Hong Kong Equities Experience 3% Decline Following Fed Minutes Indicating Additional Rate Hikes.

Introduction

In the wake of the recently released minutes from the U.S. Federal Reserve, which revealed a divided stance on the decision to suspend rate hikes in June and a projection of further hikes at a slower pace, Asia-Pacific markets witnessed significant losses. This article delves into the impact of the Fed’s minutes on Hong Kong’s equities market and provides insights into the current trends.

Fed’s Minutes Reveal Division and Anticipation of More Rate Hikes

The minutes disclosed by the U.S. Federal Reserve shed light on the internal division within the central bank regarding the decision to halt rate hikes in June. It further indicated that the Federal Reserve foresees additional rate hikes in the near future, albeit at a slower pace. This information has reverberated across the Asia-Pacific region, resulting in considerable market fluctuations.

Hong Kong’s Hang Seng Index Leads Regional Losses

As a direct consequence of the Fed’s minutes, Hong Kong’s equities experienced a significant decline, with the Hang Seng index taking the lead. During the final hour of trading, the index recorded a noteworthy 3% drop, reflecting the cautious sentiment prevailing among investors.

Chinese Banks on Hong Kong Stock Exchange Witness Downward Pressure

Shares of Chinese banks listed on the Hong Kong Stock Exchange faced downward pressure following reports of Goldman Sachs downgrading their ratings. This development contributed to the overall decline of the Hang Seng index, further impacting market sentiments.

ICBC Remains Relatively Stable, While Agricultural Bank of China and Bank of Communications Suffer Losses

While the Industrial and Commercial Bank of China (ICBC) managed to maintain a relatively stable position, Hong Kong-listed shares of the Agricultural Bank of China experienced a significant plunge of 2.4%. Bank of Communications also faced a loss, with a decline of 1.54%. The divergence in performance among these major banks exemplifies the intricacies and volatility of the current market landscape.

U.S. Treasury Secretary’s Visit to China Amidst Shifting Dynamics

U.S. Treasury Secretary Janet Yellen embarks on a trip to Beijing this week, where she is set to engage in crucial meetings with high-ranking Chinese officials. This visit comes in the wake of the abrupt postponement of EU High Representative for Foreign Affairs Josep Borrell’s trip to China. Such diplomatic engagements hold significant weight in light of the evolving global economic landscape.

Hang Seng Technical Analysis: Daily Chart Insights

To gain a better understanding of the Hang Seng index’s recent performance, let’s delve into its technical analysis based on the daily chart:

Hang Seng Trading Pattern and Key Indicators

The Hang Seng index is currently following a pattern of lower lows and is trading within a down channel. All simple moving averages (SMAs) indicate that the index is trading below its levels, suggesting a bearish trend. The Relative Strength Index (RSI) falls within the selling zone, reinforcing the bearish sentiment, while the Stochastic indicator also suggests a downward trend.

Key Levels of Resistance and Support

Immediate resistance for the Hang Seng index is observed at 18,652 points, whereas the immediate support level lies at 18,481 points. These levels play a crucial role in understanding the potential trajectory of the index in the near term.

How to Trade Hang Seng in the Current Week

Considering the recent developments and the technical analysis of the Hang Seng index, it is essential to assess possible trading strategies. Here’s a suggested trading approach for Hang Seng in the current week:

Trade Suggestion: Sell at 18,463, Target at 18,139, Stop Loss at 18,761

Based on the prevailing market conditions and the technical analysis, a potential trading strategy could involve selling at 18,463 points. The target for this trade is set at 18,139 points, while a stop loss is recommended at 18,761 points to mitigate potential risks.