The Hong Kong share index is looking to salvage an almost four-month rally this week.
HK 50 – Daily Chart
The HK50 index is testing the previous resistance at the 24,904 level, and after a breach of the April uptrend, there needs to be some strength here to hold the uptrend.
The strong run that pushed the Hang Seng to its highest point in three and a half years last month has slowed on weaker China economic data. Last week’s manufacturing data was a setback after recent strength in the numbers. A hyped Politburo meeting chaired by President Xi Jinping last week also reiterated policies from previous conferences.
Investors are also wary about the trade deal with President Trump, which may even be abandoned if he imposes sanctions on the country.
“The market has accumulated significant gains since April 7,” said Amber Zhou, analyst at Haitong International. “We expect the market to move into a pattern of sideways trading to consolidate the momentum and wait for fresh policies”.
The latest 90-day extension between China and the U.S. is being viewed by some as a headwind. Economists believed that a deal was very close due to comments from both parties.
Another negative for Hong Kong was the earnings release of HSBC Bank, which reported weaker-than-expected financial results. The company’s profit before tax was $6.3 billion in the second quarter, lower than the expected $6.99 billion.
Revenue of $16.5 billion was also slightly lower than the median estimate of $16.67 billion. One of the problems was a $2.1 billion impairment charge linked to Bank of Communications.
Traders should watch the levels noted, as there is a risk of a deeper correction on further weakness.
