The radar’s flashing. In my opinion, its time to buy the Hong Kong market – a combination of fundamental and technical factors are pointing up.
I’ve had the Hong Kong share market on my radar for some time. Strategically, I want to align with the next wave of growth from China. The industrialisation process is maturing (witness slowing construction data), and it appears the driver of future growth will be the rise of the Chinese consumer.
The share price rise of stocks like Tencent (a telco and internet provider in China) indicate I’m not alone. Tencent has leapt more than 50% over the last three months.
The broader HK market rose in that time, but fell over March, largely due to concerns about growth prospects in China. With 57% of the value of the HK market concentrated in financial stocks, the tightening of lending conditions in China weighed heavily. Financial ratios are at very encouraging levels – the PE for the whole market is below 10, and the banking sector around 8. Additionally, the tightening cycle appears to have ended, and inflation readings indicate an economy under control.
Now have a look at the 4 hourly chart from the Tracker platform:
Not only did the index bounce off support on Monday, the higher opening on Tuesday completed an “island reversal”, illustrated by the arrow. This is a fairly unusual pattern, and can be a strong indicator of a trend change.
I went long yesterday, buying just below 21,000 with stops below 20,700. Today’s most likely set up is:
BUY the Hong Kong 43 on open, stop loss below 20,914 (yesterday’s low).