Although the Hang Seng Tech Index is near its one-year high of 5,386 (its close on Feb 7 was 5,150), it is way below the high of 10,945 attained in February 2021.
The Index’s short-term indicators are not far off the high end of their range. These short-term indicators could stay in overbought territory for a couple of weeks before a consolidation sets in.
The Lion-OCBC Securities HSTECH ETF mirrors the movement of the Hang Seng Tech Index. The ETF ended the week at 86.4 cents on Feb 7, short of the one-year closing high of 87.9 cents on Oct 7, 2024.
Short-term RSI of the daily chart is high but a negative divergence has not appeared yet. The immediate upside from the break above the twice tested 79 cents level is 90 cents.
The upside target coupled with the closing high of 87.9 cents is likely to provide resistance. As the HSTECH ETF reaches its upside, prices are likely to hover around the resistance before consolidating its gains.
In addition, Bloomberg has drawn attention to the Hang Seng Tech Index and this may fuel the speculation.
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“The Hang Seng Tech Index climbed 1.8% on Friday Feb 7, to take its gains from a January low to over 20%. Xiaomi Corp. and Alibaba Group Holding, which have the biggest weighting on the gauge, each rallied almost 30% during that period. Both are viewed as beneficiaries of AI advancement.
“Alibaba’s shares have also been buoyed by the company’s assessment that its new AI model scored better than Meta Platforms’ Llama and DeepSeek’s V3 in various tests,” Bloomberg says.
Usually, in a bull market, after the leaders (in this case HSTECH) have broken out and run up, laggards should start to move. The Lion-OCBC China Leaders ETF, which mirrors the moves of the largest 80 stocks on the Stock Connect, has not broken out and is at the top of a sideways range. Whether it breaks out remains to be seen. This ETF’s biggest drawback is its lack of liquidity and trading volume is very modest.
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Elsewhere, the Hang Seng Index (21,133) has broken out of the twice-tested resistance of 20,400 during the week of Feb 3-7. The immediate upside is at 21,800, which is likely to be attained before any consolidation sets in.
The Straits Times Index lost 24 points week-on-week to end at 3,861 on Feb 7. A breakout above the current trading range should materialise with the STI’s next upside at 4,100.
The trigger for the breakout is likely to be the 10-year US treasury yield. The 10-year yield has broken below a minor top and could trend to 4.29% from its current level of 4.48%.
