On July 10th, the Hong Kong stock market rose and then fell again with slight drop during the day. However, it still cannot get rid of the running mode of repeated downturns, so it is important to pay attention to the possibility of further decline in the short-term market. The Hang Seng Index fell more than 50 points and closed below 17500 points, the first time since April 25th, while the trading volume of the entire market rose above 100 billion yuan, but still lower than the daily average of 109.7 billion yuan this year. The market liquidity has not yet shown signs of improvement. In terms of trends, the Hang Seng Index is still constrained by the previous wave peak of 18133 points or less, and the pattern of the development of one wave lower than another wave cannot be changed. It is estimated that there will still be opportunities for repeated downturns in the future. In terms of news, China announced that in June, the Consumer Price Index (CPI) for residents increased by 0.2% year-on-year. Although it has risen for the fifth consecutive month, the increase rate decreased by 0.1 percentage points from last month, showing that the economy is still in a state of strong supply and weak demand. The market generally expects that the People's Bank of China will have the opportunity to lower reserve requirements and interest rates in the second half of the year. On the other hand, Federal Reserve Chairman Powell stated at a congressional hearing that it is unlikely to cut interest rates at the interest rate meeting at the end of July, but reiterated that the next step is unlikely to be a rate hike. Powell also pointed out that cutting interest rates too late or too small will pose risks to the economy and labor market.

The Hong Kong stock market showed a pulse of rising and then falling. At the beginning of the trading day, it rose to a high of 17766 points, up 243 points. Then it followed the decline of A shares, and China Shenhua Energy (01088), which is expected to reduce its mid-term profits, led the decline, and it is estimated that it is another reason for the weakening of market support. The performance of index heavyweights continues to be differentiated. Among them, the market estimates that the Wuhan self-driving car calling service business under Baidu-SW (09888) can achieve revenue balance at the end of the year. The news stimulated Baidu's stock price to rebound significantly, rising 10.13%, which is the stock with the largest increase among the constituent stocks of the Hang Seng Index. On the other hand, Tencent (00700), another heavyweight stock, fell 0.89% to close at 377.6 yuan. The shorts accumulated in recent days have not yet subsided, and there were more than 1.5 billion yuan of short selling on Wednesday, so the stock price should rise above 387 yuan as soon as possible to force the shorts out, otherwise we should be cautious that the shorts still have the opportunity to strike at any time.

The Hang Seng Index closed at 17472 points, down 52 points or 0.29%. The Hushen 300 Index closed at 6251 points, down 24 points or 0.39%. The Hang Seng Technology Index closed at 3600 points, down slightly by 0.01%. In addition, the trading volume of the Hong Kong main board rose to more than 102.3 billion yuan, while the short selling amount was 19.1 billion yuan, and the short selling ratio further increased to 18.67%, which is still relatively high. As for the ratio of rising and falling stocks, it was 605:930, with 33 stocks rising by more than 10% during the day and 39 stocks dropping by more than 10%. The Hong Kong Stock Connect saw a net inflow for the eleventh consecutive day, with a net inflow of more than 0.8 billion yuan on Wednesday.

Author: Ye Shangzhi, Chief Strategist of First Shanghai