Here’s Why the Hang Seng Index Just Made a Comeback

Summary:

In this article, we explain why the Hang Seng index just made a strong comeback today and what to expect in the near term.

The Hang Seng index was the best performing indices in Asia on Thursday. The HSI index climbed by more than 3%, outperforming other indices like the Nikkei 225, Sensex, and Nifty 50 that rose by more than 0.50%.

Why the Hang Seng jumped

Hong Kong’s Hang Seng index has been under pressure this week as China intensified its crackdown on technology and education companies. The country’s key regulators asked many companies to change their business strategies.

For example, it asked Meituan to start recognizing its riders as employees. It has also ordered companies like Alibaba and JD to share data and open up their marketplaces. Further, the regulators have also asked Ant Financial to change its business strategy and form a holding company.

The index rose today after a Chinese regulator said that the country would continue supporting cross-border listings as long as they observed local laws. He said that the government remained supportive of allowing local firms to attract capital from abroad but the firms will need to stick with securities law.

The announcement provided a positive catalyst for listed technology firms in Hong Kong. In fact, the top-performing shares in the Hang Seng today were firms like Alibaba Health Information, Tencent Holdings, Alibaba, Meituan, and Xiaomi. On the other hand, the top laggards in the index were firms like Budweiser China, China Construction Bank, Galaxy Entertainment, and Wharf Real Estate among others.

Hang Seng index forecast

The four-hour chart shows that the Hang Seng declined to a low of H$24,376 this week as tensions rose. This was about 20% below the highest point this year. Today, the index rebounded and is trading at H$26,150. On the four-hour chart, the index remains below the important resistance at H$27,490, which was the lowest level in March.

Therefore, in the short term, the index will likely retest this resistance at H$27,490 as part of the break and retest pattern. Still, as UBS analysts warned, this is not yet time to go bottom-fishing in China, meaning that the index remains bearish.