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HK shares extend slide on rising caution

China H-shares are on a four-day losing streak which could continue with a lack of market catalysts, as investor confidence takes a hit from rising geopolitical risks.

People practice Tai Chi on the Bund in Shanghai, China
Source: Bloomberg

On Monday, Chinese stocks in Hong Kong fell 0.82% - the most in nearly two weeks.

The HSCEI Index was dragged down by automakers with the few bright spots coming from the gaming sector.

The rising likelihood of further economic sanctions against Russia has weighed down global sentiment, which saw Wall Street kicking off its week lower.

With a general lack of local market catalysts today, investors are likely to take a risk-off approach.

We could see China H-Shares test its support on the 50 day moving average, with a further support level at 10322.8.

Heading into Thursday, there will be a round of local economic data that could give some respite to markets. We will see the HSBC China manufacturing flash PMI for July and Hong Kong trade numbers for June –the market is expecting an uptick for both.

There’s also increased speculation that Chinese authorities will unveil further targeted stimulus measures for the property sector, which will be a boon for property players. Ahead of this, the current low market sentiment could give investors an opportunity to buy on dips.

Ahead of the Singapore Open

We’ll likely see some cautious trading in the markets, as investors watch closely on the developing geopolitical news.

Indonesian presidential election results are due out today, with market favourite Joko ‘Jokowi’ Widodo ahead of rival candidate Prabowo Subianto in unofficial tallies. However, any result is likely to be contested by either side and could send markets into at least another month of uncertainty.

If Prabowo scores an upset, a pullback should be expected after the strong rally this year in the Jakarta Composite and rupiah pricing in a Jokowi win.

With investors being cautious it likely means markets are largely flat, we are calling for HSCEI to open up by 0.16% at 10365.2, and the MSCI Singapore to open 0.12% higher at 378.37.

China H-Shares cash chart
Click to enlarge

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