The Correction of Hang Seng Index Persists

Hong Kong's Hang Seng Index retreated around 8% from July high at 26780 on weak Hong Kong's economic activity and the rising tension between U.S. and China.

The local economy of Hong Kong is still fragile as Hong Kong is still suffering from the third wave of coronavirus. Hong Kong's July Markit PMI dropped to 44.5, worse than the expectation of 50.4 from 49.6 in June.

The tension between the U.S. and China is escalating as the U.S. banned U.S. residents to do transactions with Tiktok and Wechat, and blocked China Telecom and China Mobile to offer service in America.

This morning, Chan's CPI rose 2.7% on year in July (vs +2.6% expected, +2.5% in June), while PPI dropped 2.4% (vs -2.5% expected, -3.0% in the previous month), according to the government.

The investors should focus on China's July industrial production (+6.2% on year) and retail sale (+1.5% on year) this week as the Chinese stocks weighted more than half in Hang Seng Index.

From a technical point of view, the index is capped by a declining trend line on a daily charting, indicating a bearish outlook.

The 20-day moving average is also turning downward and the relative strength index broke below the rising trend line. Both indicators suggest that the downside momentum remains.

Bearish readers could set the resistance level at 25200, while support levels would be located at 23900 and 22500.

Source: GAIN Capital, TradingView

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.