Place Your Bets

The casinos in Macau may be suffering of late, but they are alive and well in mainland China and in Hong Kong, albeit that for the latter two it’s their respective stock-markets as opposed to the slots and tables. Increased volatility was evident once again last week as China’s main stock-index, the Shanghai Composite, fell by 5.4% during Thursday’s session, before rallying to end the day with a 0.8% gain, the third of similar moves within the past few weeks. The volatility swings over the past 10 days are larger than all of the 70 other benchmark stock indices tracked by Bloomberg. Since the exchange link with Hong Kong commenced seven months ago, trading by Chinese investors have fuelled some of the biggest swings witnessed on Hong Kong’s exchange, the HSI, including the recent “soar and crash” examples of Hanergy Thin Film Power Group Ltd, whose share price saw a 1-day collapse of 47%, whilst Goldin Financial Holdings Ltd and Goldin Properties Holdings Ltd took a 67% haircut over a two-day period. Events such as this damage investor confidence and perhaps the mid-April warning within our “Twin Peaks” post is now transpiring.

10 June 15 Blog 1.

Finally, we are interested to note the ongoing fall of retail sales within Hong Kong, despite the booming stock-market index, as represented by the HSI. Historically stock performance and retail sales have shown a close correlation, as can be seen above, but no longer as can be observed.

Either sales are about to jump OR the HSI is about to follow retail sales lower. It’s time to place your bets!

 

 

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