China Evergrande Debt Woes, Stocks Rebound from Sell-off

 Summary of content for the week of Sep 24:

1. Week 38 major indexes performance;

2. Week 38 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S

For the week ended 24 Sep, the major benchmarks overcame an early sell-off to end the week flat to modestly higher. On Monday, the S&P 500 Index recorded its biggest daily drop since May 12, the primary factor was fears that a possible default by China’s second-largest property developer—and the world’s most heavily indebted one—might set off a global financial “contagion” similar to what followed the collapse of Lehman Brothers in September 2008. Stocks regained a large portion of their losses on Wednesday, however, which attributed to news of a restructuring plan for Evergrande, along with a capital injection into the Chinese banking system. Refer to major indexes’ weekly performance table below.

Key economic data update:

1.    Fed two-day meeting concluded Wednesday. As widely expected, they would soon consider tapering purchases of Treasuries and mortgage-backed securities. 

2.    Housing sales strengthen, with both housing starts and permits easily surpassing expectation.

Among 11 SPX sectors, Energy(XLE) and Financials (XLF) outperformed, longer-term bond yield rose sharply over the week, helping financials shares by holding the promise of improving banks’ lending margins. Utilities (XLU) and Smaller Real Estate(XLRE) stocks lagged. Refer to SPX sector indexes weekly performance below.

Technically, all three major indexes weekly candlesticks appear bullish, while their uptrend remain well intact. SPX and Nasdaq trading in between its 20 and 50dma and DJI appears relatively weaker, closed below its 20 and 50dma for the week.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland Chinese stocks (SSE weekly chart) ended a holiday-shortened week broadly flat from the prior Friday’s close after being closed Monday and Tuesday for the Mid-Autumn Festival. The market’s subdued performance was noteworthy after Hong Kong’s Hang Seng Index(.HSI weekly chart) fell more than 3.0% on Monday amid the mounting debt crisis surrounding China’s Evergrande Group. A series of large cash injections by China’s central bank during the week helped ease worries about a disorderly debt resolution for the indebted developer. However, some of Evergrande’s offshore bondholders did not receive their portion of USD 83.5 million in interest payments by a Thursday deadline in U.S. time, Reuters reported on Friday, citing unnamed sources. The company now enters a 30-day grace period, after which it will be considered in default if that period passes without payment.

Technically, SSE index is currently in a three-week consolidation after hitting its year high recorded in Feb, technical indicators appear bullish. .HSI index closed 2^nd week down in a row, tested its major support level at around 24,000 and rebounded just close above it. Going forward, it’s expected the index downside is limited.

Singapore

STI index ended the volatile week with a modest loss but appears the selling pressure is under control. Coming week, continues to watch out major support level around 3060-3050.

STI weekly chart.

U.S Lower 2nd Week

 Summary of content for the week of Sep 17:

1. Week 37 major indexes performance;

2. Week 37 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S

For the week ended 17 Sep, U.S stocks down for 2^nd week,  continues historical norm for Sep month. The markets continued to grapple with uncertainties regarding the Delta variant, global monetary policy tightening timing, fiscal stimulus, and persistent supply-chain challenges. All three major indexes ended down for the week, with the SPX index dropped the most. Refer to major indexes’ weekly performance table below.

Points to Highlights:

1.    Inflation moderates as Core consumer prices increased 0.1% in Aug, as reported on Tuesday, below expectation. 

2.    Bond yields increase as investors await Fed meeting. Fed meeting will be on coming week 21-22 Sep, many observers expected to announce the first steps in tapering monthly assets purchases designed to hold down long-term interest rates.

Among 11 SPX sectors, Energy(XLE) recorded solid gains on the back of rising oil prices, while strength in auto-related shares boosted consumer discretionary(XLY) stocks. The small materials (XLB) and utilities (XLU) sectors lagged. Refer to SPX sector indexes weekly performance below.

Technically, both DJI and SPX indexes traded below their 50dma level, DJI has been below it since last week, and SPX just closed below it this week, which could lead to more room for the downside. Nasdaq index as strongest among the three is still hovering around its 20dma, still got some room above its 50dma.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese stocks fell sharply for the week. The Shanghai Composite Index (SSE weekly chart) was down 2.4%. In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) lost 4.9%.

Weak August economic data, a fresh coronavirus outbreak in Fujian province, the growing debt crisis at embattled property developer China Evergrande Group, and the threat of tighter gaming regulations in Macau dampened investor sentiment. Strong trade data and an unexpected yet reportedly candid phone conversation between the U.S. and Chinese presidents lifted investor sentiment. Next week, China’s stock markets are closed Monday and Tuesday for the Mid-Autumn Festival and will reopen on Wednesday, 22 September.

Technically, SSE index retreated after hitting year-high level 3731.69 in Feb, uptrend is still well intact. HSI index dropped to its lowest point of 24424.74 this year in the week. Its YTD return is at -8.5% so far, the weakest among major indexes.  

