The Hang Seng China Enterprises Index may fall 12 percent, doubling its two-week retreat, after the measure slid below its average close of the past 200 days, according to Oscar Gruss & Son Inc.
The HSCEI Index, which tracks so-called H shares of Hong Kong-listed Chinese companies, tumbled 3.8 percent yesterday to 11,410.12 on concern that China’s move to rein in credit and avert bubbles in the property market will slow economic growth. That dragged the index below its 200-day moving average for the first time since April.
The index may now plunge to as low as 10,000, a 12 percent drop, according to Michael Shaoul, the chief executive officer at the New York-based brokerage. It has already fallen 12 percent in the two weeks since China’s central bank ordered lenders to raise the ratio of deposits they hold in reserve, limiting the cash available for loans.
The market’s drop “has now developed into straightforward liquidation that looks set to continue,” Shaoul wrote in a note to clients. “Many participants will want to lighten holdings in advance of the multi-day closure of local markets” for the Chinese New Year on Feb. 14, he wrote.
The index will probably decline to between 10,404, the 38.2 percent Fibonacci retracement level for its 176 percent rally from October 2008 to November 2009, and 10,000, Shaoul wrote. Its drop would drag down Hong Kong’s Hang Seng Index and stocks in China, he said. Brazil’s Bovespa stock index, trading 13 percent above its 200-day average, may fall toward the indicator, Shaoul said. China is the biggest buyer of Brazil’s exports.