Chinese markets were really, really active all last week, with the Shanghai Composite alone racking up much more than RMB2 trillion (no error there!) in total turnover, with much more icing on the cake. Here’s the big results of Friday’s feeding frenzy across China and Hong Kong markets:
- Hang Seng Index:
- Spot high-low-close-return: 24 171 / 23 773 / 24 003 / +0.71%
- Futures-implied spot HLC: 24 209 / 23 753 / 24 087
- Turnover, at HK$147.8 billion, is the highest it has been in almost seven years.
- Think about that. It’s higher than the AIA float. Higher than the ABC float. Higher than the Chow Tai Fook float. Sure, the general opening of the Chinese stock indices to the world is a Continuing Global Offering… but the frenzy is getting incredibly big. The only higher volume periods on the HSI are from the late-2007 peaks, when the stock index was going from ~26 000 to ~32 000 in a month.
- Implied volatility from the VHSI up 4.41% to 17.03.
- Trading that paced from gains to losses and back to gains again afterwards with violent spikes either way. This was generally a theme for all stock indices under watch, to be honest.
- Hang Seng China Enterprises Index:
- Spot high-low-close-return: 11 761 / 11 413 / 11 600 / +1.04%
- Futures-implied spot HLC: 11 771 / 11 414 / 11 615
- Turnover massive at HK$50.84 billion, only beaten by one day in early 2013 for the past six and a half years.
- Shanghai Composite:
- Spot high-low-close-return: 2 978 / 2 813 / 2 938 / +1.32%
- Shanghai A-Shares Top 50 HLCR: 9 906 / 9 292 / 9 675 / +2.10%
- Record-breaking turnover of RMB639.19 billion, which added to the more than RMB400 billion trade on the Shenzhen Stock Exchange, meant that the total Chinese market turnover, on Friday alone, exceeded RMB 1 trillion.
- Shanghai – Hong Kong Stock Connect:
- Northbound quota balance use at RMB2.57 billion.
- This was the result after falling from a high of RMB2.84 billion and fluctuating between increasing and decreasing throughout the day, implying sell orders were active across the link as well.
- No pattern was seen between movements in the Northbound link and gains/losses in the Shanghai Composite.
- Southbound quota balance use at RMB1.43 billion.
- Much faster quota use during the afternoon, save for one block trade sell around 14.30.
- The Kong Kong dollar gained again, closing the week out at 7.75116 to the US$. Monetary base intervention is close now, and has increased marginally throughout the week, and financial institutions are buying in marginally (a few tens of millions HK$ per day) using HKMA liquidity to finance their purchases.
Looking at the longer term, we get very different outcomes between where the different indices positioned themselves over the week. The HSI still has valid technical analysis from the recent past, and we don’t really need to change the outlook significantly, although we do have a volume explosion that could set the index of for a massive move higher should more cash flow into the Hong Kong markets and be doubled into liquidity by the HKMA to blow out money supply and allow stabilization against the US dollar.
The HSCEI is breaking very long-term trends by being above the 11 230 level, but there is still a litany of peaks that have to be overcome, from 11 645 all the way up to 14 500 at close intervals, so the resistance will be thick thick thick, although volumes and monetary base data, together with a very strong China link will prove great stimulants for the index to break the market.
Finally, we have the Chinese mainland stocks, and then particularly its large cap A50 index. This one has literally broken the (daily) charts, and deserves a special, technical look on a weekly candle basis:
Shanghai A-Shares Top 50, weekly candles.
Yes, that wick is Friday’s high-close difference… but it looks like the markets will test the 10 000 – 11 000 range in the coming week. A good thing to look at could be the longer-term past outlooks to find decent peaks to anchor expectations to.
I am getting slightly concerned about these markets rallying this much, but there are a few reasons (not necessarily good ones) to stay bullish, which I will outline below, after the jump.