INVESTMENT DAILY

The Hang Seng Index is expected to trade at 27,400 to 27,800today

    Hong Kong market further dropped on Wednesday, HSI opened lower by 57 pointsand soon rebounded followed increase of A share market. HSI once gained 299 pointat most, however, it headed south in the afternoon to close at 27,641, down 115points. HSCEI also dropped 80 points to close at 13,997. Market turnover contractedto HK$161bn. Railway sector further dropped. The market was morevolatilecurrently after a sharp surge.

    Thanks to merger and acquisition news on pharmaceutical sector, US stock marketopened higher with the Dow once rose 92 points. However, US private sector newjobs growth slowed down in April, together with Fed chairman Yellen warnings thatstock market value is quite high, US stock market fell sharply afterward. The Dowonce dropped near 200 points and closed 86 points lower (at 17,842) while theNasdaq closed 20 points lower at (4,920). Funds continued to switch away frombond market with US 10 year Treasury Yield rose 6 basis point to 2.24%.

    Given the weak A share market, HK stock also performed weak while individualstock selling pressure is high. However, as China monetary policy is likely to beloosen, we expect Hang Seng Index to see strong support at 27,000.

    Technical Analysis

    Hang Seng Index closed with inversed hammer on Wednesday. Technically, marketdropped below 20DMA (27,737), couple with MACD bearish gap expanded,showing that momentum turning weak. Hang Seng index first support would be27,000, while next support would be gap level of 26,732. For resistance, 10DMA(28,075) would become the first resistance, while next resistance would be seen atApril’s high of 28,589.