Market Commentary - For the week ending 29 September 2023

Market Commentary (Hong Kong)

For the week ending 29 September 2023

Brent Crude and WTI made new year-to-date highs while the yield on the US 10-Year Treasury Note also hit a 16-year high of 4.688%.

●    Alibaba’s Cainiao expects to raise at least US$1billion in HK IPO; partners AliExpress to start 5-day global delivery.
●    Travel agencies say China’s Golden Week outbound travel to surge 500% compared to May Day holidays; Trip.com reported online searches related to Thailand surged 800% after the country announced visa-free entry.
●    HK launched ‘Night Vibes Hong Kong’ campaign from September this year to early 2024 to boost the city’s economy.
●    Japanese Finance Minister Shunichi Suzuki said the government does not rule out FX intervention.
●    HK Chief Exec John established the Task Force on Enhancing Stock Market Liquidity, emphasizing the importance of the stock market to HK’s global positioning.
●    China’s August industrial profit rebounds, increased 17.2% yoy.
●    PBOC injected 617 billion yuan in short term liquidity into the banking system.
●    Evergrande chairman Hui Ka Yan and his son Peter Xu were arrested; trading on Evergrande shares halted.
●    Online claims that the iPhone 15 Pro overheats, battery swells go viral.
●    China's cyberspace regulator released a list of mobile app stores that fulfilled the requirement of submitting business documents to regulators. Apple’s app store was not included.
 

Hang Seng Index closed this week at 17810, down 248 points or 1.37%. Based on end-of-the-week close, the index appears to have fallen through a potential support at 18000 decisively despite a 2.51% rally on Friday that halved the week’s losses. The index closed below its entire basket of moving averages. This setup is associated with further losses.

HSI weekly chart from 04 July 2022 to 29 September 2023 (Source: DLC.socgen.com)

Hang Seng Tech closed the week at 3921, down 71 points or 1.77%. This was an end-of-week close below a potential support at 4000. The next lowest end-of-week close (and therefore a turning point to find potential support) is 3691 printed in the fourth week of May this year. HSTech closed below all of its moving average indicators. This is a setup associated with further losses.

HSTech weekly chart from 04 July 2022 to 29 September 2023 (Source: DLC.socgen.com)

Dow Jones Industrial Average closed at 33508, down 456 points or 1.34%. Nasdaq closed at 14715, up 14 points or 0.1%. The Dow closed below all of its moving average indicators.  Although the 50, 100 and 150 Day SMAs are still firmly on uptrending mode (no dead crosses), the current setup does not bode well.

The next FOMC meeting is scheduled on 01 November 2023.

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

●    81.7% probability of no change |18.3% probability of 25 basis points hike

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

●    73.7% probability of no change |26.3% probability of 25 basis points hike

Data indicates a potential peak rate of 6% until November 2024. A rate cut could appear as early as March 2024.

Shanghai and Shenzhen had a short week (no trading on Friday) as China’s National Day/Golden Week is just over the weekend. Shanghai Composite closed the week at 3110, down 22 points or 0.70%. Shenzhen closed at 10110, down 69 points or 0.68%. Shanghai could be supported since it has managed to close at or above 3100 region over the last five weeks. Shenzhen could also be in a similar technical setup since it managed to close at or above 10100 also over the past five weeks. In the week of 25 April 2023, Shenzhen printed a very prominent low at 10088. Until last week, this low of 10088 was a very prominent swing low since early 2020. Both indices closed below their entire basket of moving averages. This is a setup associated with further losses.

Economic data in coming week:

1.    Monday 02 October 2023 US releases ISM Manufacturing PMI; Fed Chair Powell and fellow FOMC members Harker and Barr to speak.
2.    Tuesday 03 October 2023, US releases JOLTS Job Openings.
3.    Wednesday 04 October 2023, US releases ADP Non-Farm Employment Change and ISM Services PMI.
4.    Thursday 05 October 2023, US releases Unemployment Claims.
5.    Friday 06 October 2023, US releases Non-Farm Payrolls and BLS Unemployment Rate.
 

Other news:

●    AIA, CK Asset, Cosco Ship Holding, Kingsoft, Kuaishou, Li Ning, Sinopec, Tencent and Xiaomi bought back shares.
●    CK Asset, Ganfeng Lithium, JD.com, Li Ning, Sino Biopharm and Sunny Optical print new 52-week lows.
●    PetroChina begins building a 21.88 billion yuan petrochemical complex in Xinjiang.
●    BYD Electronics acquires Juno Newco Target Holdco Singapore for 15.8 billion yuan.
 

Technical observations

Xiaomi 1810.hk is pushing at a seven-month high, trading above indicators.

Note chart features:

1. Over the past seven months, Xiaomi’s highest end-of-week close is $12.44 printed late-March this year followed by $12.36 that was traded five weeks ago. On Friday, Xiaomi closed at $12.34. This is an outperformance against HSI and HSTech over the same duration. The longer this butting at potential resistance continues, the more likely that it is a technical accumulation that could result in further gains. Note that in the past five-days, there was an increase in trading volume accompanying price gains.

2. In the meantime, Xiaomi also closed over its entire basket of moving average indicators. This is a setup associated with further gains.

Xiaomi 1810.hk weekly chart from 04 July 2022 to 29 September 2023 (Source: DLC.socgen.com)