Hong Kong: HANG SENG INDEX (.HSI) prepare for even greater swings

: HANG SENG INDEX (.HSI) prepare for even greater swings

Prepare for even greater swings in the dollar and funding costs in the city, as a shrinking pool of liquidity amplifies moves in interest rates.

Hong Kong’s one-week interbank borrowing cost rose the most in a decade on September 24 amid a surge in quarter-end demand for loans by banks, then tumbled by a similar magnitude.

The city’s aggregate balance has more than halved over six months due to official intervention in the foreign-exchange market as the gap between local and US rates made the Hong Kong dollar a target to short – an issue likely to persist as the Federal Reserve tightens further.

A currency peg with the dollar means Hong Kong is tied to US monetary policy. After the Fed hike last week, local banks including HSBC Holdings raised their prime lending rates for the first time since 2006. Ultra-low borrowing costs fuelled inflows into the city’s assets over the past decade, turning Hong Kong into one of the world’s least affordable property markets.

“We may see sudden spikes in Hibor and the Hong Kong dollar more often in the future, as the seizable drop in aggregate balance has made banks more concerned with liquidity shortage,” OCBC Wing Hang Bank economist Carie Li said, using the term for Hong Kong interbank rates. “Higher volatility in borrowing costs could dent confidence, with local lenders turning more cautious when making loans and investments in the property market.” Treasury yields are rising on signs of economic strength in the US, with traders now pricing in more than two Fed hikes for 2019. Benchmark 10-year yields topped 3.20% on Thursday for the first time since 2011, while assets declined in Hong Kong.

The Hang Seng Index – already rocked by the trade war – lost 0.2% on Friday, extending this week’s decline to 4.4%. The offshore yuan dropped 0.1%, while the Hong Kong dollar gained 0.02% to HK$7.8337 on Friday.

Overall, the bias in prices is: Downwards.

Note: this shows extraordinary price action to the downside.

The projected upper bound is: 27,455.26.

The projected lower bound is: 25,595.94.

The projected closing price is: 26,525.60.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 12.6754. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 38.62. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 14 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -150.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed down -51.299 at 26,572.570. Volume was 10% below average (neutral) and Bollinger Bands were 8% narrower than normal.

Open High Low Close Volume___
26,503.75026,639.64126,373.46126,572.5701,736,203,392

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 27,366.58 27,656.89 29,737.29
Volatility: 24 21 22
Volume: 1,864,878,848 1,759,645,696 2,139,520,000

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

HANG SENG INDEX is currently 10.6% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .HSI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .HSI and have had this outlook for the last 1 periods.