The Hang Seng index declined by more than 0.70% as investors waited for a statement from the United States. The index was also pulled down by Geely Automobile, the automobile group. The index is trading at $23,000, which is slightly below the week’s high of $23,500.
Hong Kong waits for US statement
Hong Kong is waiting for a statement by Donald Trump, who will comment on the city’s relationship with the US. This is after China’s rubberstamp parliament voted to bypass the basic law and impose its security operations there. This means that the mainland’s security and intelligence forces will be stationed in the city.
In a statement on Tuesday, Mike Pompeo said that Hong Kong was no longer autonomous from China. That meant that the US is seriously considering removing some of the benefits that Hong Kong residents have. It could also impose tariffs on the city.
Analysts believe that this is wrong for two reasons. First, the US has a large trade surplus with the city, which means that any tariffs would be counterproductive. Second, tariffs will punish Hong Kong citizens, who widely oppose the current leadership.
In a statement, Hong Kong government rejected the claims made by the US. The statement said:
“In the past decade, the US’ trade surplus with Hong Kong has been the biggest among all its trading partners, with merchandise trade surplus totalling US$297 billion from 2009 to 2018. In 2019, that surplus came down from US$31.4 billion in the preceding year to US$26.4 billion as a result of US-China trade tensions.”
Geely shares drop
The biggest laggard in the Hang Seng index was Geely Automobile. The shares dropped by more than 9 per cent to about $10. This happened after the company diluted investors holdings by selling shares worth more than $836 million. The company is known for its ownership of the Swedish brand, Volvo.
Hang Seng best and worst performers
Most shares in the Hang Seng declined today. The biggest gainers in the index were were Hengan International Group, Link Real Estate, HK & China Gas, Sino Land, and HK Asset. These stocks rose by more than 1%.
Apart from Geely, other bug laggards in the Hang Seng were Hang Seng Bank, HSBC, AIA Group, Sands China, and China Overseas.
Download our Q2 Market Global Market Outlook
Hang Seng technical outlook
The Hang Seng index is trading at $23,000, which is slightly higher than Friday’s low of $22,526. On the daily chart, the price is further below the 100-day and 50-day EMA. It is also below the important resistance at $23,500 and the 23.6% Fibonacci retracement level. Therefore, I expect the index to remain under pressure as the tensions rise. This could see it move below the Friday’s low of $22,526.
On the flip side, a move above $23,500 will signal that there are more buyers in the market who will be ready to push it higher.
Don’t miss a beat! Follow us on Telegram and Twitter.
More content
- Download our latest quarterly market outlook for our longer-term trade ideas.
- Follow Crispus on Twitter.
- Do you enjoy reading our updates? Become a member today and access all restricted content. It is free to join.