Domestic issue weighs Hang Seng Index

Mixed start to the week

Amid the lack of fresh leads from the start of the week, Asia markets were seen trading mixed into Monday. Sentiment across the region had been balanced between concerns over the prospects of tariffs rollback between US and China, as President Donald Trump denied at the end of last week, and some slight relief in the consumer resilience seeing Alibaba leading the Singles’ Day charge with strong performance that eventuated in another record. As noted, the escalation of violence in the Hong Kong market had also been one to capture the market’s attention, denting market sentiment in a seemingly more localized manner.

For the FX market, the trend had likewise reflected one largely of risk-off looking at USD/JPY (大口） headed back to the $109 handle trade. Prices had been finding the 200-day moving average (DMA) a challenging one to overcome even as the short-term 50DMA continue to hold its ground ahead of the 100-DMA. The US dollar index measured against the six major currencies was likewise seen losing grounds, though this had been driven to some extent by sterling gains. Some positivity can be seen on the Brexit front with news of Brexit Party chief Nigel Farage stating no contest for Conservative Party seats at the December UK election, fuelling increased hopes of passing the Brexit deal. Watch the slew of data in the day including the local Singapore retail sales, and the November German ZEW survey, as items that could drive prices.

Hong Kong market risks

Notably, on the geopolitical front, the Hong Kong market appears to be bearing the brunt of the softer sentiment at the start of the week. Over and above the lack of clarity on US-China tariffs rollbacks, domestic protests had taken a turn for the worse in the region and seeped into the work week garnering concerns. The Hong Kong Hang Seng Index (HSI) was seen giving up its test of the 200-DMA and closing below its 100-DMA in one of the worse one-day percentage drop in approximately three months at over 2.6%.

While there is no denying that the Hong Kong market is expected to correspondingly benefit should the improved US-China trade situation lead to tariffs rollback, the short-term domestic uncertainties may mean elevated levels of volatility for the HSI compared to regional indices. The upcoming economic releases including the final Q3 GDP out of Hong Kong may also do little to aid the situation and relief the HSI of near-term downside risks. As the bias turn to the downside at present for the Hong Kong HSI, look also to the comments expected from President Donald Trump on Tuesday at the New York Economic Club with anticipation that the President would touch on the trade situation with China and economic conditions among others.

Yesterday: S&P 500 -0.20%; DJIA +0.04%; DAX -0.23%; FTSE -0.42%