The Hang Seng Index (HSI), based on daily charts, began to drop after reaching a high of 20,322.2 Hong Kong dollars on July 31, before opening on Wednesday with a price of 19,001.9.
Also known as the Hong Kong 50 (HK50), the HSI is made up of the 50 largest Chinese companies listed on the Hong Kong stock market, including the China Petroleum & Chemical Corporation (Sinopec), the Bank of China, PetroChina and Alibaba.
In the daily charts, there was sideways movement between 20,800 to 18,000 since a high of 20,306.5 on August 1, and as of Wednesday, there were signs of the price swinging back into that range.
Such signals have persisted long enough to raise speculation as to whether the price will move back to around the 20,000 mark, as concerns over the shape of the US economy return.
“Hong Kong’s equities rose 61.86 points or 0.32 per cent to close at 19,246.03 during a volatile session on Wednesday, ending in the green for the first session in three, supported by a rise in US stock futures following a slide on Wall Street on Tuesday due to renewed worries about the US banking system and the economy.
“Meantime, hopes grew that China will eventually launch a large stimulus after consumer prices fell for the first time in over two years last month while factory deflation entered its 10th month,” TradingView reported on August 9.
With the strength of the US currency correlating with the health of its economy, the poor jobs data released last Friday further weakening the greenback was another indication the HSI could rise.
And while raising the Federal Fund Rate is one of the most powerful tools the US central bank has for strengthening the dollar, current indications suggest this is unlikely.
The present interest rate of 5.50 per cent – already on the limit of the target level of 5.25-5.50 and above the average 5.42 per cent from 1971 to 2023 – makes it less possible for the Federal Reserve to implement any further increases.
For this week’s trading recommendation, investors and traders could wait until the price is between 18,900 to 18,890 to buy on the HSI, setting the take-profit function at 19,500 and the stop-loss at 18,780.