Hang Seng Index Rises On China Mortgage Rate Cut, More Action In The Pipeline

Summary:
• China is reportedly preparing as much as 80 basis points cuts on mortgages, but the Hang Seng Index propulsion might get more fuel elsewhere.

Hong Kong’s Hang Seng Index inched up on Friday, driven by hopes of mortgage rate cuts by China. The Index closed at +0.75 percent, registering the fourth straight daily gain and closing the week at 17,369 points. Notable gainers included LongFor Group (+2.9%), China Mobile (+1.2%), China Construction Bank (+1.3%), HSBC (+0.5%), Lenovo Group (+1.5%), CNOOC (+1.7%) and TENCET (+0.5%)

News of potential deeper interest rate cuts by the Fed also added support to the Hang Seng Index, following softer US CPI data and higher-than-expected Initial Jobless Claims. Hong Kong’s stock market is the preferred destination for most foreign investors due to its easier tax regime and greater operational freedom compared to mainland China.

Meanwhile, Bloomberg reported on Friday that China intended to cut interest rates on $5.3 trillion worth of outstanding mortgages in an effort to give a lifeline to its struggling property market. The rate cuts could come as early as this month and could be as much as 80 basis points.

China’s property market has been shrinking this year, with a strong contagion effect felt across the economy. China’s real estate market contributes to GDP growth by 20-30%. The country will release more high-impact date on Friday, including Fixed Assets growth data, Unemployment and Industrial production data. These will likely have a significant impact on the Hang Seng Index (INDEXHANGSENG: HSI) when markets open on Monday.

Hang Seng Index analysis

The index’s upside will likely prevail if action stays above 17, 326. With the bulls in control, the first reistance could come at 17,495. If the bulls manage to clear that level, the resulting momentum could take the index higher to 17,696 points.

Conversely, moving below the 17,326 pivot mark will signal bearish control. If that happens, initial support is likely to come at 17,212. However, extended bearishness could breach that level, invalidating the upside narrative and potentially taking the index lower to test 17,077.