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Asian stock rallies come to a halt as investors take profit

The Hang Seng Index and Straits Times Index both fell 1.6% and 1.13% respectively on Friday, as investors sought to consolidate profits.

  • Hong Kong’s Hang Seng Index closed 1.6% lower as investors sold off their shares on Friday triggered by ‘overbought’ signals
  • A worsening Covid-19 situation in China and overseas also motivated the profit-taking
  • Meanwhile, Singapore’s Straits Times Index also closed 1.13% lower after having breached the 3,000 mark a day before
  • Looking to trade the Hang Seng Index or Straits Times Index? Open an IG account today

Hang Seng Index: ↓1.6%

Hong Kong blue chip equity barometer Hang Seng Index (HSI) closed 1.6% lower at 29,450 on Friday (22 January 2021), putting an abrupt end to its best yearly start since 1985.

The benchmark has enjoyed a 10% rally in the last three weeks alone, as interest from Mainland Chinese traders surged over concerns of a recent US ban on Chinese securities.

Chinese investors have already transacted nearly US$29 billion worth of Hong Kong stocks so far this year, almost a third of all purchases made in the whole of 2020.

The HSI eventually breached the 30,000 mark on Thursday (21 January), its highest level since May 2019.

Shares, however, retreated on Friday as ‘overbought’ signals a day prior prompted investors to sell down for profit consolidation. A worsening Covid-19 situation both in China and overseas also negatively impacted sentiments.

‘The stocks have risen quite a lot recently, when it broke 30,000 points and investors reached their short-term goals, they tend to take profit at a high level,’ said Linus Yip, chief strategist at First Shanghai Securities, told South China Morning Post.

‘Although funds usually have long-term arrangement (in their new portfolio), the market still will have consolidation when they stopped buying (at a high price).’

Top losers of the day included: CNOOC (-5.57%), Xiaomi (-3.72%) and Alibaba (-3.09%).

Straits Times Index: ↓1.13%

Meanwhile, Singapore’s large cap benchmark Straits Times Index also slipped 1.13% to finish the day at 2,983.09, driven largely by property drops.

City Developments saw the biggest decline on the day, falling 2.2%. Other significant property stock losses included: CapitaLand (-1.45%), Mapletree Commercial Trust (-1.8%) and UOL (-1.3%).

Elsewhere, Singapore Airlines also experienced major sell-offs, descending 2.08% to conclude the trading week.

On Thursday (21 January), the STI Index breached the 3,000 level, as global trading sentiments peaked on the inauguration of new US President Joe Biden.

The index had closed at 3,017.15 points, up 18.38 points, or 0.61% on the day.

How to trade indices with IG

Are you feeling bullish or bearish on the Hang Seng Index or Straits Times Index?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps: q

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Hong Kong 50 Index> or <Singapore Index> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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