The STI lost 20 points yesterday following a sluggish US session last Friday and a meltdown of the Chinese stock market on Monday, as the latest round of PBOC’s easing measures failed to boost market confidence, but rather highlighted the downward economic pressure government is facing against rising trade frictions with the US.

Plenty of bearish news were fed in during the long Chinese holiday period, with the latest China manufacturing PMIs falling short of expectations. Bloomberg reported China’s hacking attack of US hardware and rising US treasuring yields.

Sector wise, offshore & marine names including Sembcorp Marine, Keppel Corp and Sembcorp Industry outperformed benchmark, backed by strong oil prices. Brent oil price has consolidated for a third day, but still remained at an elevated level due to concerns of shrinking Iranian oil supply. Telcos StarHub and SingTel gave up some of the gain earlier last week after M1 received a buyout offer from Keppel, and SPH has been fully digested.

Global market sentiment was also depressed by surging US 10-year treasury yield, which came to 7-year high of 3.23%. This flagged risks of rising mortgage and loan costs, and probably more rate hikes ahead. Rising borrowing cost is usually viewed as a disruptive factor to equities and it has already caused several corrections in the US stock market this year. Nasdaq was amongst the worst performing US indices last night, and it has entered into a technical correction since last week, breaking down an ascending channel that formed since April 18.

In Hong Kong, the Hang Seng Index has come to a key support level at around 26,000 points, which is also the 138% Fibonacci Extension level. A technical rebound here will allow the formation of ‘double bottom’ pattern in the daily chart. Trend indicator SuperTrend (10,3) and 10-Day SMA are both slopped downwards, suggesting overall trend remains bearish. In the mid-term, a breaking down below this key level will open room for more downsides towards the next Fibonacci level at around 25,000 area.

Hong Kong 50 - Cash

By Margaret Yang in Singapore

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. CMC Markets is regulated by the Monetary Authority of Singapore.