Why the Hang Seng Index is off to a tepid start this week

“China ramped up its efforts to prop the uneven economic recovery a month ago, with massive monetary measures that sparked optimism and propelled HKG33 to a 2+ year peak” writes Nikos Tzabouras

“However, these measures don’t address the structural problems of the Chinese economy, while more action is needed on the fiscal front and more forceful measures to support the consumption.

“Authorities failed to follow through last week, fuelling scepticism and HKG33 reversed course with the worst week of the year. The Finance Minister announced wide-ranging fiscal plans over the weekend, but the lack of price-tag and timeframe sustain market caution, exacerbated by the softer than expected inflation report.

“As result, HKG33 makes a tepid start to the week and there is risk for deeper correction towards the EMA200. Daily closes below it would negate the bullish bias, but strong catalyst would be needed for that.

“Despite the lack of details, the latest announcement represents conviction for fiscal stimulus to compliment the monetary support and further measures could still follow. HKG333 tries to stabilize above the EMA200 and has not lost the opportunity to push for higher highs toward 25,246.”

Nikos Tzabouras is Senior Financial Editorial Writer at Tradu