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Risk Warning on Trading HK Stocks
Despite Hong Kong's robust legal and regulatory framework, its stock market still faces unique risks and challenges, such as currency fluctuations due to the Hong Kong dollar's peg to the US dollar and the impact of mainland China's policy changes and economic conditions on Hong Kong stocks.
HK Stock Trading Fees and Taxation
Trading costs in the Hong Kong stock market include transaction fees, stamp duty, settlement charges, and currency conversion fees for foreign investors. Additionally, taxes may apply based on local regulations.
HK Non-Essential Consumer Goods Industry
The Hong Kong stock market encompasses non-essential consumption sectors like automotive, education, tourism, catering, and apparel. Of the 643 listed companies, 35% are mainland Chinese, making up 65% of the total market capitalization. Thus, it's heavily influenced by the Chinese economy.
HK Real Estate Industry
In recent years, the real estate and construction sector's share in the Hong Kong stock index has notably decreased. Nevertheless, as of 2022, it retains around 10% market share, covering real estate development, construction engineering, investment, and property management.
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Market Gives Mixed Signals
Summary:
Underperforming economic indicators in the UK have increased the likelihood of the Bank of England accelerating its interest rate cuts, thereby stimulating economic activity and subsequently bolstering the GBPUSD.
Trading
1.33704
ENTRY
1.36500
TGT
1.32000
SL
1.33011 +0.00560 +0.42%
0
Point
Flat
1.32000
SL
CLOSING
1.33704
ENTRY
1.36500
TGT
Fundamentals
Ahead of monetary policy announcements from the Federal Reserve and the Bank of England (BOE), the British pound outperformed the U.S. dollar.
The final UK Services PMI for April registered at 49.0, a decrease from March's 52.5, marking the lowest level since January 2023. The Composite PMI also contracted to 48.5, entering negative territory for the first time in 18 months.
According to Tim Moore, Economics Director at S&P Global Market Intelligence, heightened business uncertainty significantly hampered economic activity. Export performance was the weakest since early 2021. Rising wage costs, linked to increases in National Insurance and the National Living Wage, drove input costs to their highest level since mid-2023. Service providers responded by implementing the most substantial price increases in nearly two years.
Business confidence declined substantially, attributed to "service sector firms preparing for prolonged global economic volatility and escalating recession risks". 22% of companies anticipate a downturn in economic activity over the next 12 months, a figure more than triple the levels observed following the 2024 general election.
MARKET WATCH: It is anticipated that the BOE will reduce the base rate to 4.25% at Thursday's meeting, supported by an 8-1 vote, aligning with market expectations and consensus. This suggests a lowered threshold for consecutive rate cuts.
We anticipate adherence to formal guidance, reiterating that "a gradual and cautious unwinding of monetary policy accommodation remains appropriate." Removing the term "gradual" from the guidance would signal the Monetary Policy Committee's consideration of successive rate cuts.
Given the downward surprise in inflation and sustained declines in energy prices since the February meeting, inflation forecasts are likely to be revised downward, despite conditional market-implied rate paths being significantly below February's projections. Wage growth has also slightly underperformed, with private sector regular pay growth at 5.9% (versus the BOE's Q1 forecast of 6.2%).
Economic growth has slightly exceeded expectations, with retail sales indicating improved private consumption, although tariff impacts pose a downside risk. We believe the former will elevate 2025 forecasts, while the latter will be reflected in a downward revision of 2026 GDP projections.
Technical Analysis
The GBPUSD showed positive intraday performance, yet remained range-bound below 1.3442, maintaining a neutral bias.
On the downside, a breach of the 1.3232 support level would signal a short-term top, potentially facing resistance at the critical 1.3433 level. A further retracement to the 55-day SMA, currently at 1.3030, or a break below this level, would shift the intraday trend to bearish.
On the upside, a breakout above the key 1.3433 resistance would confirm a resumption of a broader upward trend.
Trading Recommendations
Trading Direction: Buy
Entry Price: 1.3340
Target Price: 1.3650
Stop Loss: 1.3200
Valid Until: May 21, 2025 23:55:00
Support: 1.3339, 1.3246, 1.3204
Resistance: 1.3425, 1.3443, 1.3512
Risk Warnings and Investment Disclaimers
You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or strategy, or any other product is suitable for you based on your investment objectives and financial situation.
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