Hang Seng waits on Chinese PMI to bear

Hong Kong shares could see some catalysts this week with a raft of economic data from China.

Data board in Hong Kong
Source: Bloomberg

The Hang Seng had a few choppy sessions last week, with a relatively light week of macro data. This week, the markets should get a clearer direction from a round of Chinese PMI numbers.

At 9am this morning (Singapore time), we’ll get an indicator of China’s  economic growth with its official manufacturing PMI for August.

The reading is expected to come in lower at 51.2, versus the prior month’s reading of 51.7.

Another indicator will be released at 9.45am (Singapore time), where we should see the final numbers for HSBC China manufacturing PMI for August. The consensus forecast is calling it to be flat at 51.3.

Later in the week on Wednesday, other data points to watch out for include non-manufacturing PMI and HSBC services PMI.  The non-manufacturing PMI numbers will be interesting to watch after a print in July of 54.2 – a six-month low.

If the readings are positives, a short-term lift can be expected for Hong Kong shares. On the flipside, any disappointing numbers will cap any gains.

We expect some optimism to trickle back into the markets in the early part of the week, following the positive leads from Wall Street on Friday.

Investor confidence will also be further boosted by news that Chinese policy makers have eased rules on local government bond sales. This is expected to help improve their liquidity and financial transparency.

Ahead of the Hong Kong Open

On a short-term view, there is some bearish momentum in the Hang Seng index, so we are calling for Hang Seng to open 0.16% lower at 24,692.3 points.

However, on a long- term view, the Hang Seng is on an upwards trend, so there is some value to buy on the dips off the support.

Any positive macro data today could  prompt a short-term rebound and accelerate any moves by the index. Traders can consider entering a long position once it breaks through the support-turned-resistance level of 24,740 with a potential stoploss at 24,420.

Hong Kong HS50 chart
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