Market Commentary - For the week ending 16 February 2024

Market Commentary (Hong Kong) 

For the week ending 16 February 2024

On the back of stronger than expected CPI numbers, US 10-year and 30-year government bond yields popped to their year-to-date highs of 4.33% and 4.49% this week. Higher than expected CPI and PPI numbers also dealt a blow to stock indices. DJIA and Nasdaq 100 terminated their five-week uptrend.
 
●    China initiated a national alliance of government, academia and industry players to build solid state batteries. Industry players include BYD and Contemporary Amperex.
●    Germany’s commercial real estate market is declining at record levels. Prices fell 12.1% y-o-y for the fourth quarter and over 10% for the whole of 2023. Previous record declines were 7.6% in 2004 and 7.3% in 2009.
●    Japan slipped into recession and conceded its place as the world's third largest economy to Germany. The UK also entered recession.

Hang Seng Index closed the week at 16340, up 593 points or 3.77%. With China’s markets closed for the Spring Festival, trading volume was light. The index closed this week at a five week high and importantly, it closed above 16000 which was a previous support-turned resistance. In addition, HSI also closed above its 50-Day SMA (purple line, see right lower circle). This was the first time since July last year that the index closed above this indicator (see left top circle). 

It is possible that the index could throwback to re-test 16000 and it is also possible that HSI could be resisted by the 50-Day but this week’s bullish signal could give bulls additional energy. Based on previous price action, 17000 could be a potential resistance level. A previous swing low and high can be spotted here. The 100-Day SMA (red) could also act as a temporary ceiling. Moving averages are still pointing downwards. No big bullish reversal pattern is visible.

 
HSI weekly chart from 02 January 2023 to 16 February 2024 (Source: DLC.socgen.com)

Hang Seng Tech closed the week at 3343, up 216 points or 6.89%. The index closed this week at a four week-high that also appears to put a swing low in place. 3000 could be a support for this swing low. It is difficult to identify potential resistance overhead although the 50-Day SMA could play such a role. A bigger zone exists between 3550 and 3750. Multiple swing lows can be spotted here.

 
HSTech weekly chart from 02 January 2023 to 16 February 2024 (Source: DLC.socgen.com)

Dow and Nasdaq both made new all-time-highs early-week but closed down by the end of the week. CPI and PPI could be the main culprits as both printed higher than expected. Both indices did manage to close above most of their moving average indicators. This is a setup that is associated with further gains. 

The next FOMC meeting is scheduled on 20 March 2024.

Fed funds futures on rate hike probability by next Fed meeting as at this week’s close:
●    90.0% probability of no change |10.0% probability of 25 basis points cut

Fed funds futures on rate hike probability by next Fed meeting at last week’s close:
●    84.0% probability of no change |16.0% probability of 25 basis points cut

Probabilities on the CME Fedwatch Tool indicate no more rate hikes for this year. Rates could hold at current level till January 2025. Probabilities predict a cumulative 175 basis point cut for the whole of 2024 and up to 225 basis points between now till March 2025.

Shanghai and Shenzhen were closed for the Spring Festival.

Other news:
●    AIA, Cosco Ship Holding, Kuaishou  and Xiaomi bought back shares.
●    Ganfeng Lithium and Wuxi Biologics printed new 52-week lows.

Technical observations

Alibaba 9988.hk triple-dipped $70, now closed above its 50-Day SMA.

Note chart features:

1. Based on price action, Alibaba was gyrating about its $70 level since December last year. Inspection reveals that there were three dips below $70 each followed by reversals back above the following week. Based on the turnover distribution (see gray horizontal histogram to the left), there was a minor peak coinciding with $70. A change of hands could turn the stocks trend around. This week, Alibaba closed at a seven week high in conjunction with golden crosses in its 10, 20 and 50-Day SMAs. Price also closed above the 50-Day, which is the first time since September last year.

2. There was a prominent swing low that traded at a low of $70.05 back in March 2022. This level could be significant to a segment of investors. At the moment, there is no big reversal pattern evident. Longer 100 and 150-Day SMAs are still pointing down. This is a setup that is associated with further losses.

 Alibaba 9988.hk weekly chart from 02 January 2023 to 16 February 2024. (Source: DLC.socgen.com)