Hang Seng Recovery Underpinned by Dollar Moderation

A modest dollar correction weaker helped underpin confidence in the Hang Seng index during Tuesday with higher energy prices and better than expected mainland loans data also supportive.

The US data releases were slightly weaker than expected and the S&P 500 index registered a loss of 0.30% on the day. There was a more positive tone in Asia on Tuesday with modest Nikkei gains, while there was a recovery in oil prices, which helped underpin Hong Kong stocks.

There was some slight moderation in concerns surrounding a Fed tightening, which helped underpin equities with expectations that the pace of tightening would remain very slow. The dollar also retreated from its strongest level with the trade-weighted index back below 98.00, which eased immediate fears surrounding the competitive outlook, although there was still an important element of underlying caution surrounding the yuan. Slightly lower yields also provided some support to interest rate sensitive Hong Kong stocks.

After Monday’s slump, there was stabilisation in the China B shares index, which offered some reassurance to the Hong Kong market.

Late in the session, the latest mainland new loans data was released with a stronger than expected increase of CNY1,220bn for September from CNY949bn the previous month, which should help underpin confidence in the short-term growth prospects.

After little change at the open, the Hang Seng index gradually gained support during the morning session, although there was resistance ahead of 23,300 into the session break. Sentiment strengthened again following the break with the mainland data, a higher opening in Europe and firmer energy prices providing net support.

At the close, there was a gain of 356.85 points and 1.55% at 23,394.39, while the China Enterprises index rose 1.88% on the day. All Hang Seng sectors were in positive territory with a rebound of 2.00% in the property sector on the day.

Trends in the dollar and bond yields will continue to be important for underlying confidence with a notable focus on the US CPI data. There will also be caution ahead of the mainland GDP data due Wednesday with trends in energy prices also important.

Hang Seng 4H Chart

hangseng18-10-16

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Tim Clayton

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.

Indices

NamePrice($)CommentChange($)Change %
S&P 5002,260+13.34+0.59%
NASDAQ5,445+27.14+0.50%
NYSE11,192+41.83+0.38%
FTSE 1006,954.21+22.66+0.33%
DAX11,203.63+24.21+0.22%
CAC 404,764.07+28.59+0.60%
EURONEXT 100913.06+5.79+0.64%
Nikkei 22518,996.37+230.90+1.23%
HANG SENG INDEX22,760.98-100.86-0.44%

Commodities

NamePrice($)Change($)Change %Comment
Light Sweet Crude Oil Futures,D47.48-0.01-0.02%
Gold Futures,Dec-20161,158.40-11.40-0.97%
Silver Futures,Dec-201616.82-0.20-1.20%
Copper Futures,Dec-20162.65+0.03+0.95%