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META DATA ANALYSIS
Interest rate ‘Netflix drama’ continues and signs of recovery in HKD equities

Interest rate ‘Netflix drama’ continues and signs of recovery in HKD equities

In our update on 22 August we’d seen an alignment in the actions of both Interest Rate Swap Traders and Bond Traders. These actions were in line with the general expectation that talks about tapering will be confirmed during the anticipated Jackson Hole Summit.

Last Updated: ‎‎‎‎‏‏‎ ‎
November 17, 2021

This week’s update is co-authored with Zhang Zhenyi (BPO Manager, Senior Data Analyst)

New episode in the Interest Rates drama

In our update on 22 August we’d seen an alignment in the actions of both Interest Rate Swap Traders and Bond Traders. These actions were in line with the general expectation that talks about tapering will be confirmed during the anticipated Jackson Hole Summit.

Well, the summit happened. Fed Chair Jerome Powell’s speech at the summit hinted that while tapering plans are in discussion, interest rate hikes won’t come as soon as we think. Interest rates initially went lower immediately following the summit. However, they have since nicely recovered last week and are now going up nicely.

While interest rate traders may have been fickle minded, Bond traders have been resolute. We are in our 10th week of continuous bond selling.

Fibonacci Level held strong on interest rates

As we watch closely on the impact of the Jackson Hole Summit on the current 5-year rate, it was observed that the 38.2% line in the Fibonacci Retracement Levels continues to hold as a strong support level. The market made an attempt to bring interest rates below this level, but did not succeed.

Summer Break continues

Traders tend to take a summer break every year and this year was no different. As expected, our data shows the summer slowdown persisting last week, as market activity continues to fall. Weekly trading volume has hit a new low of the year as shown in the chart below.

Sharp signs of activity in HKD equities

Nevertheless, activity in China-related equities remained unaffected by the summer break. In fact, we observed some interesting activities in the HKD-Denominated equities as Beijing attempts to ease panic about its big-tech crackdown.

After weeks of heavy sell-off, there is a sharp sign of a pullback and reversal last week, largely attributed to the Communications sector. The chart below shows the result the two weeks of Communication stock selling we saw is over for now. Technology stocks continue to be sold, although in a lesser amount.

Conclusion (tl;dr)

  • Bond sell off rally continues as interest rates rise
  • Overall trading volume hits new-low
  • China-related equities show signs of recovery

Please note that this newsletter is just a data analysis of actual investor behaviour and does not constitute investment advice in any form.