Hang Seng index smashed short-sellers again with a 557 points rally on Tuesday. Technically, it has broken out above the top ceiling of the upward channel with strong momentum. It seems that the 30,000 points psychological level is just a notch away.

Technology (Tencent), Insurance (Ping An Insurance) and Securities (Citic) continued to drive this rally, with strong southbound flows fuelling liquidity and lifting the valuation of H-shares.

Southbound flows via the stock connection is an important reason behind Hang Seng’s 30% gain year-to-date. In the first ten months of this year, total turnover of HKEX surged 22% comparing to the same period last year. Improved market condition, ample liquidity and continuous southbound flows are changing the valuation mechanisms in the HK market. Chinese capital are gradually penetrating into this previously foreign-capital-dominated market, gaining market share and re-evaluating some of the high-quality industrial leaders which were long being undermined.

As the Hong Kong equity rally continues, the gap between A-H markets is expected to narrow down and eventually reach equilibrium in the long term.

A stunning 1400 points spike in the Hang Seng future contract at last night’s session opening surprised many, and may had caused damage to traders who are trading against the trend. The reason behind this spike was unknown in the public, but street whispers suggest it might be caused by a ‘fat finger’ buy trade which swept through a big chunk of price ladders and thus result in surging prices within seconds.

In Singapore, the Straits Times Index climbed 35 points or 1% as the ‘catch-up’ rally is carrying on. Banks extended gains alongside with properties,offshore & marine names. Concerns over PM Lee Hsien Loong’s latest comment on tax rates didn’t provide immediate market impact, as markets take more of a gradual ‘phase-in’ and expect government to conduct proper communication with the public before executing any tax hikes.

Technical Analysis

Hong Kong 50 – Cash

  • SuperTrend (10,3) and 10 Day-Simple Moving Average both sloped upwards
  • Broke out above upper ceiling of the ascending channel, suggesting more upside
  • Immediate resistance is the psychological resistance at 30,000, followed by 30,400

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