HSI and Yuan surge as China pledges policy adjustments

Hong Kong stocks are having a strong rebound today, concurrently with a surge in Chinese Yuan. These dynamic shifts come in the wake of a promise from China’s Politburo to “adjust and optimize policies in a timely manner” for its troubled property sector. The top decision-making body has also underscored its commitment to promoting stable employment as a strategic objective. Other pledges include efforts to stimulate consumer spending and manage debt risks, and an intention to implement “counter-cyclical” policy.

HSI opened with a substantial gap up and, at the time of writing, is trading over 3% higher. However, from a technical standpoint, HSI will need to convincingly overcome resistance level at 19523.71 and 55 D EMA to neutralize near-term bearish ness. Failing to do so, the decline from 22700.85 – whether it’s seen as a corrective move or part of a larger downtrend – is still expected to extend beyond 18044.85 low.

Meanwhile, USD/CNH is diving notably too. Market rumors suggest that major state-owned banks have been observed selling US Dollars to buy Yuan in both onshore and offshore spot markets to bolster Yuan exchange rate. On the whole, USD/CNH is seen as extending the corrective pattern from 7.2853 only. In case of deeper fall, strong support could emerge at around 38.2% retracement of 6.810 to 7.2853 at 7.1037 to bring rebound.