- Summary:
- The Hang Seng index is tumbling today as investors react to the just passed China sanctions bill in the United States and a surge in coronavirus cases
The Hang Seng index declined by almost one per cent as the market reopened today. The index is off by more than 200 points and with almost all companies being in the red. The index is an outlier, with the Nikkei 225 and KOSPI up by more than 1%. Chinese bourses are closed today.
Hong Kong stocks falls as US passes China sanctions bill
The Hang Seng declined partly because of a bill passed in the US senate. The bill will strengthen the country’s ability to sanction Chinese officials who are violating the “one country, two systems” rule. It was presented by Chris van Hollen, a Democrat from Maryland and supported by most republicans.
The bill comes at a time when the US and China are on divergent paths. For example, the Trump administration has blamed China for letting the virus spread in the early days. China has rejected this characterisation. Also, the US has blamed China for not following the “one country, two systems” rule on Hong Kong. China and Hong Kong argue that the issue is a national issue.
Hang Seng falls as coronavirus risks persist
The Hang Seng index declined as the number of coronavirus infections in the United States and other countries persisted. Just yesterday, Texas announced that it was halting its reopening plans as the number of cases continued to rise. At the same time, the US reported more than 39,000 new cases, which a record. The challenge for Hang Seng stocks is that the coronavirus crisis will continue for a longer period than what most people were expecting. This will hurt many companies in Hong Kong.
Hong Kong top movers
Most companies in the Hang Seng were in the red today. The only ones in the green are Sunny Optical, CSPC Pharma, Geely Automobile, Bank of China, Bank of Communications, BOC Hong Kong, and HKEX. On the other hand, the top laggards in the index are China Unicorn, China Mobile, AIA Group, and PetroChina. These shares have dropped by more than 1%.
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Hang Seng technical outlook
The daily chart below shows that the Hang Seng index is falling for the second straight day. As the price dropped today, it moved below the important 100-day exponential moving average. Still, the price is above the ascending trendline that connects the lowest levels on May 25 and 29, and June 15 and 23. Therefore, a break below this trendline at $24,570 will see the index continue falling as bulls attempt to test the next support at $24,237.
On the other hand, a move above $25,075 will invalidate this trend. This price is slightly below the 50% Fibonacci retracement and along the highest point on June 24.