hong kong city at night
Hang Seng Index (INDEXHANGSENG: HSI) is retesting its monthly lows after a sharp decline. The benchmark index of the Hong Kong stock market is having the third red day of the week, putting its weekly drop at 2.11%. Our analysis reveals that there could be more downside for the index.
On Friday, the Hang Seng index fell by 116 points which translated into a 0.59% drop during the final trading session of the week. The slump in the Chinese stock market appears to have acted as a headwind for Hong Kong markets. Chinese stocks fell for the fourth consecutive day as CSI300 dropped to its two-week lows.
The latest data shows that the Hong Kong economy has significantly recovered since the ease of travel restrictions. There has been a significant increase in the inbound tourism in the country. Consequently, the country’s GDP has risen by 2.7% in the first quarter of 2023.
However, the economic data from China is still indicating a slow recovery in the 2nd largest economy. This has also led to a weakness in the Hang Seng Index, which is once again trading below the key psychological level of 20,000 points.
At the time of writing, INDEXHANGSENG: HSI is trading at 19,627 points which is just slightly above its 19,500 support. The index needs to hold the 19,500 level, or a bigger drop might be on the cards. In case of a breakdown, I expect the index to retest its 18,900 support, as marked on the following chart.
The formation of an inverted cup & handle pattern on the chart makes Hang Seng Index forecast even more bearish. This gives a target of 18,100 points which is 7.5% below the current level. However, this pattern is still not complete, and the bulls can save the day by defending the 19,500 level.
I’ll keep posting my updated analysis on Hang Seng Index in my free Telegram group, which you’re welcome to join.
This post was last modified on May 12, 2023, 11:43 BST 11:43