HK50 Index Sinks Lower Below 20200.00 Mark As Recession Fears Rattle Global Markets

• China's Main stock index declines below the 20200.00 mark as recession fears rattle global markets
• A new round of poor U.S. economic data signals the likelihood of a recession in the U.S., in turn, sees the HK50 index tumble on Friday
• Hong Kong and China-Listed Electric Carmakers Shares Tumble
• Growing fears of rising interest rates following sticky inflations abroad are set to continue to bode poorly for Asian markets

China's main stock index slid on Friday in what was its second-worst week in more than a month, as recession fears and slowing economic growth rattled stock markets around Wall Street on Friday. As per press time, Hong Kong's Hang Seng Index (HK50) slid over 0.11%/22 points to trade at 20250.1 during the mid-Asian session, a week in which China's main stock index is set to close in modest losses amid growing fears of rising interest rates, and investors decided to stay off risk-driven assets.

Today's southside move follows a gloomy day on Wall Street as a new round of poor U.S. economic data signalled a potentially greater-than-expected economic slowdown in the U.S. Additionally, growing fears that rising interest rates by the U.S. Central Bank will tip the U.S. into a recession also contributed to the negative sentiment on Wall Street. That said, the combination of negative factors saw the HK50 index shed over 0.55%/112.5 points to close at 20272.0 on Thursday. The Philadelphia Fed Manufacturing Index in the U.S. fell to -31.3 points in April 2023, the lowest since May 2020, from -23.2 in March. It marks an eighth consecutive negative reading, missing market expectations of -19.2. Indicators for activity remained negative, but less than last month, namely new orders (-22.7 vs -28.2) and shipments (-7.3 vs -25.4).

Elsewhere, the number of Americans filing for unemployment benefits rose by 5 thousand to 245 thousand on the week ending April 15th, the most in one month and above market expectations of 240 thousand. "The trend higher in jobless claims clearly shows a slowing in the labour market and plays to views of a U.S. recession in 2023," said National Australia Bank (OTC: NABZY's) head of market economics, Tapas Strickland. Additionally, the downbeat Philadelphia Fed Manufacturing Index, pointing to an economic slowdown, further exacerbates recession fear in the U.S. Further limiting the mainland index were the firm Japanese core inflation readings for March, which came in at 3.1%, unchanged from February, data from the Statistics Bureau showed on Friday.

That said, China's main stock index has taken little support from the People's Bank of China, keeping its benchmark lending rates at historic lows, even as the move points to more liquidity support for local stocks.

While data earlier this week showed that China's economy grew more than expected in the first quarter of 2023 (China's GDP rose to 4.5% in Q1 2023, up from 2.9% in Q4 2022), growth was primarily driven by a resurgence in consumption. The country's manufacturing sector, considered a bellwether for the economy, struggled to recover from a COVID-induced slowdown.

Hong Kong and China-Listed Electric Carmakers Shares Tumble

Hong Kong and China-listed stocks of electric carmakers also logged steep losses tracking Tesla Inc (NASDAQ: TSLA), which sank 6% after the close as the firm's quarterly profit margin missed expectations amid an escalating price war. Hong Kong shares of NIO Inc (H.K.: 9866) (NYSE: NIO), Li Auto Inc (H.K.: 2015) (NASDAQ: LI), and BYD Co Ltd (H.K.: 1211) lost between 1.2% and 5%, while Shenzhen-listed units of Contemporary Amperex Technology Co Ltd (S.Z.: 300750), a major battery supplier to Tesla, fell 2.5%. The main index, however, logged small gains on Friday from gains in the consumer discretionary sector led by LI Ning Co Ltd (Hong Kong: 2331), which rose 3.22%/1.85 points to trade at HK$59.25 per share. Additionally, gains from the industrial sector led by CK Hutchison (Hong Kong: 0001) added 2.06%/1.05 points to trade at HK$52.05 per share.

Going forward, growing fears of rising interest rates following sticky inflations abroad is set to continue to bode poorly for Asian markets, given that they diminish the returns from more risk-driven assets. Tighter monetary conditions also limit foreign capital flows into the region.

Technical Outlook: Four-Hours HK 50 Index Price Chart

From a technical standpoint, the price's ability to break below the key support level plotted by a horizontal trendline extending from the late-March 2023 swing low supported the case for a further downside move. Sellers have heeded the call to SHORT the index upon receiving confirmation of price acceptance below the 20-day and 50-day EMA levels at 20420.8 and 20538.7, respectively. Additionally, the RSI 14 move below the signal line into the bearish territory was a new trigger for sellers to push down the price.

A further increase in selling pressure from the current level will drag spot prices toward the next relevant support level at the 20141.4 level. A decisive flip of this support level into a resistance level will pave the way for a decline toward the 20011.4 support level.

On the flip side, attempted recovery back above the key resistance level breakpoint might confront stiff resistance at the 20-day and 50-day EMA crossover confluence level at the 20382.9 level. A convincing move above this barricade followed by a break above the horizontal trendline now turned resistance level (bullish price breakout) would pave the way for an ascend toward the next relevant resistance level at 20467.0 level. A decisive flip of this resistance level into a support level would pave the way for more gains for the spot index.