Hang Seng pares gains as Alibaba share price soar; HSBC still in trouble

Hang Seng

The Hang Seng index pared back earlier gains as traders continued to worry about the rising tensions between the United States and China. The index is trading at H$26,166, which is slightly below the intraday high of H$26,292.

US crafts strategies to punish China over Hong Kong

The Hang Seng index is cautious because of the rising tensions between the United States and China about the recently-passed security law. Media reports say that the Trump administration is considering several actions to punish China for the controversial law.

The nuclear option is for the US to limit the peg of the Hong Kong dollar. This peg has been around since 1983 and is a major reason why most foreign funds through to China through the city. The currency is simply more stable than the Chinese yuan. Such a move would be detrimental to the Hang Seng index.

Most analysts believe that such a move is not possible because of the impact it would have. For one, it would hurt ordinary people in Hong Kong and the US. China would not be affected as much.

Other options being debated include sanctioning some Hong Kong banks. HSBC, as the leading bank in Hong Kong would be vulnerable. Indeed, HSBC share price is down by 0.45% a day after it dropped by more than 4%. The US is also considering imposing sanctions on several high level Chinese officials.

On a positive note, China is making some strides to reconcile with the United States. In a statement, the country’s foreign minister expressed concerns about the deteriorating relationship. He proposed that independent Chinese and US think tanks identify key issues and proposals on how to boost the relationship. He said:

“China’s policies towards the US have not changed, and we still want to develop China-US relations in a sincere manner.”

Meanwhile, a new report showed that Causeway Belt has just been overtaken by Tsim Sha Tsui as the most expensive retail neighbourhood in the city. A few weeks ago, we wrote about how many stores that used to house expensive retail stores are now housing small enterprises. In the report, we warned about the bubble in Hong Kong’s property market.

Hang Seng top movers

Alibaba was the biggest mover in Hong Kong. The stock rose by more than 10.5% after Jefferies reiterated its buy rating on the company. The note said that the company, “emonstrates strong execution with multiple business models, and is at the sweet spot of a recovery story backed by strong technological strengths.”

In the Hang Seng, AAC Technologies, Sunny Optical, Hang Lung, HKEX, and Tencent are the biggest winners. Each of these firms have gained by more than 3%. On the other hand, the biggest losers are Wharf Real Estate, Galaxy Entertainment, New World, and BOC Hong Kong. These shares have dropped by more than 2%. As mentioned above, HSBC share price has dropped by 0.55% and is trading at H$36.80.

Hang Seng technical analysis

On the daily chart, the Hang Seng index moved above the important resistance of $26,500 on July 7. In the past two days, it has remained below this level. It is still above the 50-day and 100-day exponential moving averages. It is also along the 38.2% Fibonacci retracement level.

Still, the trend of the index is still bullish. It will remain like that as long as the price remains above the important support of $25,553, which is the Monday’s open.

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