Still expect short-term correction, but need to position for possible multi-year uptrend in the Chinese market

HSI and HSCEI both severely overbought

9-week RSI >70, 9-day RSI >80

But peaking is usually a process (instead of a particular price level), so we don’t need to be all out. Gradual reduction of holdings is still the best choice.

Multi-year uptrend in the Chinese market possible

Recent divergently strong performance of Hong Kong stock markets (v.s. weak U.S. and Chinese stock markets) may be because international institutional funds building position for Chinese economy recovery. As retail investors played a dominant role (~70%) in the A-share markets and the A-share markets have performed poorly in the past 3 years, it is understandable for A-share markets to take longer time to form a solid bottom.

HSI monthly MACD (which is a very good long-term indicator) will likely turn positive this month. We need to re-think the chance of Chinese markets hitting a multi-year bottom, especially as Chinese economic growth has likely hit the bottom after 7 quarters of slowing down and A-share markets suffering for 3 years already.

Strategy: Slightly adjust target holding level:

10-20% broad market (as correction seems <5%)

30-50% individual strong stocks

10-20% stable / high-yield stocks