Inverting Hong Kong Yields Signal More Hang Seng Pain: Jefferies

With the U.S. yield curve coming close to inverting, so is Hong Kong’s thanks to its currency peg to the dollar. That signals more downside for the benchmark Hang Seng Index, which fell into a bear market this month, according to Jefferies strategists.

“While a Hong Kong inverted yield curve is not unheard of, it has generally preceded Hang Seng Index market peaks,” analysts led by Sean Darby, chief global equity strategist at the brokerage, wrote in a Sept. 17 note. “The Hong Kong equity market is facing higher domestic real rates, an inverting yield curve and ongoing contraction in the Hong Kong aggregate balance. We remain modestly bearish.”