Hang Seng Subdued After Chinese Factory Activity Falls Back to Contraction
HKG33 Analysis
China's post pandemic recovery has faltered, but there are signs of stabilization, provided by recent releases. Retail sales and industrial production increased in September and so did Manufacturing PMI, which had expanded (above 50) for the first time since March.
Today's update was disappointing though, as factory activity slipped back to contraction territory in October, printing 49.5. At the same time, the real estate market languishes and consumer demand remains suppressed. Beijing had been taking measures to support the economy, so October's incoming data will be important to gauge their effectiveness, in a month that could see a lift from the Golden Week holidays.
The Hang Seng Index drops today due the poor PMI print, unable to benefit from this week's earnings by some of its top constituents. Banking giant HSBC saw its Q3 profit after tax (PAT) more than double compared to a year ago, but declined on a sequential basis and HSBC.hk slumps this week [1]. Auto giant BYD registered a more an 82.16 % y/y surge in its Q3, but that was lower than the top range of its own projection (67%-101.99%) and BYDC.hk dropped today. [2]
HKG33 registered its third straight losing month, as China's piecemeal approach to stimulus fails to inspire the stock market. The Index is vulnerable to lower lows towards 16,127, although strong catalyst would be needed for a breach.
On the other hand, HKG33 tries to contain the decline and the Chinese economy shows signs of stabilizations. A return above the EMA200 that would pause the bearish bias would not be surprising, but does not inspire confidence for a meaningful recovery as the upside is hostile.
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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