The epidemic is not at its peak

In the past week, the performance of the Chinese and Hong Kong stock markets before the Lunar New Year holiday was mainly affected by the spread of the new coronavirus pneumonia epidemic in the Mainland

For the whole week, the Hang Seng Index fell by 3.8% to close at 27949 points; the Shanghai Stock Index fell by 3.2% Ended at 2976. I believe investors are particularly concerned now. When will the impact of the epidemic development on China and Hong Kong stock markets end?

With reference to the 2003 SARS (commonly known as SARS) epidemic in Hong Kong, it is believed that the performance of Hong Kong stocks is expected to settle until the spread of the epidemic is controlled. So, is there any way to effectively capture when the development of the epidemic is under control? This can be used to observe the statistics of news big data, or find clues from it.

New pneumonia reports skyrocket

Attached [Figure 1] is a statistics of the media in Hong Kong, including newspapers, magazines, radio, and video. From 2002 to 2004, the contents of the report showed the words “atypical pneumonia” or “SARS” (monthly figures). The epidemic that year began to appear in early 2003 (relevant reports will be due to the emergence of the epidemic); entering the end of the first quarter, the number of reports showed a fountain-like spike, and the relevant figures rose to a high of more than 25,000 articles in April and May, showing that At that time, the epidemic began to erupt, and the situation turned sharply. Therefore, the performance of the HSI at that time was also implicated, and the trend continued to decline (as it is now). At the end of April 2003, the Hang Seng Index fell to its lowest level in more than four years at 831.87 points.

However, relevant news statistics have declined significantly in June of that year (actually, if daily changes are observed, the statistics will gradually decrease in late May), reflecting that the epidemic situation began to be controlled after May (or did not spread further), The performance of the HSI also stabilized in similar time, and then even recovered its upward momentum. From the perspective of market indicators, the smooth long-term market width of 50 antennas higher than 250 antennas bottomed out around the end of May 2003, confirming the end of the downward trend in Hong Kong stocks [Figure 2]. In other words, from the media reports on the relevant epidemic situation, we can roughly grasp the peak period of the epidemic, and even when the Hong Kong stock market is affected by the epidemic.

As for the current situation? Attached [Figure 3] is the Hong Kong media from the end of last year to the present, the statistics of the word “Wuhan” and “coronavirus” or “pneumonia” appear on the statistics (weekly figures). The relevant figures have only started to rise in the past week. Relevant reports have only begun this year when the epidemic started. This is only the beginning of the outbreak. I believe that before the relevant statistical confirmation peaks and falls, [note: referring to the situation in 2003, I believe it lasted no less than two months], the trend of Hong Kong stocks will continue to bottom out.

Blue Chip only moves to China

Looking back at the performance of Hong Kong stocks in the past week, as mentioned earlier, the HSI fell by a little over a thousand points (3.8%) throughout the week, ending the 7-week strong rise. Of the 50 index stocks, only China Mobile (00941) and Hengan International (01044) recorded weekly gains of 5.29% and 2.81%, respectively. China Mobile’s outstanding performance has also indirectly driven the telecommunications sector to become the only industry that recorded a weekly increase. Among the blue-chip stocks that fell, AIA (01299), China Construction Bank (00939) and Tencent Holdings (00700) fell 4.6%, 5% and 3.3% respectively during the week, dragging down the HSI by more than 330 points. As for the first two sectors with the worst performances, they are industries sensitive to the development of the epidemic, namely hotels / leisure and aviation, respectively, which fell by about 10% and 8% weekly.

In fact, excluding the impact of the outbreak on Hong Kong stocks, from the perspective of technical or market indicators, Hong Kong stocks have already adjusted pressure after entering 2020. Since the beginning of January to January 20, the Hang Seng Index has repeatedly reached a test high. However, during the period, the short-to-medium-term market width did not follow the rise of the HSI. Instead, the former performed flat, and the latter even took the lead to fall. Run away. The divergence situation is also seen on the Hang Seng Index and the RSI technical indicators [Figure 5], which has long laid the groundwork for the adjustment of market conditions. It can be seen that the worsening of the new pneumonia epidemic may be the last straw that has crushed the camel and accelerated the correction of the Hong Kong stock market.

In any case, the short-to-medium-term market width of Hong Kong stocks has fallen below the 50% strength level, reflecting that the market’s performance has clearly weakened. From the performance of 3 antennas higher than 18 antenna short-term market width in the past year, the indicators often have to return to the support area of ​​20% to 30% to have greater support, which means that there are still risks and room for further market bottoming.

In terms of technical trends, the Hang Seng Index climbed to the top of the ascending channel on Monday (20th) and reached a high of 29174 points. However, the gap fell due to the impact of the spread of the pneumonia epidemic in Wuhan. The HSI fell below 10 days, 20 antennas and last year. The central axis position of the rising channel extending upward in mid-August. The technical trend has deteriorated significantly. The short-term support will be 250 days and 50 antennas, that is, about 27700 points and 27500 points. However, the larger technical support is around 27000 points, which is equivalent to the bottom line of the aforementioned ascending channel. The top of the transaction-intensive area and the 50% pullback support level of the rising wave from mid-August last year to the beginning of this week; this position also happens to be December 12. Rises at the bottom of the rift. Therefore, there is no room for loss at the 27,000-point mark, otherwise the market outlook will fall more deeply.

SSE Index Weakness in Medium and Long-term Markets

The mainland stock market was also affected by the deterioration of the epidemic. The Shanghai Composite Index fell below the 3,000-point mark, fell by nearly 100 points (or 3.2%) weekly, and fell for the second consecutive week. It was the worst closing day performance since the record in 1990. . In terms of market indicators, the Shanghai Stock Exchange Index’s short-, medium-, and long-term market widths have all deteriorated significantly. The short-to-medium-term market width has dropped from more than 90% two weeks ago to the latest 28.5% and 41.8%; the stock price is higher than the 250 antenna ratio, and it has also fallen from more than 50% in the middle of this month to 33 at the close on Thursday. %【Figure 6】. As the short, medium and long-term city Kuantong reported falling below the 50% threshold for strength and weakness, reflecting the current weakening of the market conditions, I believe that with the development of the epidemic, there are still opportunities to further explore.

In terms of technical trends, entering the beginning of this year, stimulated by the news of the first-phase agreement reached during the Sino-US trade negotiations, the Shanghai Composite Index broke through the top of the hovering area (about 3040 points) for nearly half a year; however, due to the recent news of the epidemic, the trend went down. Fall back below the top of the hovering area. In the short term, the initial support of the Shanghai Stock Index is about 200 antenna positions, about 2966 points [Figure 7], which is equivalent to the 38.2% pullback support level from early January to early April last year, and around 2920 points, which is equivalent to August last year. Extended uptrend line support.

In summary, the development of market conditions in the past week was dominated by epidemic development. From the perspective of news big data, the number of news reports related to the pneumonia epidemic is soaring in a fountain style, reflecting that the epidemic situation is beginning to spread and deteriorate. I believe the situation will continue to ferment in the short term, which will continue to put pressure on the performance of China and Hong Kong, and even the global stock market. There may be 27000 support points under test.


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