Hang Seng Hits 3-Week High, Rising Yields Trigger Caution

The Hang Seng index moved higher with support from higher oil prices and solid mainland PMI data, but the further sharp increase in US yields helped to pull the market down from Its best levels.

Oil prices moved sharply higher following the OPEC deal to cut oil production, which had an important impact in boosting the Hong Kong market.

US equity markets were unable to sustain initial gains with the S&P 500 index declining by 0.27% and the Nasdaq index declined by 1.0% on the day as non-energy stocks retreated.

The official mainland PMI index was stronger than expected with an increase to the highest level for over 2 years at 51.7 for November from 51.2 previously, which underpinned sentiment surrounding the near-term outlook, although there was a decline in the Caixin index for the month, which created a significant element of caution.

There were renewed dollar gains following the OPEC deal, which increased concerns surrounding competitiveness, although there was relief that the yuan was fixed stronger, which eased immediate concerns surrounding the mainland impact.

The People’s Bank of China (PBOC) circulated new rules for companies, which make yuan-denominated loans to overseas entities with the measures aimed at curbing capital outflows from China.

US yields were also an important focus with an increase in 10-year yields to fresh 18-month highs just above 2.40%, which increased concerns surrounding the threat of higher yields in Hong Kong, which would also pose important risks to the economy, especially in the property sector.

After opening slightly higher, the Hang Seng index advanced firmly during the morning session and peaked just below the 23,000 level before running into resistance. There was a more defensive tone during the afternoon session as fears over rising interest rates had a significant impact.

At the close, there was a gain of 88.46 points and 0.39% at 22,878.23, the highest close for three weeks. There was significant divergence in the market sectors with the Commerce sector rising 1.14% on the day and Finance also in positive territory, but there was a decline in Utilities and Property. The Hang Seng China Enterprises index rose 0.55% on the day.

Global trends in the dollar and energy prices will continue to have an important impact with developments surrounding bond yields also having a crucial influence with any further increase in yields undermining confidence.

Hang Seng 4H Chart


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.