Taking the slow boat

HK Junk Boat

The Hong Kong HSI stock market has not been able to reach the lofty 30,000 level seen in Oct 2007. Corrective wave wave B has just peaked and the trend is now down as C wave unfolds. We will not see a bottom for the HSI until the low of wave A is breached – ie below 10,000.

It will be a long slow path to recovery, which will only happen once wave C has bottomed.

HSI 29-08-30 1993-2013

The HSCEI has become a lot more correlated with the China A-share market – especially since 2005. This is partly due to many traders now actively monitoring the A vs H-share spread, which compares the price difference between China shares listed both on the mainland A-share bourses and offshore in Hong Kong. The Hong Kong economy is also becoming more correlated with China, and as the China economy cools expect the Hong Kong economy to cool along with it.

HSCEI 03-09-13 1993 to 2013

 

SSE Comp 29-08-13 1990-2013 i

For more information on the long term China A-share view please see Prepare for the Ride Ahead