The Hang Seng Index is expected to breach the 20,000 level, posing a challenge

Last Friday, which was the futures settlement day, the Hang Seng Index (HSI) opened low and then rose throughout the day. It reached a level of 19,900 in the afternoon before entering a sideways trend. The HSI had a daily fluctuation of 558.69 points with a trading volume of 1377.28 billion yuan. The HSI, the Hang Seng China Enterprises Index (HSCEI), and the Hang Seng Technology Index (HSTECH) rose by 1.41%, 2.07%, and 2.89% respectively.

The HSI closed with a large bullish candle, reaching a high of 19,940.59 points, the highest level since June 20th. Considering the trend of the previous trading day, it formed a bullish pattern known as "breaking through resistance." It also broke through the upper boundary of the Bollinger Bands, indicating it is oversold. The MACD histogram expanded, indicating a positive trend. Throughout the day, there were 1,075 advancing stocks and 610 declining stocks, showing a generally favorable market condition.

Evergrande Auto (0708) resumed trading after a suspension of nearly 16 months, with its stock price dropping by 61.25% to close at 1.24 yuan. The trading volume amounted to 626 million yuan, marking the largest decline of the day.

The settlement meeting for July futures was evaluated at 19,782. The total number of open contracts for August was 114,314, with a net open interest of 28,447. The net open interest accounted for 24.8% of the total open interest, lower than the previous month, indicating a flat performance expected in August.

In June, the monthly increase in the Personal Consumption Expenditures (PCE) price index in the United States expanded to 0.2%, while the annual increase slowed to 3%. The core index, which excludes food and energy, saw a monthly slowdown to 0.2%, in line with market expectations, and an annual slowdown to 4.1%, slightly below market expectations. The data reflects signs of inflation slowing down in the United States, and investors anticipate the Federal Reserve potentially slowing the pace of interest rate hikes. This has resulted in positive performance for the three major US stock indices.

The overnight futures and ADRs are rising, indicating a potential higher opening for the Hang Seng Index, with resistance levels at 20,000/20,150.

On the other hand, Mainland China is set to release its official manufacturing PMI for July at 9:45 am, with a forecasted value of 49.2, compared to 49 last month. This data is expected to add uncertainty to the market situation.

China Overseas Grand Oceans Group (0081) primarily engages in property investment and development, property leasing, and investment holding.

The group recently announced that its affiliated companies achieved contracted sales of RMB 4.662 billion and a contracted sales area of 368,500 square meters in June 2023, representing a year-on-year decline of 8.1% and 20.3%, respectively. From January to June 2023, cumulative contracted sales amounted to RMB 25.94 billion, with a contracted sales area of 2.1452 million square meters, indicating a year-on-year increase of 24.6% and 7.7%, respectively. As of the end of June 2023, the cumulative amount of subscribed but not yet signed contracts reached RMB 807 million, with a subscribed but not yet signed area of 60,800 square meters.

In June 2023, the group added one new project in Hefei City, Anhui Province, with a total floor area of 184,500 square meters and a total land price of 2.037 billion yuan. From January 1 to June 30, 2023, the group accumulated a total floor area of 471,100 square meters and a total land price of 3.546 billion yuan.

On the other hand, the meeting of the Political Bureau of the Communist Party of China Central Committee proposed to "timely adjust and optimize real estate policies" and to "elevate stable employment to a strategic level and consider it comprehensively." The meeting also mentioned the prevention and resolution of local debt risks and expressed the need to "activate the capital market and boost investor confidence." As the meeting did not mention "no speculation in housing," there may be a change in policy direction, which is expected to benefit the development of the domestic real estate sector.

The group's stock price has recently improved, and there are signals in the financial technology system. The group's valuation is relatively low compared to its peers and deserves attention. If valued at a P/E ratio of 4.5, the target price would be 4.75 yuan.

The author is a licensed individual of the Hong Kong Securities and Futures Commission and does not hold the aforementioned shares. The above article represents personal opinions.