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Chart of the Day: HK50

Investors from mainland China are expecting an eventual recovery in Hong Kong’s equities market, as billions of dollars flow into the local stock market via the Shanghai-Hong Kong Stock Connect.

Hong Kong stocks have underperformed mainland stocks this year due to the unrest, and investors from the mainland are seeing the cheap prices as an opportunity to purchase shares at a discount. Interestingly, more than half the stocks listed in Hong Kong are mainland companies.

The Hang Seng Index (HK50) gapped up on the open yesterday after bouncing off trend support at 26200 last week and strengthened further as pro-democracy candidates swept an 85% election win. The index closed up 1.5% on the day. Could this be the platform for the HK50 to rebound from this year’s setbacks?

HK50 daily chart

Keep in mind that newsflow is still far from positive. Tensions remain high. Whether or not this changes city chief executive Carrie Lam’s - and Beijing’s - stance will steer the HK50’s fate.

The election is the first opportunity for Hongkongers to vote after a string of increasingly violent protests since March. Voting unfolded peacefully despite concerns that violence could delay proceedings, with pro-democracy candidates winning a district council majority.

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