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FxWirePro Call Review: Add fresh short positions in HangSeng targeting 25500

In February this year, we called on our readers go short on Hong Kong’s benchmark Hang Seng index as problems continued to mount of the economy, especially due to the higher interest rate in the United States and U.S. trade war against China, https://www.econotimes.com/FxWirePro-Sell-Hang-Seng-index-targeting-at-least-10-percent-decline-1166498 . Recently, Societe general published a report suggesting Hong Kong is currently the most vulnerable economy.

Since Hong Kong dollar is pegged to the USD, Hong Kong Monetary Authority (HKMA) raises the interest rates along with the U.S. Federal Reserve in order to keep the peg stable. Since December 2015, HKMA has raised interest rates seven times with the last one being in this month. Hong Kong dollar (HKD) is allowed to float between 7.75 and 7.85 per USD and it is important to note that the HKD is trading at the lower range of the peg around 7.85 per USD since March this year. In a separate article, here, https://www.econotimes.com/Sniffing-a-peg-break-Series-HKD-might-suffer-temporary-breach-in-peg-1265373 we suggested that the HKD peg might break temporarily with a drop to 7.96 per USD.

We clearly expect a further decline in the Hang Seng index. After bottoming in February 2016, over the past two years Hong Kong’s benchmark stock index Hang Seng has risen by almost 84 percent before being hit by a global stock market selloff in late January. With the Federal Reserve set to increase rates by at least twice this year, the Hong Kong’s domestic economy likely to see more tightening, which is not to be good news for the Hang Seng index.

We have already extended our final target for the index to 25500 area in a follow-up review and in this review, based on our calculations, we would like to point out that an opportunity window has opened where fresh additional short positions can be entered into or short-term traders can enter into new shorts.

Trade idea:

Enter fresh short positions in Hong Kong’s benchmark HangSeng index or HKG33 (CFD of Hang Seng) at the current rate of 27190 area with a target of 25500 area. Short term traders entering new positions should keep the stop loss around 28600 area. The end target likely to see extensions.

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