Hang Seng Forecast as Evergrande and Kaisa Crisis Mounts

Summary:
• The Hang Seng index crawled back even as concerns of Evergrande and Kaisa continues. The index is also rising

The Hang Seng index crawled back even as concerns of Evergrande and Kaisa continues. The index is also rising as technology companies continue to struggle. It is trading at H$24,000, which is about 3.65% above the lowest level this month. It has lagged its global peers like Nasdaq 100, Nikkei 225, and Dow Jones.

Hang Seng has been one of the worst-performing indices this year. It has fallen by about 23% from its highest level this year. This happened even as its peers have jumped to an all-time high. There are two main concerns for the index. 

First, the real estate sector in Hong Kong and mainland China has struggled this year because of the actions by Beijing. There are rising risks that Evergrande will go bankrupt now that it has struggled paying its debt. 

On Monday, it failed to pay its instalments. It is not alone. Kaisa, another developer has struggled to repay its bonds and its proposal to convert its debt to equity has struggled.

Alibaba is the worst-performing stock in the Hang Seng today as its stock crashed by more than 4%. Other laggards in the index are NetEase, Wharf Real Estate, Alibaba Health Information, and CK Hutchison. On the other hand, the top stocks are Li Ning Co, WuXi Biologics, Sands China, and Sunny Optical.

Hang Seng technical analysis

The four-hour chart shows that the Hang Seng index has made some modest gains in the past two days. These gains, however, have lagged those of its global peers. It has tested the 25-day moving average and is slightly above the key support level at $23,125. 

Therefore, there is a likelihood that the index will keep rising as bulls target the upper side of the descending channel at about H$25,000. On the flip side, a drop below H$23,400 will invalidate the bullish view.