The economy of China is hit by the decision to liquidate the developer Evergrande due to a debt of USD 300 billion. Bloomberg writes that this will have huge consequences for all of China.
While the S&P 500 index rose by more than 3% since the beginning of January, the Hang Seng index fell by more than 8%. JPMorgan and HSBC point to local government debt, non-performing bank loans and negative sentiment in the private sector.
The weekly chart of the stock index Hang Seng (HSI) shows that:
→ The price is in a downward trend, which is shown by the black line.
→ The price dropped close to the 2022 minimum.
→ The RSI indicator is located near the oversold zone.
What is important: the price is near the lower border of the long-term channel (shown by orange lines), from which support can be expected.
Expectations of investors to lower the interest rate from the Fed may increase the appetite for risky assets, which features Chinese stocks.
As Reuters writes, Goldman Sachs noted in its note to clients that hedge funds are actively buying Chinese shares – for the period from January 23 to 25, there was the largest capital inflow in the last 5 years. Perhaps the managers of hedge funds believe that the plans of the Chinese authorities to stimulate the economy for more than $280 billion will become a reality, and the price of the Hang Seng index will make a jump from the lower border of the long-term channel, breaking the black line of the downward trend.
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