I don’t know how else to describe the massive Hang Seng Index or Shanghai Composite run today, clocking in at the lower and upper ranges of the 2.x% handle respectively. Also, on top of this was the Shenzhen Stock Exchange at 3.72% up! What happened?
Going back to candlestick analysis done over the weekend helps explain some of the irregularity, with Monday a brisk fall covering the increases so far plus the gap range. On top of this we had the typical bearish rejecting doji on Tuesday. All in all, the technical stars were aligned, but most of all the volume was simply incredible! The HSI clocked HK$94.7 billion over the day, of course led by HSBC’s disposal of Ping An shares to Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group, causing ping an to lead volumes.
Analyzing the initial market surge further though, reveals that it was not as huge of an effect as one might have expected – the volume pop was around HK$18-19 billion in the initial market auction and the normal day volume at this stage is about HK$5-7 billion depending on overnight markets. say we get a pop of HK$14 billion, this still leaves HK$ 81 billion as the quote-taking trade today. A very, very good volume signal overall, especially with the 470 point run we amassed, with the majority of that run being in the strongest upwards moves, giving a lot of upwards “volume per point”.
The technical image overall is still very good and we are returning slightly to the main driver: China, and the main source: risk as China yesterday allowed insurance firms to take up an unlimited amount of ownership in banks. It’s a good show of regulatory progress towards a freer economy (albeit a small one) but again, it should provide quite a juicy boost for bank firms. We could be looking at some really good value plays longer term, and given the focus on financials, I do expect the Hong Kong market to remain highly buoyant on this news for a while to come. Fundamental backing for my speculation on the HSI hitting 23 000 – 24 000? Could be.
In the mean time, volume is back, baby! Again fueled by ever increasing bank system balances indicating that there is a fairly relentless inflow of capital into Hong Kong. See me at 23 000!