The Hang Seng index is wavering today as investors reflect on the performance of Wall Street yesterday. The index is trading at $23,745, which is a few points above its intraday level of $23,598, which was the lowest level on June 8.
The Hang Seng has been under pressure recently as the relations between the United States and China have worsened. According to media reports, China is seriously considering putting a set of American companies on its Entity list. That move is being forced as the country starts applying its sanction powers more. While the entity list has not been released, it is said to include a company like Cisco, which competes with Huawei. A tit-for-tat game between China and the US tends to hurt companies in the Hang Seng.
The index has also suffered because of the banking sector. Indeed, HSBC shares are today down by more than 1.57%, becoming the worst-performing stock in the index. There are concerns that the company could be punished by China because of its roots in the United Kingdom. And the UK has a close relationship with the United States. As such, moves by China could impact the bank’s entry into the mainland economy, where it is expanding.
However, an analyst at Blackrock said that the worst could be over for the weakness of the Hang Seng index. He argued that investors are likely to move to the index now that it has started being more tilted towards technology. Indeed, tech firms like Alibaba, Xiaomi, and Tencent are some of the constitiuent firms.
Banks are among the weakest performers in the Hang Seng today. Bank of Communications, China Construction Bank, ICBC, and Hang Seng Bank are among the worst-performers. On the other hand, Sino Biopharmaceutical, Xiaomi, Techtronic, and Alibaba are among the best performers.
The Hang Seng is trading at $23,745. On the daily chart, this price is slightly below the 38.2% Fibonacci retracement level. (This retracement is drawn by connecting the lowest and highest level this year). Also, the index has moved below the neckline of the head and shoulders pattern at $24,165. It is also below the dynamic resistance of 20-day weighted moving average.
Therefore, I suspect that the index will continue falling as bears aim for the next support at $23,000, which is both a psychological support and also along the 23.6% retracement level.
