MARKET EXPRESS China / Hong Kong

HSI continued to be dragged down by A-share market and DJIA futures price. HK markettumbled yesterday. It was dragged down by the A-share market and the DJIA futures contract. Therebound in SHIBOR triggering a fear of tightening in liquidities. All China banking stocks and Chinaproperty stocks thus fell, turning the earlier gains of HSI into losses. Finally, HSI lost 316 pionts or1.35% to close at 22,999 which was a level very close to the intraday low. HSCEI lost 196 points or1.84% to close at 10,457. Intraday volatility increased to 535 points. As the losses widened in theafternoon session, market turnover increased to HK$71.94bn. Turnover for blue-chips wasHK$26.23bn which was 24% higher than the average turnover for the previous 6 months. Theadvance-to-decline ratio dropped to 0.42 to 1, showing a weak market sentiment.

    Although HSI formed a “Dark Candle” with long body under a sharp decline yesterday, themarket may not become very weak if the lower bound of the Bollinger Band can bemaintained. Dragged down by the weak A-share market and the drop in DJIA futures, HSIextended its losses in the afternoon session to form a “Dark Candle” with long body which reflecteda bearish sentiment. It seems that the downside potential of the market is still high. Particularly, HSIlost the lower bound support of its uptrend yesterday, which may trigger strong selling pressure.

    However, if HSI can stay above the lower bound of the Bollinger Band, HK market may stabilize oreven undergo a technical rebound. The short-term support for HSI will be at the 50-day MA at22,732.