To The Moon

How low will Hang Seng Index (HSI) fall to ? Where & When will Chinese stocks bottom?

Before delving into the two topical questions, it would be very useful to examine its past 5 years movements.

{Please refer to attached HSI chart}. 

Without elaborating, plain to see that HSI currently is at its "bottom-est", despite its 0.72% blip-rise today 27 Oct.

It could be seen from the graph that HSI "peaked" around Feb 2021.  All that changed by Mar 2022 with the start of Russia-Ukraine war that is still ongoing.  After trading sideways for a while, HSI started to free-fall.

To attempt to explain HSI's fall, below are some plausible causes  :

1.  Zero infection enforcement.   Insistence on an impractical standards have caused many expats and HK citizens to leave; reducing investing activities.  Mass exodus resulted in a brain drain situation; further denting economy and stock market.  Does not bode well for any open economy.  Hong Kong is no exception.

2. Withering economy.  Side effects of extended lockdown have caused many businesses to belly up, resulting in a slump economy.

3.  Business is secondary.  Regimented enforcement of zero infection policy - played out clearly before foreign investors.  Made them sit up and realize that business is second fiddle. Not that important to the ruler.

4. Concerns were detected at recently concluded Congress party.  History was made with appointment of current president for another 5 years of services.  Would it be another 5 years of antagonism between the 2 largest trading bloc ?

5.  Tit-for-tat engagements between US & China has blurred the line, making it increasingly difficult to differentiate who is right or wrong?

Quote,

George Orwell's novel Animal Farm's last sentence - best sums up above sentiments - "the creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”

Unquote

6.  More important, old monies have exited HSI and flowed back to US; regarded as a "better the devil you know" haven.  Afterall the old monies and govt institution go way back versus an impenetrable, steadfast cowboy regime.  No ?  LOL.

As long as above 6 factors are still 'active', potentials for HSI to fall further remains a possibility ? Regardless how integrated the 3 Chinese bourses (Hong Kong, Shanghai and Shenzhen) are, as long as foreign funds don't return, there is little upside to how bouyant HSI could really be.

Simply put, the left pocket to right pocket tradings serves as a smoke screen only, I feel.

Having been in the market for a while, my epiphany about the stock market is that there is always room for "low" market to be even "lower" and vice versa.  With that said, a "realistic" bottom could between 11,000 to 12,500 optimistically ?

When will Chinese stocks bottom ?  Thats relatively "straight forward" to postulate : 

1.  When all 6 factors have been mitigated,

2.  When ruling party confims not further tech-persecutions.

3.  When investors' confidence (especially foreigns) are restored - maybe, just maybe the old monies would return. 

Until then stay away and not get suck into the quicksand-y HSI, no ?

Agree with the analysis ?  Share your thots in the Comments section below.  Like this article pls.  Its important to me.  Thanks in advance.

Matching song ?  Epiphany by Taylor Swift. Dunno ? YouTube it.

@TigerStars

@CaptainTiger

@MillionaireTiger 

@Daily_Discussion 

@Tiger-AU 

@ASX_Stars

@TigerPM