The Hang Seng Index shows signs of dawn, but there is a bearish divergence with the MACD

Mainland China's CPI in July fell by 0.3% on a yearly basis, slightly better than the market expectation of a 0.4% decline. The decrease was primarily driven by a 1.7% drop in food prices, while non-food prices remained steady. On the other hand, the PPI in July declined by 4.4% year-on-year, marking its tenth consecutive monthly drop and falling below the market expectation of a 4% decline. On a monthly basis, it decreased by 0.2%. These figures indicate increasing deflationary pressure in the mainland.

The Hang Seng Index (HSI) opened lower on Wednesday but rebounded after reaching a low of 19,056.1 points. It climbed to 19,270.48 points by 11:01 before retracing. The index dipped to the 19,100 level in the afternoon and saw a slight recovery towards the end of the trading day, but it failed to challenge the morning high. The overall volatility for the day was 214.38 points with a total turnover of 85.039 billion yuan. The HSI and the H-share index rose by 0.32% and 0.39%, respectively, while the Hang Seng Tech Index (HSTECH) fell by 0.01%.

The Hang Seng Index fell to its lowest level since July 25th and partially filled the upward gap that occurred on that day. The index closed with a bullish candle, which, when combined with the trend from the previous trading day, forms a positive "dawn" pattern. The MACD bearish divergence widened, diverging from the index. There were 850 advancing stocks and 750 declining stocks throughout the day, indicating a preference for the overall trend.

Investors are awaiting the release of July inflation data in the United States on Thursday night (Hong Kong time), which may have a softening effect on the three major US stock indices.

After the U.S. stock market's closing, President Biden signed an executive order strictly prohibiting U.S. funds from investing in China's sensitive technologies and requiring notification to the U.S. government for other technology investments. This executive order authorizes the U.S. Treasury Secretary to prohibit or restrict U.S. investment in three areas in China: semiconductors and microelectronics, quantum information technology, and certain artificial intelligence systems. U.S. officials stated that the U.S. government will engage in multiple rounds of public consultations regarding the scope of the restrictions, and it is anticipated that the related limitations will be implemented next year, emphasizing that the new restrictions will only affect future investments.

The above news is expected to weigh on Hong Kong-listed Chinese technology stocks, as it involves several heavyweight stocks, which is also expected to be unfavorable for the stock market performance.

With overnight futures and American Depository Receipts (ADR) declining, the Hang Seng Index (HSI) is anticipated to open lower, with a subdued trend. Support levels to consider are 19000/18900.

China Gas (0384) primarily engages in investing, constructing, and operating urban and rural gas pipeline infrastructure, gas terminals, storage facilities, and gas logistics systems in China. It delivers natural gas and liquefied petroleum gas to residential and commercial users, constructs and operates compressed natural gas/liquefied natural gas refueling stations, and develops and applies technologies related to natural gas and liquefied petroleum gas.

For the fiscal year ending March 2023, the group's revenue amounted to HKD 91.988 billion, representing a year-on-year increase of 4.3%. Gross profit was HKD 12.035 billion, showing a year-on-year decrease of 23.5%, with an overall gross profit margin of 13.1%, lower than the corresponding period last year at 17.8%. Shareholders' net profit was HKD 4.293 billion, reflecting a decrease of 44.0% compared to the previous year.

However, according to media reports, recently several towns in Inner Mongolia, Hebei, Hunan, Anhui, Hubei, Shandong, and other regions have raised the retail price of natural gas for residential users. Among them, Jinan increased the price of residential piped natural gas by 0.2 yuan per cubic meter starting from September 1st. A major bank pointed out that the main obstacles to urban gas operations in 2022, such as economic slowdown, significant upstream cost increases, and real estate slowdown, are expected to gradually improve in 2023. It is predicted that the urban gas sector may experience an upward cycle in 2023, potentially benefiting group businesses.

The group's stock price has recently shown improvement, and there are signals of emergence in the financial technology system. The group's valuation is at the industry average level, worth paying attention to. If valued at a P/E ratio of 12, the target price would be 9.56 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.