Since the start of the pandemic, the Hang Seng Index (HSI) has underperformed the Straits Times Index and this looks set to persist for the rest of 3Q2021. The HSI is up 19.9% since its March 2020 low of 22,805. The STI is up 26% from its March 2020 low, and 34% from its October 2020 low.
The Hong Kong market’s most followed barometer fell below its 200-day moving average, currently at 27,623, on July 8, 2021. At 27,344, it maybe just a whisker away. But in falling below its 200-day moving average, the HSI has fallen below a thrice tested support at the 27,700 to 27,800 range. The break below this support indicates a downside of 24,400 to 24,500.
Quarterly momentum in falling, ADX is rising and the DIs are negatively placed. However short term indicators may be sufficiently oversold by July 12-13 to trigger a rebound, with resistance may materialise at the 200-day moving average.
The STI is not looking strong. Its direction depends on whether it can hang on to its 50- and 100-day moving averages which have drawn together, with the 50-day at 3,145 and the 100-day moving average is at 3,125 compared to the STI’s level of 3,131. Should the 50-day fall below 3,125, a negative signal would have formed.
In the meantime, the STI has establiahed a sideways range with support at 3,092, and resistance at 3,158.
While the HSI is being buffeted by its H-shares, in particular China-based tech stocks, the STI has some form of stability from the resilient performance of the local banks and the large-cap REITs. In addition, the STI’s Directional Movement Indicators are neutral, with ADX flipping downwards, and the DIs staying neutral-to-positive. Quarterly momentum is relatively neutral. There again, a breakout on the upside is a tall order given the neutral stance of the medium term indicators and lack of buying volume.
