Hang Seng could test last week’s low

Hong Kong shares were under pressure yesterday, shedding nearly 2%, closing at 24,705.

China flag
Source: Bloomberg

Investors have been cashing out after the recent stream of soft Chinese macroeconomic data.

Concerns were raised yesterday after Premier Li Keqiang indicated that M2 money supply growth had moderated to 12.8% for August.

The sell-off was also driven by expectations that we could see more structural reforms in China rather than more targeted stimulus measures.

Chinese stocks will be in focus again today with another round of data to be released in the morning.  

Inflation numbers have come in weaker for August. PPI showed a print of -1.2%, against the consensus forecast of -1.1% and July’s -0.9%.  CPI was marginally weaker, coming in at 2% versus the forecasted 2.2% and July’s 2.3%

With the readings suggesting further weakness in China’s economy, we are likely to see further pressure on Chinese stocks and see the Hang Seng test its next support level.

The bears have dragged the Hang Seng Index close to the support area of 24,620, which was last week’s low. Traders can watch for the index to make a clear break of support to consider a short position in the interim.

Hong Kong HS50 Cash Chart
Click to enlarge

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.