Time to tiptoe back into HK market 16Jan2022

Time to tiptoe back into HK market 16Jan2022
Photo by Ruslan Bardash / Unsplash

Highlight this week was Hong Kong's stock market performance.

Global stock indices sorted in descending order with respect to the 50-day moving average (*percentage over exponential moving averages)

Hang Seng Index(HSI) rose 3.79% this week. HSI has shown enough recovery that there is enough bullishness for traders to tip-toe back into the market. However, HSI is still below 200day moving average. China's stock market is weak. It is hard for HK stock market to have a strong rally when mainland China's market is weak. This is why I use the word tip-toe. Certainly not time to be aggressive yet.

Broad market statistics 14Jan2022

Straits Times Index(STI) has been an outperformer among Asian stock markets year-to-date. Unfortunately, the outperformance is mainly driven by banks and not shared by the broad market. Same thing can be said about the HK market.

So far this year, financial stocks have been doing well, thanks to the Fed plans to raise interest rates in the coming months. Rising interest rates raise profit margin of financial companies who can lend out at higher rates.

Energy-related stocks also performed well. S&P500 energy sector ETF rose 16.23% year-to-date and it is only the second week of the year.  This is not good news for consumers who are worried about inflation. Inflation is also bad news for investors because rising inflation pressures central banks to raise interest rates. Rising interest rates have always been bad for stock markets historically, except for a few select sectors like financials.

The biggest threat to stock markets this year is rising interest rates driven by rising inflation. Indeed, 2022 has not been a good start for most stock markets so far.

Most stock indices are in the red year-to-date, though it is still early for the year.


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