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), and the bottom in September, 2001.

In mark6.htm, I predicted that DJIA will break the diamond formation through my gut feeling, and now it is confirmed to be correct. As the title “Time to Buy” implies that good days are ahead, but I also predicted that one should buy when the HSI drop below 17,000.  HSI did drop below 17,000 slightly twice in separate occasions, implying that the penetration of 17,000 is good buying opportunity.  This time, I analyze the fundamental side for you.

1. Both the US DJIA and NASDAQ break upside on the chart formation implying that the US market will go up. This will certainly exert pressure on Hong Kong market to go up in mid-term.
2. The property market in Hong Kong has finally turn around after a long and severe recession.  Both the first and second liners in property sector have moved up, but there will be a long way to go.  As property sector is the core of Hong Kong stock market, the recovery of the property market may provide a big boost.  In the early part of 1999-2000 stock boom exist when the property market stayed stagnant for a long time.
3. The entry of China in WTO will certainly increase business activity in Hong Kong because Hong Kong is the gateway to China. Increased business in Hong Kong will lead to another stock market boom.
4. Hong Kong is now experiencing a very high growth rate in both import and export.  Consumer confidence increases slowly and unemployment rate drops slowly giving a clear signal of economic recovery. The bank sector is particularly demonstrating a big come back.
5. Stock market in the neighboring region, viz. China, Japan, S., Korea, and Asean countries all are in the growth phase in their business cycle.  This give Hong Kong a very encouraging economic environment because economic units interacting extensively.
6. From the fast recovery of the Hong Kong stock market during June-August, 2000, the decline during April to June was only a major correction, and not a bear market.
7. After the rosy fundamental review, let us go back to the technical side on the short-term outlook. The two peaks around 17,800 and a low around 16,900 formed during late July and August produce a down moving channel.  Although there is a strong support around 17,000, my guess is that the market have to penetrate 17,000 downward to exhaust its selling pressure, and acquire enough upward momentum to break the upside of the small/short channel so created.  Again, below 17,000 is a good time to buy.