Whew, we’re finally past all the major market-moving data today! Let’s celebrate with the daily scheduled bit of more Shanghai – Hong Kong Stock Connect roundups! You know the drill by now.
- Hang Seng Index:
- Fell 0.1% to a close at 23 350, with an intraday low at 23 253 and high at 23 461.
- Turnover fell again, to HK$61.1 billion from HK$65 billion yesterday.
- The futures-implied spot closed at 23 246, with a low of 23 207.
- The implied futures-spot spread is now negative, and the index is in contango by 2 basis points! Uh-oh…
- Hang Seng China Enterprises Index:
- Fell 1.1 basis point to a close of 10 379, with an intraday low at 10 331 and high at 10 443.
- Turnover was actually up, to HK$11.45 billion, from HK$10.89 billion yesterday.
- Futures-implied spot was 10 349, and a low of 10 310, with the implied futures-spot spread still positive but much smaller than yesterday at roughly 15 index points.
- Shanghai A-Shares Top 50:
- The SSE composite gained 1.67 points (7 bps) to 2 453 with a low around 2 444 and a high around 2 461.
- The A-Shares Top 50 was up to 7 486, with a low of 7 381 and a high of 7 507.
- Turnover was down on the day, to RMB150.8 billion.
- Shanghai – Hong Kong Stock Connect data:
- Northbound trading was down from yesterday (as per usual) with a final value of RMB2.28 billion traded.
- Southbound trading was smoother, but came in at RMB200 million, which was even smaller than yesterday’s RMB250 million!
- We again had some increases in the Southbound quota balance, indicating more selling than buying across the Southbound link, with the majority of these coming in around 11 am and 3 pm. The morning trade makes it look like unmatched/non-disguised block trading was involved given the sudden jump upwards of the balance.
- On both markets, more quota was traded at the last hour than the average hourly rate for the day, but the quota use was also relatively fast in the morning on the Southbound link, while it accelerated continuously on the Northbound link.
- Hong Kong Monetary Authority data:
- Few changes overall, but a fall in the monetary base of roughly HK$300 million, with the majority of this being contributed by Certificates of Indebtedness.
- A HK$15 million fall in the Closing Aggregate Balances!
- OEFBN’s were similarly drawn down by HK$17 million.
- The OEFBN’s held by Non-Bank Financial Institutions increased by HK$300 million, reaching a still-low level of HK$77.8 billion.
So, what to make of all of this?
First of all, there is the divergence according to how linked to China an index is: the Shanghai shares are marginally up, the HSCEI is essentially unchanged and the HSI is marginally down. The Shanghai blue-chips being up by nearly 0.4% speaks something to the positivity of the Chinese indices relative the Hong Kong dittos, but this could of course be because of good morning data and news as well as less correlation to the rest of the world as below-estimate flash PMIs started coming out from Europe.
Throughout the evening, index futures across Asia fell on these bad CPI numbers. Later, marginally higher unemployment claims in the US than expected came in, and there was a bout of dollar weakness which might very well be a pullback on some of the massive gains the currency has seen, particularly against the yen. Remember, these days the dollar is a risk-positive currency, unless it’s a bond purchase related move into the dollar.
CPI however was a bit higher than expected (0.1%, around 1.7 for Basic CPI and 1.8% for Core CPI) off the back of an increase by 0.4% in weekly earnings. Together with the Philadelphia Fed Business Outlook survey being massively positive (40.8 vs. expectations of 18.3 and prior results of 20.7), home sales being up 1.5% (expectation: unchanged, last: 2.6% increase) and leading indicators up 0.9%, (exp: 0.6%, last: 0.7%) the US posted very, very strong data at GMT 15:00. This slowly turned the indices around and while Japan still looks marginally down, the S&P500 is up on the day versus last night’s close, so this could be good for the Hong Kong market opening.
Where are China indices positioned technically?
Hang Seng Index:
- Crossed the 50% Fibonacci level on that chart at 23 271.
- The futures closed a hair above the 252 SMA at 23 229!
- The ADX on the spot price is ominously peeking upwards ever so slightly, and the DMI’s are spread wide.
- On a positive note, it’s the first time this week that we are closer to the top of spot price than the bottom, and that makes DMI’s easier to cross positively now than before.
- The MACD EMA divergence indicator is slowing down its fall at a positive level, which implies that the supports we’ve crossed through have some effect.
It seems as if the HSI is largely taking a breather here. The fall could be rather significant, but with good overnight moves, and the indication that the Shanghai – Hong Kong Stock Connect generally provides turnover when the going is good, a strong opening looks even more primed to turn the market positive than yesterday, and you know how bullish I was then. The HSI still has an absolute forest of resistances to wade through, but increasing turnover has worked wonders on this index in the past, and a positive signal going into next week isn’t so bad either.
Hang Seng China Enterprises Index:
- The HSCEI spot, for the second day, closed with a doji with legs straddling the 189 and 252 SMAs.
- However, the futures dove beneath this and just bounced when encountering the 50% Fibonacci level and positive trend line combo.
- Having an ADX increase, increasing volume and a negative move indication on the MACD however is not a position I want to be in…
- The DMI setup is really bad on the futures, but much less so on spot. If the overnight data allows price to gain, then it looks like the spot will carry weight and might be in a position to accelerate price higher, given two consecutive dojis.
There is the potential for large moves here, largely depending on the mechanics around the 189 and 252 SMAs and the 50% Fib. All three on one side of price probably means momentum that way, but if price is somewhere in the middle then there might be a bit too much of too tight supports and resistances.
Shanghai Composite, A-Shares Top 50:
The A50 did several things that were really good for price:
- Outside bullish candle. Good price action signal!
- Rejected the 21 EMA and SMA soundly.
- Closed above the lined-up August, September and October highest daily closes which were all clustered between 7 427 and 7 466. Now there’s just the September high at 7 495 and 23.6% Fib at 7 510 holding it back!
- Any gain will turn the MACD-EMA divergence higher, and blow out the DMI positive gap.
Shanghai shares look set to be in a particularly good position, if they can just cross one minor technical level (September high price) and an intermediate but important level (the 23.6% Fib).
Is it a bad sign that charts interest me this much? I’ll be benched in anticipation for tomorrow’s data!