The Hang Seng index experienced a big intraday swing to close 0.2% lower at 31,355 points, after touching decade high of 31,733 points in the mid of the day.
Weakness came through from the mainland A-share market as profit-taking activities finally kicks off following Shanghai Composite’s 11 consecutive session gain. The rally has been overstretched despite of positive sentiment and dollar’s weakness, which is translated to higher mainland asset prices due to HKD-USD currency peg.
Tencent Holding (700 HK), the index largest component, lost 2% and closed at 433.2. Technically, Tencent failed to break through key 161.8% Fibonacci Extension level of 445 at a second attempt and may retrace back to immediate support near the 10-Day SMA. A deeper correction could potentially bring down the price to 417 area – a 127.2% Fibonacci level in conjunction with SuperTrend (10,3) lower bound. Momentum indicators MACD and RSI have shown signs of weakness in its upward momentum as the broad market’s rally seems to have run out of steam after Hang Seng’s 15 non-interrupted session gain.
US Equity market closed on Monday and thus there was lack of catalysts from overseas. Dollar’s weakness dominate movements in the forex and commodity markets, whereas euro and sterling rallied to their highest level since the EU referendum. Crude oil prices are lifted by soft dollar too, with Brent stood firm above US$70 mark.
Singapore stock market benefited from rising oil prices, which gives the offshore & marine sector a boost and sent Straits Times Index to close at its highest level since April 2015. Rising oil price also helps to alleviate concerns on bank’s exposure to the oil & gas sector, which were among the main dragging factor for banks’ performances over the past years.
Market focus will soon shift to the corporate earnings season, which serves as a quarterly test to a market full of complacency sentiment. Major markets include US, EU, Japan and China have seen four to five consecutive quarter of earnings improvement, and this is likely to continue as global cyclical upswing is gaining momentum.
CMC’s client sentiment function shows that among CMC’s global client basis, the sentiment on the Hang Seng Index (Hong Kong 50 product) remains bullish-biased with 83% of Top client’s position on the long side, up 21% from yesterday. The sentiment on GBP/USD leans towards the upside too, with 78% of top client’s positions positioned for sterling to strengthen further.
Client Sentiment – Hong Kong 50 and GBP/USD
Singapore Earnings Calendar
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