Hong Kong stocks gapped sharply lower today and stays pressured, after US President Donald Trump stepped up his criticism on China’s handling of the coronavirus outbreak. He said the government was putting together a report that will be “very conclusive”. “My opinion is they made a mistake. They tried to cover it, they tried to put it out,” he said.
Trump’s comments came hours after Secretary of State Mike Pompeo told ABC, “I can tell you that there is a significant amount of evidence that this came from that laboratory in Wuhan.” A focus will turn to White House deputy national security adviser Matt Pottinger’s speech today, on US relationship with China. Part of the remarks will be delivered in Mandrin, which could carries some direct message to China.
As for US retaliations, an immediate focus would be on whether Trump would use executive order to block a government retirement fund to move some investments to Chinese equities. The so called Thrift Savings Plan, the federal government’s retirement fund, is set to transfer around USD 50B to mirror the MSCI All Country World Index, which includes China. The scheduled move would be carried out by mid-2020. Next would be new tariffs on Chinese goods as Trump indicated.
Hong Kong HSI is currently down -947 pts or -3.84% at the time of writing. Rejection by 55 day EMA suggests that rebound from 21139.26 might have completed at 24855.47 already. Focus will be on 23483.31 support. Break will confirm this view and bring retest of 21139.26 low.