Hong Kong stocks poised for bounce

Asian stocks are set for a positive session today, with  positive leads from Wall Street. The S&P 500 clocked its biggest jump this year, following an indication that the Federal Reserve would keep interest rates low.

Hong Kong Stock Exchange
Source: Bloomberg

Chinese stocks especially should see some positive sentiment following the release of some pretty decent China macro data yesterday.

HSBC China Services PMI for September showed a print of 53.5, below the previous month’s 54.1.

While it failed to beat  August’s reading, the September reading was the second highest in 18 months, suggesting consumer sentiment growth is on stable footing.

As Hong Kong’s pro-democracy movement enters into its 12th day, the protestor numbers have largely dwindled. 

Formal negotiations between protestors and government officials are scheduled for Friday, so it could be relatively calm in the markets till then.

Ahead of the Hong Kong open

An improved market sentiment over the past few days has lifted the Hang Seng Index, which has bounced off a support level of 22,400 points. On that basis, we are calling for the Hang Seng Index or Hong Kong HS50 to rise 0.98% to 23,498.9 points.

In the interim, there looks to be a further upside, signalled by the crossing of the 20 MA above the 50 MA (also its 38.2% Fibonacci retracement level) on a four-hour chart. The index is also testing its 100 MA, a break above this will suggest the upward momentum will continue. The next resistance it is likely to test is the 50% retracement level at 23,874 points.

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