Since our last publication, the Hang Seng Index has declined by 18% and hit 19,700 medium-term support as expected (printed an intraday low of 19,260 on 9 April), reinforced by the uncertainties of the US White House Administration’s ratcheting reciprocal tariffs on Chinese imports.
Thereafter, US President Trump has watered down his hard-line approach towards US-China trade relations by slashing US duties on Chinese imports to 30% from 145% for 90 days after the conclusion of the first round of US-China trade negotiation talks held in Switzerland over the weekend of 10 May.
The financial markets have coined the latest theme, the “TACO” trade, in the short form for “Trump Always Chickens Out”. It means that Trump has the usual repeating habit of announcing bold tariffs, then retreating after a significant “risk-off” backlash ignited by the markets.
Overall, the Hong Kong 33 CFD Index (a proxy of the Hang Seng Index futures) has gained by 27% from its 9 April low of 19,070 to today’s 9 June intraday level of 24,175 at this time of the writing.
Part of this two-month rally was a swift 7% up move from last Monday, 2 June, to today, where the Hong Kong 33 has had four consecutive days of higher closing levels supported by US President Trump one to one phone call with China President Xi on last Thursday, 5 June that led to the second round of US-China trade negotiation talks to conducted in London today, 9 June.
Other than the “TACO” theme play, there are macro and momentum factors that are supporting the start of a new medium-term uptrend phase for the Hong Kong 33 CFD Index.
