Asian market erased all the gains this year as Powell confirmed March rate hike

One of the most discussed questions of 2022 finally got an answer. In the first FOMC meeting of the year, Jerome Powell said that the Fed is ready to raise rates in two months and shrink its bond holdings as the inflation proves to be the hottest in a generation. The chair also declined to rule out quantitative tightening and warned there's a risk of a prolonged period of surging prices.

Although the narrative of four rate hikes in a year with up to 50 bps for the first time has been fermenting since the start of the new year, the speech by Powell doused any remaining hope.

What’s Quantitative Tightening (QT)

Quantitative tightening is a contraction monetary policy applied by a central bank to decrease the amount of liquidity within the economy. In other words, the policy is the reverse of quantitative easing, aimed to increase money supply in order to "stimulate" the economy.

Since the pandemic commenced in early 2020, nearly all the global central banks are applying quantitative easing monetary policy to prevent the economic recession, which is also believed to be the key drive underlying the booming of the equity market for the past two years. S&P 500, for example, has grown by 91.6% from April 2020 to Dec 2021.

As a result, the introduction of quantitative tightening is unsurprisingly triggering the panic selloff across the equity market as the liquidity, viewed as the “petrol” for the equity market’s ongoing growth, will be negatively impacted.

Asian market fell unanimously on Thursday lead by Hang Seng Tech index dived by over 4%.

Hang Seng

• Hang Seng dropped more than 2% today at the open
• The index has walked sideway from its encouraging upward trajectory since early this year
• Next support will be its 50-days moving average, around 23703, which if broken, will bring the price to 23474 and erased all the gain for this year.
• 24700 will be the next test and key resistance should Hang Seng aiming to move back to its previous moving channel.

Hang Seng Tech

• The four hours chart shows the index is falling below all the major moving averages.
• A shape of “double head” has been clearly formed, suggesting the overturn of momentum should be in view.
• Next support will be looking at the low from Jan 6^th, which is also the floor level for Hang Seng Tech during the past 18 months.
• Multiple layers of resistance for Hang Seng Tech include 20 and 100-days moving average and the bottom level between the “double head”, around 5600.

Taiwan Index

-Taiwan stock suffered the biggest drop since October 2021 and broken through the ascending moving band formed since then.

-The drop from the past two weeks has evaporated all the gains since early December.

-Currently supported at 17014, the low from Nov 27^th. Next support will be eye on 16931.

-RSI reached its lowest level since Oct 6^th.

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