US-China trade war, turmoil of emerging markets, devaluation of RMB and China slowing economy push Hong Kong stock market from bullish to bearish. Hang Seng Index ended at 26,422.55 yesterday which was 20% lower than the peak of January in this year.
After the dead cat bounce during the past 2 weeks, there is a steep decline in Hong Kong stock market and I believe that the bottom hasn’t be reached. While lots of Hong Kong investors saying “Be greedy when others are fearful” and going to buy stocks in lower prices, I am considering “Be fearful when others are greedy”. There are a couple of reasons to believe that the stock prices are not cheap enough. Firstly, the US-China trade war tension hasn’t been released. Each time Trump threatens new traffics on Chinese goods, both mainland and Hong Kong stock markets tumble. And two sides are not expected to come to a solid agreement or compromise in a short period of time. Secondly, nervous investors are yanking money out of the emerging markets. As China is considered to be the world biggest emerging markets, hot money is fleeing China now. Together with the China slowing economy and RMB devaluation, China is no longer attractive for foreign investors. Thirdly, Hong Kong is going to follow the US Federal Reserve to rise interest rates in September which will make investors consider more to borrow cash and buy stocks. Besides, Alibaba co-founder and chief Jack Ma is going to retire from the Chinese e-commerce giant. Is it another factor implies that there will be a sharper-than-expected slowdown in China economy this year?
Do you see any attractive factors excluding lower prices to buy stocks in HSI? Technically, I will see resistance at 26,000 area and then 25,600 for a possible bottoming signal in September.