While the Hang Seng Index (HSI) retraced from August 21 after three consecutive weeks of decline, the following weekly price closed lower than the opening of 18,519.08 Hong Kong dollars (HKD), with this week’s trend also downward.
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.
PP Link Securities (PPLS) business manager Long Samnang said the HSI has been in a downtrend since August 18, 2023, when Chinese real estate developer Evergrande Group filed for bankruptcy protection in the US, raising concerns over the health of the Chinese economy and weighing on investor sentiment.
Samnang added that, as most debt-plagued real estate developer in the world, Evergrande’s woes would inevitably have a prolonged negative impact on China’s economy, including job cuts and a depressed housing market.
CNN Business reported on July 18: “Evergrande Group, the world’s most indebted property developer, has posted long-delayed financial results as a key part of its debt restructuring, which is shaping up to be one of the largest in Chinese corporate history.
“The company reported losses attributable to shareholders of 476 billion yuan ($66 billion) and 106 billion yuan ($15 billion) for 2021 and 2022, respectively, according to a Monday stock exchange filing. Combined net losses for the two years amounted to 582 billion yuan ($81 billion).”
And in a positive for the US economy, the Non-Farm Employment Change for August, released on September 1, exceeded the forecast of 169,000 jobs added, with the actual figure 187,000, according to Forex Factory, higher than the previous month’s 157,000.
Samnang said the Federal Reserve at its next meeting, on September 19-20, is expected to maintain its benchmark interest rate in the 5.25 to 5.5 per cent range despite the recent improvement in the US economy.
Such a decision would likely heap more pressure on the HSI as higher interest rates make it more expensive for businesses to borrow money and invest.
For this week’s trading recommendation, investors can consider selling on the HSI, setting the take-profit at 18,300 HKD and the stop-loss at 18,777 HKD.