Hong Kong stocks declined today as the market reacted to a gloom message by the Secretary for Commerce and Economic Development. The hang Seng index declined by more than 1.60%.
Hong Kong minister warns on economy
In an interview with the South China Morning Post (SCMP), Edward Yau Tang-wah warned that the economy will continue to suffer in the second quarter of this year. He made the announcement in a conference in China.
The comments came as the government prepared to release the final Q1 GDP data. The preliminary data released in April showed that the economy contracted by 8.9% in the quarter. This was the worst year on year decline of the economy since records began. It was also the worst performance since the Asian financial crisis that happened in 1998. The statement by Edward also came a month after Paul Chan Mo warned that the city was headed towards the worst recession ever.
The Hong Kong economy has been facing two serious problems that have led to rate downgrades by rating agencies. The social unrest seen last year led to a contraction while the current coronavirus pandemic has worsened things.
The Hang Seng index is also reacting to the rising number of coronavirus cases in the city. While experts see no need for alarm, they warn that more cases could mean more lockdowns to prevent the disease from spreading.
Hong Kong stocks best and worst performers
Only three companies in the Hang Seng index were in the green today. The biggest gainer was CK Infrastructure, whose stock rose by 1.20%. It was followed by AAC technologies and Tencent Holdings, whose stocks rose by 1% and 0.30% respectively. Tencent stock rose after the company released better results than expected. The worst performers were Shenzhou International, Sino Land, and China Mengniu dairy, which fell by more than 2%.
On the daily chart, we see that the Hang Seng index, which was in a strong upward trend moved below the important trendline shown in pink. The price, which also formed a small inverted hammer pattern on Monday also moved below the 38.2% Fibonacci retracement level. As a result, it has remained below the 50-day and 100-day exponential moving average. Therefore, I expect the bears to remain in control as they attempt to test the 23.6% retracement at 23,085.
On the flip side, a move above the 50-day EMA level of 24,500 will invalidate this trend of the Hang Seng index. This movement will send a signal that there are more buyers in the market.