The Hang Seng declined by more than 3% as investors worried about the ongoing parliamentary session in Beijing. All stocks in the index declined, with the worst-performing being Wharf Real Estate followed by AAC Technologies. Other worst-performers were Sino Land, Swire Pacific, and New World.
China hits Hong Kong
Hong Kong was given back to China by the British a few years ago. At the time, the agreement was that Hong Kong would be an autonomous place operating under the “one country, one system” for 50 years. This meant that the city would have its own parliament, its own currency, and its own judicial system.
In the past few years, China has been flexing its muscles on the city. And, in the current parliament session, officials are considering imposing national security legislation on the territory. That will be against Hong Kong law.
The implication is that the people in the city will take to the street once again to protest the new law. This will affect the city and the companies listed in the Hang Seng. In a statement, a Chinese official said that, “in light of the new circumstances, improvements in the security framework were highly necessary.”
Hang Seng braces for protests
Last year, Hong Kong became ungovernable after the government attempted to pass a new legislation allowing China to extradite its officials. With the current legislation, analysts believe that Hong Kong residents will move back to the street, which will have a damaging effect on the economy.,
The Hang Seng index, is trading at $23,020. On the four-hour chart, the index has moved to the 23.6% Fibonacci Retracement level. It has also moved below the pink trendline, which was guiding the upward trend. Similarly, the index is now solidly below the 50-day and 100-day exponential moving average. Therefore, I expect the Hang Seng index to remain under pressure. A break below $23,000 will likely open the probability that the index will move below $22,000.
On the flip side, a move above the important resistance level of $23000 will invalidate this trend. This was the lowest level on April 22 and May 6.