Source Financial Union
On May 23, Hong Kong stocks continued to adjust at a high level. The Hang Seng Index fell 327 points, or 1.7%, to close at 18868. The Hang Seng Science and Technology Index fell 2.4% to close at 3896. The transaction amount in the big market was only HK $129.9 billion, which was a good signal because of the small demand for selling.
The net inflow of Hong Kong Stock Connect is HK $3.51 billion. Considering that the Hong Kong stock market has been adjusted by about 4.2%, the current domestic capital flow is not large.
On the market, the board almost fell across the board, with only 337 stocks rising on the main board and 1176 stocks falling. Oil and coal were the few sectors that rose, while the stock price of Fast Hand (1024 HK), whose performance was better than expected, rose 1.7%.
The next night, the Federal Reserve released the minutes of the FOMC meeting in May. Officials unanimously hoped that the interest rate would remain at a high level, and it would take a longer time to observe the progress of the inflation decline. The yield of the US 10-year treasury bond did not change much, and the minutes of the FOMC meeting were not the main reason for the adjustment of Hong Kong stocks.
Since late April, the rising trend of Hong Kong shares has mainly focused on valuation and risk appetite repair, and trading funds, short position covering and some foreign capital backflow provide support. However, the overall downward trend has not yet been completely reversed.
The rising trend of the Hang Seng Index, market sentiment and capital are similar to the rising trend of "economic restart" at the end of October 2022, but the core lies in the market's expectation of China's economic fundamentals. Although the Hang Seng Index has rebounded 22.8% from a low peak since late April, the yield of China's 10-year treasury bonds has remained at a low level of 2.3% over the same period, and the recent weakening of offshore RMB has returned to the level of 7.25, reflecting investors' cautious views on China's long-term inflation and growth prospects.
At present, most of the Hong Kong stock valuations have been repaired, and the risk premium has returned to the relative extreme level in the past two years. The 20 day moving average PUT/CALL ratio of the Hang Seng Index rose to 1.12 times, often a precursor to the periodic peak of Hong Kong stocks.
In addition, the pressure to cover short positions has subsided, and the short selling ratio of Hong Kong stocks has continued to decline with the rise of the index. At present, the short selling ratio of the big market excluding TraHK funds is only 12.5%, almost falling to the lowest level in recent years. When the short selling pressure almost subsides, it also indicates the reduction of fuel (short position covering) that subsequently drives the market up.
Zhongtai International believes that it is not a bad thing for Hong Kong stocks to adjust temporarily and digest overbought stocks. It is expected to reach a new high after adjustment. The short-term support level of Hang Seng Index is 18800 and 18300 respectively.
As of May 23, the long-term market breadth of the Hang Seng Index and the Hang Seng Composite Index (the ratio of the stock price higher than the 200 day moving average) reached 62.2% and 54.6% respectively. The long-term market breadth of Hong Kong shares has broken through the 50% bull bear boundary, which is far from 80% of the overbought area, indicating that the medium and long-term wave rise has been confirmed.
Historically, when the Hong Kong stock market changed from a bear market to a bull market, the long-term market breadth would basically rise from the level below 20%, and Hong Kong stocks had a long-term sustained upward trend.
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Editor in charge: Wang Qilin
