMA at 14720 so bears could be looking at this space.

The next FOMC meeting is scheduled on 20 September 2023 which is Wednesday in the coming week.

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

●    98.0% probability of no change |2.0% probability of 25 basis points hike

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

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

Data indicates a potential peak rate of 6.00% until November 2024. A rate cut could appear in January 2024.

Shanghai Composite closed the week at 3118, up 1 point or 0.03%. Shenzhen closed at 10145, down 137 points or 1.34%. Both indices closed below their basket of moving averages. Such a setup is associated with further losses.

Economic data in coming week:

1.    Thursday 21 September 2023 FOMC statement and press conference, unemployment claims.
2.    Thursday 21 September 2023 SNB policy rate and monetary policy assessment.
3.    Thursday 21 September 2023 BOE official bank rate and monetary policy summary.
4.    Friday 22 September 2023 BOJ policy rate, policy statement and press conference.
5.    Friday 22 September 2023 French, German, UK and US manufacturing and services PMI.
 

Other news:

●    AIA, CK Asset, Cosco Ship Holding, Kingsoft, Kuaishou, Tencent and Xiaomi bought back shares.
●    CNOOC printed a new 52-week high; CK Asset, Li Ning and Sunny Optical printed new 52-week lows.
●    Tencent-backed Tuhu Car plans to raise HKD1.26 billion in a Hong Kong IPO.
●    Geely agreed to help Indonesia develop and manufacture a national electric car by 2025-26.
●    Xiaomi inked a global patent cross licensing deal with Huawei; the latest Xiaomi 14 smartphone could roll out in November.
 

Technical observations

Xiaomi 1810.hk has found footing over past weeks, could be building a base.

Note chart features:

1. Over the past five weeks, Xiaomi printed three positive weekly candles. This is price action that suggests there could be some support. Inspection reveals that week lows stop at a region between $11 - $11.50. This zone can be defined by a previous swing low in mid-March, another in mid-July and a swing low in the middle of June.

2. At a broader level, Xiaomi exited its downtrend somewhere early this year in a series of golden crosses between its moving average indicators. Right now it is in a horizontal ranging mode where those moving average indicators criss-cross and signaled a number of false leads so far. With this week’s session, Xiaomi closed end-of-week above its entire basket of moving averages. This is usually associated with further gains and so deserves some inspection. Volume is rising which is a positive sign.

Xiaomi 1810.hk weekly chart from 02 January 2023 to 15 September 2023 (Source: DLC.socgen.com)