WEEK AHEAD: JANUARY 25

Short Description

On my radar this week is the surging Hong Kong stock market. The benchmark Hang Seng index is at a 20-month high. I’ll talk about the price chart, what’s driving the gains and whether it can continue. Thanks! Rich

Video Script

Hang Seng indices continue new uptrend- THE WEEK AHEAD (Jan 25-29, 2020)

Hi everyone, I’m previewing the week ahead in financial markets and on my radar this week is the surging Hong Kong stock market. The benchmark Hang Seng index is at a 20-month. I’ll talk about the price chart, what’s driving the gains and whether it can continue. And of course, I’ll also rundown this week’s economic calendar.

Let’s start with a look at the HK-Shares price chart in the MT4 trading platform. This is our proxy for the Hang Seng China Enterprises index. This week we passed the April 2019 high after breaking above this long term down trendline three weeks ago. The previous high around 11,800 as well as the 12,000 round number are possible resistance. If the price breaks above these levels, it’s extra confirmation of a new long-term uptrend. Should the price reverse, it could offer opportunities to trade on a pullback later. 

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Right let’s run through the economic calendar quickly and then I’ll talk more about the Hang Seng. We have Germany IFO expectations for January on Monday, where investor sentiment is holding up well thanks to gains in the DAX 30. A slight uptick in UK unemployment is expected. The rapid US housing market is expected to have moderated slightly. Aussie CPI is expected to remain unchanged. The Fed are expected to keep policy unchanged, perhaps offering a slightly rosier outlook and maybe adding some clarity about recent chatter about tapering QE. Deflation in Germany is expected to ease to -0.6%. The first reading of US Q4 GDP is expected to show a more normal reading of 4.4%. Then we finish off with German GDP and US Core PCE price index.

So, let’s talk about Hong Kong. The index came under a bit of pressure last year following the introduction of the Hong Kong national security law. However, after making a multi-year low in March amid the coronavirus outbreak last year, the index has come back into vogue. 

One factor is that American threats to delist or sanction Chinese companies like listed in on the NYSE and Nasdaq have come back to bite them. More Chinese companies are moving away from dual listings in US and into Hong Kong. This makes the index a future home for big international Chinese companies and all the growth that could come with them. 

Related to this is that the Heng Seng is riding a trend of greater investor interest in China, especially as Joe Biden enters the White House with expectations that he will eventually end the US China trade war. There are of course downside risks, among which is an overdue correction in global stock markets. The fear that foreign companies might see Hong Kong as a less attractive hub for business across Asia looks overblown. For now, investors are focusing on China as the only major economy that grew in 2020 and bright growth prospects going into 2021.

Right thanks everyone, good luck trading this week and make sure to subscribe to our channel so you don’t miss the next video.