HKHSI and NASDAQ Downturn (5/5/2000)

Major Correction in the Horizon (4/15/2000)

Prof. Kai Keung Mark is a retired professor, Dept. of Biology, The Chinese University of Hong Kong and Dept. Head and Principal Lecturer, Dept. of Science, Hong Kong Institute of Education. He has three biotechnology patents. He uses his understanding of high technology to forecast market movements . He has published 13 articles in Financial Trend, and leading Hong Kong stock analysis journal plus many other Mark's letters since 1987. His prediction reliability rate reached 80%. He accurately predicted the October crash (10/18/87), the bottom level of 1990(3/5/90), the peak level of 1994 (5/11/92), the peak level of 1997 (2/12/96), the peak level of 2,000 (8/22/99), the peak in March 2000 (2/20/2000), the bottom in September, 2001, the US bottom in 2003 (5/28/2003), the HK bottom in 2003 (6/13/2003), the US peak in 2007 (11/14/2007), and the HK peak in 2007 (1/9/2008).

Bear finally reached Hong Kong

HSI appear to be stronger than DJIA, NASDAQ, NKY, UKX, DAX, and CAC in the past four months. So on Nov.22, 2007 and again on Dec. 3rd, 2007, the famous land developer, tycoon Lee made a very bullish forecast, saying that the recent fall of HSI has accounted for most of the bear elements, so HSI will rebound significantly, and HSI will reach 33,000 early next year. Therefore it ia time to buy. The author, on the other hand perceived totally different out look, a very bearish one, in comparison with tycoon Lee.

In the author's last article "International bear signs strong and clear" (Nov. 14, 2007), it is pointed out that no clear bear signal is observed for HSI, thus the author did not make any concrete remarks about the Hong Kong market, However, Hong Kong is an important financial center, so such a successful forecasting series is not complete without an article on HSI. Now the author has observed some more concrete bear signals in the Hong Kong market. His analysis is now outlined below.

• HSI now formed a down channel (see fig. 1) with peaks one lower than the previous one. It is this down channel that give signal to the author that BEAR has come to Hong Kong.
• When HSI rise from 20,000 to 32,000 pts during August-October, 2007, with a rise of 12,000 pts, the HSI formed a perfect up channel with 4 contact points with the upper return line, and 3 contact points with the lower support line, but this up channel has broken down side. This big up move also contain three subwaves ( 1, 2, 3 ).Such extensive up swing is common in the last bull swing, and also competable with the model movement of Elliott wave pathern (see fig. 1).
  
  
• The drop, after penetrating the long up swing down side, reached 26,000 pts, or a drop of 6,000 pts (1/2 of rise)(see fig. 1) which is more than the 1/3 of the rise of 12,000 pts normally expect for correction in bull market. However it is not a clear bear signal yet.
• HSBC is the leader of the conventional blue chips own by the rich, the funds and the informed. HSBC price movement produce two well seperated heads, the double head formation, and even worst is that the neck line was broken downside, so this double head formation was confirmed (see fig. 2).
  
  
• The international financial markets have showed strong and clear bear signals (Nov,14,2007). Since Hong Kong would be affected by international financial markets by both bull or bear moves in the past, so this time should also be affected. The Hong Kong bear signals observed mention above is what one expect, and can be considered as a confirmation of the bear move around the world. It also confirm that HSI usually turn behind DJIA (June 13, 2003) because HSI is a lagger.
• Hong Kong stock market is now significantly influenced by the Chinese markets, but Chinese markets are now reaching a vulnerable state. First, the Chinese market is rising too fast and too high in such a short time. For example, the Shanghai A index did drop from 2300 points (April 14, 2001; July 5, 2001; August 14, 2001) to 1,110 pts by mid 2005, but then suddenly turn and shoot up like a rocket, and reached 6,400 pts recently rising 5.8 folds. (see fig. 3) This is extremely extensive among most international financial markets, even for emerging markets, so it is expanding like a bubble. (Jan.4, 2007)

Fourth, the Chinese economy is now facing a fast rising inflation which is a serious issue, thus a forceful means must be taken to control it before it became out of hand. The Chinesee government now commited to tighten the money supply. There are only a few means to cool off the economy, but any one of them can easily triger the bursting of the stock market that is now in a big bubble.

Fifth, based on past experience, most stock market bubbles end up bursting with a bang. Japan and NASDAQ are recent examples.

Given these five reasons, one should understand why the author is worried about the potential fall of the Chinese market, and certainly will drag down the Hong Kong Market significantly.

In summary, the author have listed out many bear features related to the Hong Kong market, and thus feels that the bear has finally reached Hong Kong. The author anticipated that the bear will hit in 2008, and HSI may drop to as low as 22,000 pts, so very bearish among most HK stock market forecasters.