Hong Kong stocks have been on a correction over the last two months, but that may be ending.
HK 50 – Daily Chart
The HK 50 saw a correction after the May breakout of strong downtrend resistance. A rally has now formed, with the price now trading at 18,293, and the index will look to push toward the 20,000 level.
Last week’s softer-than-expected US inflation reading boosted expectations that the Federal Reserve will cut interest rates at its September meeting.
Property stocks were mainly supported, with Sun Hung Kai Properties and other Hong Kong-based developers rallying on the prospect that the rate cut would revive home sales in the region. The Hong Kong dollar’s peg to the US dollar means the Hong Kong Monetary Authority has to raise or cut the city’s benchmark interest rate in lockstep with the Fed’s rate changes.
Bank stock earnings in the United States also hinted at a slowdown in consumer spending and stress among borrowers. That could feed into further rate cuts, and the US stock rallied on Friday.
The Chinese economy’s growth figures will be released on Monday, which could also boost stocks. The forecast is for 5.1% after 5.3% last month, but there is still potential for a better-than-expected result.
China’s ruling party also starts its third plenum meeting this week to discuss the outlook for the economy. That could bring positive news for the market with the potential for further property market reforms or support.
Chinese authorities also suspended short-selling in the stock market last week, which could help stock prices in the coming weeks.
There will also be little data from the United States in the week ahead. However, a European interest rate decision may affect the dollar.
