Market Commentary - For the week ending 26 April 2024

Market Commentary (Hong Kong)

For the week ending 26 April 2024

USDJPY closed at 158.30, a fresh high after the BOJ kept its policy rates unchanged again. US 10 and 30Y Treasury Bonds make new year-to-date highs

●    Indian self-driving startup Swaayatt Robots is developing autonomous vehicles that can cope with India’s road conditions including wandering cows and tuk-tuks weaving through traffic. A video released by the company suggests that they are making good progress.
●    US Sec. of State Blinken’s arrival in China was received by a local party chief and no red carpet. China warned that the two countries' relationship could be moving towards a downward spiral.
●    In response to the REPO ACT which allows the Biden administration to confiscate Russian assets, a Russian court has now ordered the seizure of $440 million assets from JP Morgan.
●    Smartphones sales in China rose 1.5% y-o-y in Q1 according to Counterpoint Research. Huawei sales surged 69.7% while Apple sales fell 19.1%. 
●    Times of Israel reported that the Eilat Port which handles automotive and potash trade received only two ships since the end of November 2023.  
 

Hang Seng Index closed this week at 17651, up 1427 points or 8.8%. This week’s action shot past the consolidation range building up over the past weeks and also cleared a potential 17000 hurdle. It also revealed last week’s drop as sellers’ remorse. The index closed above its entire basket of moving averages which is a setup associated with further gains. 18000 could be tested. The index could also move sideways to build or discover a new support. The previous consolidation range could fill this role. Note that index formation below 17000 now resembles an inverted head and shoulders’ pattern although the right shoulder is slightly extended.

HSI weekly chart from 03 July 2023 to 26 April 2024 (Source: DLC.socgen.com)

Hang Seng Tech closed the week at 3718, up 440 points or 13.43%. HSTech shot above a zone between 3550 and 3650 where the previous swing highs and swing lows ended. This week’s high could be a nod to 3750 as a potential resistance. The index also closed above its basket of moving averages which is a setup associated with further gains. No significant reversal pattern can be observed. Zone between 3550 and 3650 could become potential support.

HSTech weekly chart from 03 July 2023 to 26 April 2024 (Source: DLC.socgen.com)

Both the Dow and Nasdaq rebounded from 2023 high. This is a 52-week high support and trading above it is usually associated with further gains. However sentiment for both indices are still likely negative for both as they are in the red for both the month and quarter. Both indices are also trading below their 50-Day SMA.

The next FOMC meeting is scheduled on 01 May 2024.

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

●    97.6% probability of no change |2.4% probability of 25 basis points cut

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

●    96.8% probability of no change |3.2% probability of 25 basis points cut

Probabilities on the CME Fedwatch Tool indicate no more rate hikes for this year but also indicate possibility for rates to stay at current level until April next year. Probabilities predict up to 125 basis points cut for the whole of 2024 and up to 150 basis points between now till April 2025.

Both Shanghai and Shenzhen indices rose for the week. Shanghai closed at the highest end-of-week level of 3089 year-to-date. It is up 0.76% and closed above its entire basket of moving averages. This is a setup associated with further gains. Shenzhen index is up 1.99% for the week but lags behind Shanghai. Its 150-Day SMA hangs overhead.

Other news:

●    AIA, BYD, Kuaishou, Wuxi Bio and Xiaomi bought back shares.
●    China Mobile, CNOOC and Xiaomi printed new 52-week highs. Sunny Optical and Xpeng printed new 52-week lows.
●    Toyota and Nissan have teamed up with Tencent and Baidu respectively to carry out research on AI and smart cars.
●    Meituan is looking to fill eight Riyadh-based positions. Market chatter speculates that it will expand operations to Saudi Arabia.
●    CNOOC posted record Q1 profit.
●    Renault talked to Xiaomi and Li Auto on potential collaboration in electric and intelligent vehicles.
 

Technical observations

Kuaishou 1024.hk perched at trendline, high volume.

Note chart features:

1. There is a very long trendline that joins five major swing highs going back to the second half of 2021 (only partially shown in this chart). Depending on how one draws the line, Kuaishou is either perched on or has broken the line. Breaking such a line could signify a change of trend, especially a long duration line such as this. In conjunction with the big gain this week, volume also increased significantly. Such a combination is associated with further gains.

2. Notably this week’s gain also took the stock past $50. There was a swing high here from March this year to early April. In fact, $50 was also the turning point for multiple swing highs and lows throughout 2023. Overcoming its resistance turns it into a potential support.

Kuaishou 1024.hk weekly chart from 04 July 2022 to 26 April 2024. (Source: DLC.socgen.com)