SuperRare Signal that Hong Kong Stock Mkt Has Hit RockBottom

[xray]

Bloomberg
Super-Rare Signal Suggests Hong Kong Stock Market Has Hit Rock Bottom
Ernest Tsang
Fri, November 25, 2022, 12:42 AM

(Bloomberg) -- A stock-market indicator is flashing an extremely rare signal that suggests Hong Kong has hit the bottom after years of Covid restrictions, a tech industry crackdown and a property-market implosion in China. Strategists who study charts this week spotted an event that last happened 55 years ago: a so-called crossover on a graph that combines the speed and magnitude of price changes to assess whether a security is about to make a big turn. A very similar shift in 2009 marked the start of a multiyear bull-run in the U.S. To chartists, the switch that popped up in recent days could be the long-awaited signal every investor in the city is hoping to see: the end of a stock-market slump that drove the main index as much as 53% below the pandemic-era peak set in February last year.

The 14-month Relative Strength Index of Hong Kong’s Hang Seng stock index this month completed the turnaround — dropping below 30 and then surging back above that key threshold — for the first time since October 1967. If it holds true, it could mark the end of the pain induced by almost three years of pandemic lockdowns, a backlash against big tech companies that breached government policies and a property implosion that bankrupted some of the biggest developers.

History shows that a security is typically “oversold” when its RSI dips below 30 and “overbought” when it rises above 70. According to Investopedia, strategists use the RSI to work out when to buy or sell securities and whether they are primed for a trend reversal. Chartists commonly study the 14-day RSI rather than the monthly view. At the same time as charts give hope, new-found optimism around President Xi Jinping’s policy pivots and November’s epic stock rebound have prompted some major Wall Street banks to move away from their long-held bearish views on Chinese shares.

In 2009, around the time of the Global Financial Crisis, a similar formation on the S&P 500 Index marked the start of a bull-run, with the measure rising to an all-time record in January this year.

--With assistance from Li Zhao and Alex Millson.

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Live Long and Prosper....

[xray]

uncleharley:

You may be able to do something with this (IMHO)....

Live Long and Prosper....

[xray]

The Wall Street Journal
Global Stocks Rise on Signs of Fed Slowdown
Anna Hirtenstein
Thu, November 24, 2022, 11:40 AM
Global stocks edged up in the wake of Federal Reserve minutes that revealed most officials expect to slow the pace of interest-rate increases. U.S. markets were closed Thursday for the Thanksgiving holiday, after rallying in the previous session following the release of the Fed minutes. Asian stock indexes rose Thursday, playing catch-up to the U.S. gains.

[xray]

Bloomberg
JPMorgan Sees $1 Trillion Demand Boost for Global Bonds in 2023
Garfield Reynolds
Thu, November 24, 2022, 9:42 PM

(Bloomberg) -- The worst may soon be behind global bonds, with supply set to shrink faster than demand, according to JPMorgan Chase & Co. The key driver will be estimated reduction of $1.6 trillion in global bond supply, outpacing an estimated deterioration of about $700 billion in demand, strategists led by Nikolaos Panigirtzoglou in London wrote in a research note Thursday. That decline in demand will be a major improvement from the $5.9 trillion slide last year, they said.

Bonds have slumped around the world in 2022, leading to the first bear market in a generation, as central bank interest-rate hikes pushed up yields and volatility. Global debt has tumbled 16% this year, heading for its first ever back-to-back annual decline since at least 1990, according to a Bloomberg index. Still, the gauge has risen more than 5% in November amid the lure of higher yields and the prospect of slower Federal Reserve tightening.

“After unprecedented deterioration this year, we expect the balance between bond demand and supply to improve,” the JPMorgan strategists wrote. “With analysts focusing on 2023 outlooks, there is an emerging consensus view that softening growth and declining inflation should contribute to declines in bond yields.”

Lower Stockpiles

Central banks are likely to sell more of their debt stockpiles via quantitative tightening next year, while commercial banks are also expected to keep trimming their holdings, according to the JPMorgan team. Meanwhile, there’s likely to be increased demand from foreign reserve managers, pension funds and retail investors, with the last two being drawn in by higher yields, they wrote.

