The Hang Seng Index appears poised for a breakout. Attempts by the China Securities Regulatory Commission and the People's Bank of China to revive the Chinese market may be paying dividends. The Hang Seng Index is in the process of challenging the twice-tested resistance level of 20,400. A breakout would indicate an upside of 21,800. The Hang Seng Index ended at 20,225 on Jan 31.
Although the Hang Seng Index remained within its sideways range, the Lion-OCBC Securities HS Tech ETF (HSTECH) which mirrors the movement of the mainland-heavy Hang Seng Tech Index has broken out of its resistance at the 78.8 cents to 79 cents range, accompanied by a notable expansion in volume, a sign that buying demand has materialised. While the breakout indicates an upside, the immediate resistance is at the closing high of 88.7 cents on Oct 7, 2024. The intra-day high on Oct 8, 2024 was 88.9 cents.
Chart Credit Maybank
For investors or traders who missed out on HSTECH, the Lion-OCBC Securities China Leaders ETF is at the top of a trading range. This ETF mirrors the movement of the 80 largest stocks on the Stock Connect. The ETF is not as liquid as HSTECH which is the most liquid ETF traded on the SGX as evidenced by its average daily volume. Unlike HSTECH, the China Leaders ETF needs more buying demand in terms of volume to stage a breakout. The breakout level is at the thrice tested $1.739. The closing high in October last year was $1.92 and the intra-day high In Oct last year was $1.945.
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Chart Credit Maybank
In the meantime, our Straits Times Index which closed at 3,885 on Jan 31, is challenging a twice-tested resistance at current levels. Unlike HSTECH, volume has not expanded sufficiently for a breakout.
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On the other hand, the 10-year US treasury yield has retreated and may ease a trifle more. This could provide the trigger needed for the STI to break out. A successful breakout would take the STI to a short-term upside of 4,100. Although 4,000 provides a psychological resistance, moving above this level is not impossible.
