Lockdown Fears and Market Uncertainty Leave Equities Vulnerable

• The rise in cases in Beijing has sparked fears that the capital could face a Shanghai-style crisis, triggering a panic buying on Monday.
• Hence, lockdown fears combined with market uncertainty have been weighing on domestic risky assets.
• Hang Seng Index is down over 11% since its high reached in the beginning of the month, erasing 40% of its March gains (following the headline on ‘malicious short sellers in mid-March).
• The HSI index is currently testing its 19,865 support, which corresponds to the 61.8% Fibo retracement of the 18,235 – 22,500 range (March/April low high).
• A break below that level would open the door for a move down to 18,235.50, which was the low reached on March 15.
• The Chinese yuan has also been under the radar in the past week after USDCNY broke through some key technical levels; USDCNY broke above the 6.5125 level earlier and is approaching its ST key resistance at 6.5790 (March 30 2021 high).
  • A break above that level would open the door for a move up to 6.64 (38.2% Fibo retracement of the 6.307 – 7.1780 range).
• The recent WoW change is the biggest we have seen since the CNY ‘devaluation’ in August 2015, which triggered a market shock (SP500 was down 10% following the CNY move).

Source: Bloomberg/MNI