Hang Seng Punched in the Face Today – Is the Sell-Off Justified?

The Hang Seng index is among the worst-performing indices in Asia today. The index is down by more than 1.70%, which is lower than the 1.5% decline of the Shanghai Composite. In Japan, the Nikkei 225 is down by more than 0.52% while in Australia, the ASX 200 has fallen by more than 0.50%.

Tencent shares falter

Tencent is the second-worst performing shares in the Hang Seng today after CK Asset. The technology giant’s shares have fallen by more than 5% in reaction to Donald Trump’s executive order on Chinese technology giants.

In his order, the president asked all American companies to end any deals they have with Tik Tok and WeChat. The latter is owned by Tencent. In addition, the Trump administration has vowed to crackdown on public US companies that don’t meet American accounting standards.

However, the reality is that investors are overreacting today. For one, WeChat has about 3 million users in the United States most of whom are Chinese. Also, WeChat does not have any major American partners and revenue. Most importantly, the order does not include the valuable company’s valuable gaming apps.

At the same time, the decision by the administration to target public Chinese companies will be a blessing to Hong Kong and the Hang Seng. Indeed, some of the biggest Chinese companies listed in the US have made a decision to dual list in the city. A good example of this is Alibaba, the giant e-commerce firm. Also, Ant Financial has decided to list in Hong Kong, instead of the US.

Other top movers in the Hang Seng

Most companies in the Hang Seng are in the red today. The biggest laggard is CK Asset, whose shares are down by more than 7%. Other laggards are AAC Technologies, CSPC Pharma, and Sunny Optical. The only firms in the green are Shenzhou International, Link Real Estate, and Galaxy Entertainment.

Hang Seng technical outlook

The daily chart below shows that the Hang Seng index has been in a downward trend since July 7, when it was trading at $26,780. This week, the index moved below the 100-day and 50-day exponential moving averages, and today, it moved to the 38.2% Fibonacci retracement level. This Fibonacci connects the highest and lowest points this year. Therefore, it seems like bears have prevailed, which means that the index may continue to fall as bears target the next support at $26,000.

On the flip side, a move above $25,212 will invalidate this trend. This price is important since it is the highest point on Wednesday and Thursday.

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