The increase in net demand next year is likely to reduce the yield on the Bloomberg Global Aggregate bond index by about 40 basis points, the strategists said. The yield is currently at 3.52%.

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Live Long and Prosper....

[xray]

Bloomberg
China Investors Look for Turning Point After $370 Billion Rally
Tassia Sipahutar
Fri, November 25, 2022, 4:30 AM
In this article:

AB
+0.44%

(Bloomberg) -- With Chinese markets prone to sharp turning points followed by long and powerful trends, timing when to buy is almost as important as choosing what to purchase. Investors who jumped into Chinese stocks on Nov. 11 when Beijing cut Covid-19 quarantine periods and dialed back testing have shared in a rally that’s added almost $370 billion to the value of equities in the MSCI China Index. Others are still waiting for clearer signals after Wall Street got it so wrong this time last year. Goldman Sachs Group Inc., JPMorgan Chase & Co. and BlackRock Inc. were among those who recommended piling into the market then, only to see more than $4 trillion in value destroyed over the 10 months through October.

“Chinese policies are like a giant freight train coming down the track,” said John Lin, a fund manager for China equities at AllianceBernstein in Singapore. “What you do first is get out of the way. Don’t stay on the track! Then the instant that you can, jump onto the train.” China’s benchmark CSI 300 Index has risen about 8% from this year’s low set in late October even as Covid cases have been rising. Daily infections climbed above 30,000 for the first time Thursday as officials struggle to contain outbreaks that have triggered new restrictions in some of the largest cities.

Ahead of Curve

Abrdn Plc is among those who already see opportunities in the nation’s corporate bonds after the Covid policy changes and a sweeping package of measures to aid the property sector. Investors can also position right away to take advantage of a likely steepening in China’s government bond yield curve as the economy reopens from Covid, according to Ray Sharma-Ong, a fund manager for multi-asset and investment solutions at abrdn. “Go along on the front-end of the curve while going short on the back-end,” Sharma-Ong said. A better outlook for growth will push up back-end rates, while China’s supportive monetary policy will contain front-end rates, he said. Dollar-denominated Chinese corporate bonds already offer opportunities with yields around 8%, he said. Investing in local currency corporate debt comes with a bonus of 2% positive carry after investors hedge back the yuan to the dollar, according to Sharma-Ong, who expects the yuan to keep strengthening.

Enticing Equities

M&G Investments (Singapore) Pte and Eastspring Investments Singapore Ltd. are in the market buying Chinese stocks. Eastspring says they can’t get much cheaper, while M&G favors domestic-facing consumer brand names, original equipment manufacturers for electric and traditional vehicles, and factory automation. “We are very close to trough valuations and very, very close to trough assumptions on earnings as well,” said Bill Maldonado, chief investment officer at Eastspring, which oversees $222 billion. “You’d be buying now and expecting things to kind of rebound on a three-to-six-month basis.” Catherine Yeung, investment director at Fidelity International, said so much negative newsflow has already been factored into the price of Chinese stocks that the worst is likely over for investors.

December Insights

For those still on the sidelines, a Politburo meeting in early December, followed by the annual Central Economic Work Conference, may offer useful signals. Jason Liu at Deutsche Bank AG’s international private bank plans to keep an eye on state media around this time. News from the closed-door work conference, which will bring policymakers together to review the economy this year and set goals and tasks for 2023, may be a catalyst for further re-opening trades. “We may see some signals from the top leadership,” said Liu, who expects near-term volatility in Chinese assets and a “very gradual” shift away from Covid Zero over the next few quarters.

Liu recommends looking past the likely choppiness and taking a broad position in Chinese equities, including the technology sector, to benefit from a gradual shift in sentiment. He also sees the yuan as attractive given likely appreciation through the first half of next year. Liu doesn’t recommend credit at the moment, saying it may take longer for the property market to improve.

