- Summary:
- Why did the Hang Seng index slump hard today? We explain why the new China rules pushed the index substantially lower and key movers.
The Hang Seng index nosedived on Tuesday after China pledged to tighten its rules on unfair internet competition. The rules were published by the State Administration for Market Regulation (SAMR). The HSI index declined by more than 1%, with most companies being in the red. Other Asian indices like the Nikkei 225 and Shanghai Composite also declined.
Tech stocks lead Hong Kong stocks lower
The Hang Seng index has been left behind this year. While its peer indices in the United States and Europe have surged, the index has declined by more than 6% year-to-date. This performance is mostly because of China’s battle with its technology companies.
This war continued today when SAMR announced a new draft as it sought to stop unfair competition in the tech sector. The companies will now need to face more rules such as not providing false data like the number of clicks. Also, operators should not conceal negative reviews as they promote positive ones. Also, the rules bared operators from using data and algorithms to collect and analyze competitors trading information.
Therefore, the Hang Seng index declined sharply today. The worst performers were WuXi Biologics, ANTA Sports, Haidilao, Tencent, Alibaba, and HKEX. These firms shares declined by more than 4%. The best performers today were companies like Sunny Optical, AIA Group, China Unicom, and China Resources Land.
Meanwhile, year-to-date, the worst performers in the index include firms like Haidilao, Alibaba, Ping An Insurance, and Sands China. Tech stocks like Alibaba, Meituan, Xiaomi, and Tencent have led the weighted declines. On the other hand, the best performers are firms like Techtronics, Citic Pacific, CSPC Pharma, and Sunny Optical.
Hang Seng index technical analysis
The daily chart shows that the Hang Seng index has been in a sharp downward trend recently. The stock broke out lower on July 26th and then attempted to crawl back. It then found a strong resistance at H$26,800. The index continued falling today and is now below the 25-day and 15-day moving averages.
Therefore, I suspect that the index will keep falling as investors target the YTD low of H$24,773. This view will be invalidated if the price manages to move above the key resistance level at H$26,830.
