$HSI(HSI)$ Bullish🇭🇰 stocks declined as investors locked in gains after a strong rally & await more recovery signals in the Chinese economy & amid worries of the Fed interest rate hike announcement. Sell-off on Jan 30 & 31 narrowed the HSI’s advance in Jan to 10.4% from as much as 14.4% but it still remains the 🏆Best Performer🏆 among major global stock benchmarks this year, a rally that added USD 1.55 trillion of capitalisation📈📈📈🐂🐂🐂🐂 due to record monthly foreign inflows after after 🇨🇳 dropped strict COVID curbs last month.
Views On Why 🇭🇰 Stocks’ Rally Has Ended For Now:
⭐️⭐️⭐️ According to MegaTrust Investment, a boutique Chinese investment firm, the HSI could drop by 10-18% over the next 2 months from the level on 27 Jan, which marked the peak in the index’s advance from its Low on 31 Oct 2022. Rationale:
⚠️ HSI’s relative-strength indicator showed the market has been “overbought” since 4 Jan. The index slipped 10% over 5 weeks after it peaked in mid-Feb 2021, when the indicator was above the 70-point threshold.
⚠️ HSI has surged 55% over 58 days, following a 35% loss over 86 days of drawdown from Aug-Oct, & the latest boom-bust move is a bit too much against the 20%+ swings in previous cycles.
⚠️ The Alibaba Group, Tencent Holdings & NetEase trio have gained by 60%-92% since 31 Oct. & are also flashing similar overbought warnings.
⚠️ The extraordinary run in the last 3 months is a relief rally & a technical correction is long overdue.
⚠️ The rally in 🇭🇰 stocks is overstretched compared with the history of 5 such market recoveries since the Covid-19 outbreak, & will likely creating a trap for latecomers piling into 🇨🇳 reopening rally.
🤔 However, the panic-selling bouts like in 2022 is unlikely to happen given the zero-Covid pivot & a 180-degree turn on property & technology sector clampdown.
Views On Why It’s An Opportunity To Add 🇭🇰 Stocks:
⭐️⭐️⭐️ Morgan Stanley (MS) reiterates buy-the-dip call after the HSI slumped on 30/1 amid concerns about rapid, excessive gains this year, citing growing signs of a post-COVID economic recovery.
🐂 According to the statistics bureau, the official PMI manufacturing index of 🇨🇳 rose to 50.1 in Jan, ending 3 months of contraction & confirming that the economy had bottomed in Dec 2022.
🐂 Economic momentum to improve further in Q1 and Q2 as the service sector recovers & consumption normalises.
🐂 The national online retail sales for the first 5 days of this year's 2023 national online New Year's shopping festival reached Rmb 208 billion. This was up 5% from the same period in the year prior. Categories that showed strong growth were the sales of imported fresh food, health supplements & gift boxes for the new year. In particular, it was stated that growth was particularly strong for new consumption models like live streaming & on-demand delivery.
⚠️ MS however suggested that the correction could be triggered by signs of an escalating 🇨🇳-🇺🇸 tech war. 🇨🇳 Tech stocks dropped after 🗞🗞🗞 posted that the Biden administration has stopped approving licenses for 🇺🇸 companies to export most items to 🇨🇳’s Huawei.
🐂 Goldman Sachs is steadfast in its buy calls since 🇨🇳 abandoned its zero-Covid policy & believes that the reopening playbook will broaden into growth recovery.
🤔💭 My Thoughts:
(1) HSI still dropped 0.52% today(2/2) despite Fed raised interest rates by the much expected 25bps, Powell being perceived to be dovish, & the S&P 500 & Nasdaq jumping by 1.05% & 2% respectively on 1/2. Hence, the sell-off in end Jan had nothing to do with Fed worries.
$Nasdaq100 Bull 3X ETF(TQQQ)$
(2) Fundamentally 2023 seems better than 2022 for 🇨🇳 stocks & there’s still upside for the HSI to hit the 52-Week High of 25,000+ points. 2021 High is 31,000+ points
(3) Since panic bouts of selling like 2022 is unlikely given the 180-degree changes, & I don’t want to be the “latecomer” piling into the rally only now, risking to be caught🎣 in the downtrend, I’ll wait for a 10% correction before entering & add if it continues to dip😉
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