Date
20 September 2017
Chinese A shares continued to hover around 3,600 points without clear direction, with the Shanghai Composite Index gaining 1.4 percent last week. Photo: CNSA
Chinese A shares continued to hover around 3,600 points without clear direction, with the Shanghai Composite Index gaining 1.4 percent last week. Photo: CNSA

Hong Kong market may test 23,000 with limited momentum

The Hang Seng Index is likely to rally further amid improving market sentiment after hitting a 20-day average of 22,653 points last week.

The Federal Reserve has sent a clear signal for the first US rate hike before the year is out and European Central Bank chief Mario Draghi has hinted that he is ready to ramp up debt purchases.

Hong Kong stocks gained 1.6 percent last week.

Natural gas

The National Energy Bureau plans to boost the ratio of natural gas in China’s energy consumption to 10 percent by 2020 from 5 to 6 percent at present.

The National Development and Reform Commission cut non-residential natural gas prices in a bid to deepen market reform in the sector.

The news led to an 8.9 percent jump in Kunlun Energy (00135.HK), the top-performing blue-chip stock.

However, high oil inventory continues to weigh on oil prices.

PetroChina (00857.CN) lost 1.1 percent last week and Sinopec (00386.HK) eased 0.8 percent.

Casino tumble

Macau Chief Executive Fernando Chui said in his policy address last week that gaming revenue is expected to tumble to 200 billion patacas (US$25.81 billion), the lowest since 2010.

Galaxy Entertainment Group (00027.HK) fell 4.8 percent on the news, Sands China (01928.HK) lost 3.2 percent and SJM Holdings (00880.HK) gave up 2.9 percent.

The hotel/leisure sector tumbled 2.45 percent last week, making it one of the worst performing sectors.

Up and down

The Hang Seng Index fell below 22,400 points early last week, then rebounded amid expectations of a Fed liftoff and improving external outlook.

The benchmark bounced back above 22,700 points on Friday and went on to smash the 20-day average.

The index also broke the golden ratio of 23.6 percent from its April level while short selling remained at 12 percent.

The benchmark could hit the previous peak of 22,980 in the short term.

However, daily market turnover is not quite active, averaging about HK$61.9 billion last week.

Also, the market still lacks momentum given that the ratio of gainers was below 70 percent of more than 1,800 stocks.

Investors should not have unrealistic expectations.

A-share market

Chinese A shares continued to hover around 3,600 points without clear direction.

The Shanghai Composite Index gained 1.4 percent to close at 3,630 points last week.

About 87.2 percent of stocks climbed above the 20-day average, up 1.4 percentage points from the week before.

By contrast, 95.7 percent of stocks rallied above the 50-day average, up 0.7 percent from the previous week.

However, the ratio is expected to remain in the overbought range for a while.

Studies show the market has further upside on the back of recovering market turnover.

Also, the minutes of the last meeting of the Federal Open Market Committee show that most members believe a December liftoff is suitable.

It seems the Fed has achieved consensus in that regard.

Fed fund rates indicate that there is a 68 percent chance of the rate hike taking place next week.

This article appeared in the Hong Kong Economic Journal on Nov. 23.

Translation by Julie Zhu

[Chinese version中文版]

– Contact us at [email protected]

JZ/DY/RA

Department of Investment Analysis at HKEJ

EJI Weekly Newsletter

Please click here to unsubscribe