Hong Kong, Chinese stocks may trend quiet as US holiday looms
With no new economic data expected from mainland China or Hong Kong this week, investors are looking overseas for market mover indicators although that may be hard to come by with a major holiday break shutting US markets later this week.
Local markets will likely drift sideways as a result, say analysts, with the big news as to whether the yuan will be elevated to International Monetary Fund reserve currency status scheduled for next Monday.
“At the moment there are not many bright spots,” for the Chinese economy, said Louis Tse Ming-kwong, a director at VC Brokerage in Hong Kong. Recent stock market turnover has been “so slim” with buyers only dipping in when they think prices look cheap.
The likelihood of a quiet week would also give investors time to catch their breathe following a 20 per cent run up in mainland shares since late August.
Shanghai stocks ended on Friday 0.4 per cent higher at 3,630.50, while the large cap tracking CSI300 index closed down 0.02 per cent at 3,774.38. In Shenzhen, the composite index extended recent gains, closing 1.3 per cent higher on Friday at 2,285.83.
The Shanghai and Shenzhen indices were up 1.4 per cent and 3.6 per cent respectively for the week.
The Hang Seng Index jumped 250 points around half an hour before the final bell to close 1.1 per cent higher at 22,754.72.
It was the Hang Seng’s strongest weekly gain in five weeks with the blue-chip tracker up 1.6 per cent during the five trading sessions.
The gains were matched by the strong performance of Wall Street on Friday, but dealings are expected to be muted by the Thanksgiving holiday in the US on Thursday and most players there will take the Friday off to extend the break into the weekend.
The Dow Jones industrial average rose 91.06 points, or 0.51 per cent, to close at 17,823.81, the S&P 500 gained 7.93 points, or 0.38 per cent, to finish at 2,089.17 and the Nasdaq Composite added 31.28 points, or 0.62 per cent, to 5,104.92.
In the currency markets the yuan might ease slightly as “no one will want to be short US dollar,” right now, according to Michael Every, head of financial markets research at Rabobank.
The reason is fairly simple as the markets count down to the December 16 decision by the Federal Reserve to possibly raise US interest rates for the first time in almost a decade.
In the US markets, soon to be released data on personal spending, durable goods orders and housing, will be broadly positive, predict analysts at Capital Economics.
The firm’s analyst Paul Ashworth forecasts a “big rebound” in both durable goods orders, thanks to a recovery in commercial aircraft components, and in new home sales. The Fed minutes of their meeting released last week had flagged December as a likely time when rates could liftoff.
Stronger currencies normally accompany rising interest rates and this will put pressure on China’s central bank to decide whether it wants to track the US dollar higher under its dirty peg, or devalue. Every expects the yuan will be allowed to weaken by Chinese authorities, who can control the currency’s movement by setting a daily trading range against the greenback, but only after it is added , as expected, to the IMF’s reserve currency basket.