Hang Seng dropped below 20000 and entered correction
The Hang Seng Index kicked off the new week at its lowest level in seven weeks, below 20,000, which is more than 10% lower from the January high.
Hang Seng Weekly Review
The global market sentiment continued to deteriorate in the final week of February, as hotter-than-expected US inflation data reinforced the view for further monetary tightening.
The US Personal Consumption Expenditures Price Index (PCE) increased by 5.4% in January from 5.3% in December on a yearly basis, higher than the anticipated 4.9%. This print marked the third upside surprise to the market this month, following the red-hot nonfarm payroll and CPI print, suggesting that the inflation path is moving in the wrong direction. Consequently, the prospect of a tougher inflation battle is setting traders up for volatility moving forward, with another three 25bps rate hikes by the Fed now priced in.
The Hang Seng Index started the week at its lowest level in seven weeks, below 20,000, which is very close to giving up all its year-to-date gains. Since the first trading day of February, the Hang Seng Index has lost more than 10%, the Hang Seng China Enterprises Index has declined by 11.3%, and the Hang Seng Tech Index is the worst performer, dropping nearly 15%.
Looking ahead, one of the most significant economic events in the upcoming week will be China's National People's Congress meeting, from where investors expect further policy support on economic growth. China's new leadership team will also announce the economic targets for 2023, as well as the new economic plan.
Hang Seng Technical Analysis
The downtrend for the Hang Seng Index has accelerated in the past three weeks, with the 100-day moving average currently acting as primary support (19750-19850). This level also coincides with the low from May 2022 on the weekly chart. Further downside from here will bring the 200-day moving average in view, which would cement the view of a bearish turn. On the upside, the major challenge for the Hang Seng Index in the near future would be the descending trend line, which could limit any rebound to the 20100 level.
- Hang Seng Daily Chart
- Hang Seng Weekly Chart
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