- Summary:
- Hang Seng Index Forecast: INDEXHANGSENG: HSI is facing headwinds from the slow growth and deflation in China. It needs to reclaim 200 MA soon.
Hang Seng INDEXHANGSENG: HSI) index has been in a sideways accumulation phase since March 2023. Hong Kong equities are facing some serious headwinds due to the underwhelming post-pandemic recovery in China. The benchmark index has failed to gain any strength above the key psychological level of 20,000 points.
On Wednesday, HSI showed a slight recovery despite opening lower. The index closed the day after rising 0.32% and gaining 61.86 points. However, the index still remained below the 200-day moving average, suggesting that the bears still have the upper hand.
HSI Shruggs Off Chinese Deflation
The Chinese CPI data for July 2023 was released today. The data showed that consumer prices fell last month, which is a major cause of concern for the world’s biggest economy. Even after lifting the lockdown restrictions months ago, the Chinese economy is still struggling to recover. These concerns have increased the selling pressure on Hong Kong equities.
Although the Hang Seng index managed to remain green despite the Chinese CPI report, it still remains 5.5% below its July high. According to the latest data, consumer prices in China dropped in July for the first time in 24 months.
Hang Seng Index Forecast
As visible on the following INDEXHANGSENG: HSI chart, the index has fallen below its 200-day moving average. This key moving average acts as a line in the sand for many traders. If HSI fails to reclaim it in the coming days, I expect a retest of the 18,900 points level.
A break below this level will turn my Hang Seng Index forecast very bearish. In this case, the first target for the bears would be 18,275, which is 4.82% below the current level. Tomorrow’s release of July CPI report in the United States will be very critical in this regard.
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