Why Is the Hang Seng Index Showing Bearish Signals? | Analyzing Key Support Levels and Market Trends

The litecoin wallet androidHang Seng Index experienced a significant gap down at Tuesday's opening, with the initial trading level marking the day's high. Within the first 16 minutes, the index plunged nearly 230 points before finding temporary support at the 19,000 level. After this sharp decline, the index entered a period of sideways movement, ultimately closing just above the psychologically important 19,000 mark. Daily trading volume reached 95.05 billion yuan, with a price range of 344.42 points.

Several factors contributed to the market's downward pressure. Tencent Holdings (0700) faced selling pressure after its major shareholder, Prosus, announced plans to continue reducing its stake in the company. The Dutch investment firm indicated it would sell approximately 2%-3% of its Tencent holdings annually, potentially reducing its stake to 24%-25% by year-end. Tencent's shares dropped 4.594%, significantly impacting the index. Meanwhile, the property sector showed particular weakness, with Longfor Group (0960), Country Garden Services (6098), and Country Garden (2007) falling 9.907%, 9.613%, and 8% respectively.

Technical indicators paint a concerning picture. The index formed a bearish engulfing candle pattern, closing below the 50-day, 200-day, and 20-day moving averages. The MACD's bullish divergence has narrowed, suggesting weakening momentum. Market breadth was decidedly negative, with 506 advancing stocks versus 1,140 decliners, reflecting broad-based selling pressure.

In the United States, June retail sales data came in mixed. Headline retail sales grew 0.2% month-over-month, below the 0.5% consensus estimate. Core retail sales (excluding autos) also rose 0.2%, missing the 0.3% forecast. However, the control group (excluding autos, gasoline, building materials, and food services) showed stronger growth of 0.6%, exceeding expectations. This data, combined with positive corporate earnings reports, helped push major U.S. indices higher as investors grew more confident about inflation control.

Looking ahead, the Hang Seng Index appears vulnerable to further downside. Night session trading and ADR performance suggest continued weakness, with potential support levels emerging around 19,000 and 18,900.

China COSCO Shipping Corporation (0598), a major player in China's freight forwarding and logistics sector, reported first-quarter 2023 operating revenue of RMB 22.361 billion, representing a 24.56% year-over-year decline. This decrease primarily stems from significantly lower sea and air freight rates compared to the same period last year, coupled with weakening demand in European and American markets that reduced transport volumes.

Despite the revenue decline, the company demonstrated improved cash flow management. Net operating cash flow surged 92.12% year-on-year, as management implemented more efficient working capital strategies that substantially reduced cash outflows compared to the previous year.

In a potentially positive development for the sector, the Shanghai International Energy Exchange (a subsidiary of Shanghai Futures Exchange) has proposed new freight rate index futures contracts for the Europe route. These contracts would feature a multiplier of 50 yuan per index point, minimum price movements of 0.1 points, and daily price limits of ±10% from the previous settlement price.

Market analysts view this initiative as strategically important for China's shipping industry. As a maritime powerhouse, China currently lacks long-term freight rate forecasting tools and price risk management mechanisms. The introduction of these futures contracts represents a significant step in supporting the country's maritime strategy while contributing to Shanghai's development as an international financial and shipping hub.

From a valuation perspective, China COSCO Shipping appears attractively priced relative to peers. Technical indicators show recent improvement in the stock's performance, and applying a P/E multiple of 5 suggests a potential target price of 3.1 yuan.

The author holds relevant licenses from the Hong Kong Securities and Futures Commission (SFC) and currently has no positions in the mentioned securities. Views expressed represent personal opinions.