Singapore

STI index has been trapped within its narrow three weeks trading range, just above its 200dma support level. This week, continues to watch out major support level at its 200dma level 3060 and horizontal support 3050( 3060-3050 support level) in the short run.

STI weekly chart.

U.S Stocks Down, China Up

Summary of content for the week of Sep 10:

1. Week 36 major indexes performance;

2. Week 36 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S

For the holiday-shortened week ended Sep 10, U.S stocks finished four-consecutive days lower, Market concern of the Delta variant and Fed tapering timing persisted. All three major indexes ended down for the week, with the DJI index dropped the most. Refer to major indexes’ weekly performance table below.

Major events:

1.    Softening consumer demand impacted by the delta variant. Payroll gains dropped sharply in Aug seemed to linger around and exacerbate worries about the slowing down in economic rebound.

    2. Inflation worries. The producer prices reported on Friday rose 0.7% MoM, above consensus, indicating inflation comes in hotter than expected.

    3.  Biden’s stimulus plan faces new uncertainties as whether his plan can be passed in Senate.

All 11 SPX sectors ended in the red for the week with the small Real Estate(XLRE) led the declines as longer-term interest rates increased, while Consumer Discretionary(XLY) and Financials(XLF) held up best. Refer to SPX sector indexes weekly performance below.

Technically, the three major indexes' weekly charts remain in uptrend BUT they appear peaking and losing steam after running up without major pullback, the last time the SPX experienced a 5% or more pullback was about a year ago, in Sep 20, when stocks declined 9.6% from highs.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese stocks rose for the 3^rd straight week. The Shanghai Composite Index (SSE weekly chart) gained 3.4%. In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) gained 1.2%.

Strong trade data and an unexpected yet reportedly candid phone conversation between the U.S. and Chinese presidents lifted investor sentiment. China’s exports in August increased 25.6% over a year earlier, while imports climbed 33.1%, according to the country’s statistics office. China’s monthly trade surplus rose to USD 58.34 billion in August, up from July’s USD 56.58 billion.

Technically, SSE index rebounded back to its top level hit in Feb this year, with very bullish weekly candlestick. HSI index also closed on its 3^rd week up streak. Much weaker as compare to SSE index, as China’s crackdown on tech giants mainly listed in HK.

Singapore

STI index rebounded after about a month’s retracement and consolidation, led by the banks. Technically, watch out major support level at its 200dma level 3060 and horizontal support 3050( 3060-3050 support level) in short run.

STI weekly chart.

 

U.S Stocks Mixed, China to Launch a New Beijing Stock Exchange

Summary of content for the week of Sep 3:

1. Week 35 major indexes performance;

2. Week 35 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

4. Major indexes monthly performance for August

U.S

For the week ended Sep 3, U.S stocks headed into the long holiday weekend mixed, Nasdaq and SPX indexes notched yet another record high and the narrow blue-chips focused DJI closed with a modest loss. U.S financial markets will be closed on Monday for a Labour Day holiday. Refer to major indexes’ weekly performance table below.

For the month of August, Nasdaq Composite Index was the best performer with a 4% gain, while Singapore's STI lagged with a 3.5% down. Refer to below major indexes monthly performance table.

Major events:

1. Jobs growth slows in Aug. As reported on Friday, Aug nonfarm payroll grew by 235k, much below the forecast 750k. The impact of the delta variant of the coronavirus in the leisure and hospitality services sectors was clear. The bad news was largely taken as good news, as it seemed to make the Fed less likely to begin tapering asset purchases later this year.

2. Aug U.S services sector activities slowed but remained solidly in expansion territoty.

Among 11 major SPX sectors, Energy(XLE) and Financials(XLF) outperformed this week, while Utilities (XLU) lagged. Refer to SPX sector indexes weekly performance below.

Technically, the three major indexes' weekly charts remain in an uptrend.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese stocks rose for a second consecutive week. The Shanghai Composite Index (SSE weekly chart) gained 1.7%. In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) gained 2%.

1.    Chinese companies posted robust earnings for the June quarter, with a 36% annual increase in earnings per share, according to mainland broker CITIC. Upstream resources sectors saw the strongest earnings growth, followed by new energy vehicles and semiconductors. The consumer, pharmaceutical, and telecom sectors lagged. 

2.    On Thursday, President Xi Jinping announced the launch of a new stock exchange in Beijing. The new exchange is aimed at providing equity financing for small and mid-size enterprises and reflects China’s strong commitment to its capital markets. 

3.    The People’s Bank of China said that it would provide RMB 300 billion in low-cost funding to banks for lending to small and medium-sized enterprises (SMEs).

Technically, the SSE index was trading near its top since May 2021 after two weeks rebound. .HSI index appears much weaker, still within its three-week trading range after two consecutive weeks bounce, as investors are still wary of the top tech stocks crackdown impact, which believed has not ended yet.

Singapore

STI index ended flat after had falling for three weeks in a row, the index was the worst index performer in Aug, lost 3.5%. Technically, expected it will have its support at 200dma level 3050 for the near term.

STI weekly chart.