Hang Seng Sets Fresh 2023 Lows on Renewed Property Woes Ahead of China’s Golden Week
HKG33 Analysis
China's post pandemic recovery has been faltering, with weak consumer demand, suppressed factory activity and subdued trade. At the same time, fears around the crucial and problematic real estate market have reemerged. Evergrande, the posterchild of the property crisis, announced on Monday it was unable to issue new debt, as part of its restructuring plan [1]. Today its stock was halted from trading in Hong Kong again [2]. Trading had resumed in late August, after a seventeen-month suspension. Earlier in the week, Evergande had reported an Operating Loss of RMB 11.720 billion for H1 2023 (around USD 1.6 bln), a significant improvement from a year ago. [3]
Authorities have taken some measures to support the real estate market, such as lowering mortgage rates on existing loans [4]. They have also vowed to support the brooder recovery, but have refrained from bold stimulus. Stronger monetary action would harm the already weak currency and forcedul fiscal stimulus could threaten the country's credit ratings. In any case, Beijing's piecemeal approach has failed to inspire markets.
Markets also contemplate contentious Sino-Western relations, with restrictions on tech trade and investment. The US Commerce Department added eleven Chinese firms to its Entity List this week [5]. Furthermore, electric vehicles have emerged as the new conflict ground, after the European Commission launched an anti-subsidy investigation into EVs coming from China.
HKG33 is running another losing month and heads toward the conclusion of a negative quarter. It reacted negatively to today's news around Evergrande and falls to fresh 2023 lows. It threatens the September 2022 low (16,997) that would open the door to 16,127, but the 2022 multi-year lows are distant (14,576).
On the other hand, recent data showed that Beijing's effort to support the economy may be starting to have an impact. Retail sales improved in August, production strengthened and deflationary pressures eased. These may help HKG33 contain its losses and rebound. However, a catalyst would be required for reclaiming the EMA200 (at around 14,290) and the upside is unfriendly.
Markets now await the latest manufacturing PMIs over the weekend, as China's Golden Week kicks-in, which can boost the travel industry. Chinese travel provider Trip.com, said that bookings to foreign destinations increased nearly 20 times ahead of the eight-day holiday, compared to last year. [6]
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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