It is unusual for the Straits Times Index to outperform the Hang Seng Index, but that is what is happening since the last week of Oct. During the week of Nov 1-5, the Hang Seng Index fell by 500 points week-on-week, to close at 24,870. This comes on top of the 749 point decline by the HSI in the last week of Oct.
The turbulence in the bond market on the mainland has probably spilled over to the Hong Kong stock market as Chinese developers - some of which are listed in Hong Kong such as China Evergrande Group, encounter problems with either coupon payments or repaying or refinancing their US dollar bonds.
See: STI gains strength against HSI
The SIngapore market, which is often seen as a yield rather than a growth market, perhaps provides shelter from the north Asian storm.
The Straits TImes Index shows continued strength after moving above 3,200, a level which it cleared in the week of Nov 1-5. The index had ended at 3,209 on Oct 29, but the move above 3,200 was more convincing on Nov 1. The break above 3,200 indicates an upside of 3,345. As of Nov 5, indicators are supportive, with quarterly momentum in positive territory, ADX rising, and the DIs positively placed. The moving averages are also positively placed, and are likely to act as uptrend lines for the time being. The 50-day moving average is currently at 3,121, and the 100-day moving average is at 3,130. Support appears at the breeakout level at 3,200.
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See also: STI steadies despite overbought US markets and rising US risk-free rates
The move by the HSI down to 24,870 takes the index below its 50-day moving average which is currently at 25,284. Indeed, a move by price below a decliing 50-day moving average is not a positive signal, and indicates further volatility. In the meantime, quarterly momentum which had rebounded to its equilibrium line remains in negative territory and has resumed its decline. The only saving grace is the low level of ADX at 14, which may prevent a sharp sell-off. The break below the 50-day moving average is likely to see the HSI re-test support at twice tested 23,900 level.
Photo of Great Wall at Jinshanling: The Edge Singapore
