• HSF declined 1.7% in Oct after a splendid 3Q16: Hang Seng futures (HSF) ended 29 pts or 0.1% higher at 22,908 on 31 Oct after fluctuated wildly within 23,054 (+175 pts) and 22,707 (-172) intraday. The wild swings were triggered by (i) mainland flows into the city through an exchange link with Shanghai dried up; (ii) investors boosted bets on higher U.S. borrowing costs ; and (iii) renewed slide in Yuan. Chinese developers were among the biggest losers as cities rolled out rules to cool property price gains after warnings from China’s top policymakers about asset bubbles in China and uncertainties around the U.S. presidential election amid FBI’s probe on Clinton’s email saga resurfaced last Friday.
• Investors' risk appetite is also being curbed by a near 5% slump in Hang Seng index heavyweight AIA Group. The world's third-largest life insurer by market value hit a 3-1/2-month low after China's card company UnionPay said it would tighten rules over how mainland customers use its debit and credit cards to purchase Hong Kong insurance products. Despite the marginal gain, HSF dropped 1.7% in Oct on profit taking pullback after surging 11.3% in 3Q16.
•  Critical support trendline near 22,200 to prevent further slide below 21000. In the near term, the strong rally since February is losing steam as HSF is expected to extend its profit taking consolidation in Nov after enjoying a 11.3% rally in 3Q16. Key short term supports are situated at 22,500-22,800 with critical support trendline near 22,200. Failure to defend 22,200 will witness further correction towards 22,500-22,800 zones.
• On the flip side, a strong close above 23,000 psychological barrier will spur HSF higher towards 23,400-23,600 territory.

Source: Hong Leong Investment Bank Research - 1 Nov 2016