Spring Pivot

Morgan Stanley is among those with high hopes for an acceleration of China’s economic opening in spring, when the weather turns more friendly, vaccinations may increase and the National People’s Congress in March looms as a key event for market-moving developments. Investors who have been underweight in Chinese assets may shift to neutral around this time, according to Andrew Sheets, chief cross-asset strategist at Morgan Stanley. China’s domestically-focused consumer companies stand to benefit, according to the investment bank. “If investors are presented with a pausing Fed and China reopening, and growth being stronger in the second half of 2023, I think they’ll view that as a positive backdrop for a lot of different emerging-market assets,” Sheets said.

The Future

Reopening of the economy from Covid may drive a positive swing of inflows into China’s equities in 2023 equivalent to 1% of gross domestic product, according to Bloomberg macro strategist Simon Flint. This in turn will buoy the yuan, he said. James Leung, head of multi-asset for Asia Pacific at Barings, recommends aligning China stock portfolios with the government’s policy priorities by investing in the electric vehicle sector, renewable energy and the hardware technology supply-chain.

AllianceBernstein sees stocks in energy and technology security as low-hanging fruit for investors, so long as the companies are aligned with the government’s goals. The market has changed from the era before the pandemic and the regulatory crackdown, when investors would hunt for the latest tech and biotech darlings “and then watch the money grow 10 times, 100 times,” AllianceBernstein’s Lin said. “Now you can still find growth, but it has to be policy-sensitive kind of search.”

--With assistance from Ruth Carson, Sofia Horta e Costa, Ishika Mookerjee and Abhishek Vishnoi.

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Bloomberg
BlackRock Wary of China Stocks Beyond Potential Near-Term Rally

Ishika Mookerjee
Fri, November 25, 2022, 4:18 AM
In this article:

BLK
+0.20%

(Bloomberg) -- BlackRock Inc., the world’s largest asset manager, says it’s cautious on the longer-term outlook for Chinese stocks even as sentiment toward the market is turning more positive
“Geopolitics remains a key risk,” a team comprising portfolio managers and Belinda Boa, head of Asia Pacific active investments, wrote in a report on the region’s 2023 outlook. Among other concerns, there’s uncertainty on the possible impact of new U.S. policies on sectors beyond semiconductors as well as potential retaliatory measures, they said.

Privately owned enterprises and foreign investors also face a potentially “adverse climate” given the bigger emphasis on ideology relative to the past few decades in China, according to BlackRock. The money manager’s tone breaks with the growing bullishness toward China and is markedly different from its own view a year ago.

November has seen a big rebound in Chinese stocks as the government unveiled guidelines to ease its Covid Zero approach, with investors piling in as valuations appeared to have priced in a lot of the bad news. The Hang Seng China Enterprises Index has surged 21% so far in November, on track for its best month since 2006.

While BlackRock now sounds apprehensive on Chinese equities further out, it acknowledges that economic growth and the market may surprise to the upside if the property sector stabilizes and pandemic curbs are relaxed.

Economists so far are quite pessimistic on China’s growth prospects in 2023, seeing 4.9% of expansion next year, according to a survey conducted by Bloomberg News. Nomura Holdings Inc. cut its projection for this year’s expansion to 2.7%.

“The mostly bearish sentiment has led to oversold equity positions and attractive valuations, while the earnings outlook has moved from challenging to more optimistic on a relative basis,” the fund managers wrote.

Here are some other takeaways from BlackRock’s report:

-Asset manager prefers South and Southeast Asian equities over North Asia on geopolitical challenges and slowing IT demand in the latter

-Sees opportunities in Indonesia; says Malaysia is “coming up as a scalable alternative” to China and, in some cases, Taiwan

-Cautious on India in the near term as “animal spirits run high,” and the country records “subpar” balance of payments versus regional peers

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Live Long and Prosper....

[richardsok]

My Hong Kong technicals remain volatile and mixed -- and there's always that eight-ton CCP gorilla just on the other side of the door.
Nearly untradeable for my method.

Good luck with it.