Pro: Hang Seng Index is an Outright Buy for the Brave

Summary:
• The Hang Seng index continued its downward trend as concerns about the Chinese and global economy continued.

The Hang Seng index continued its downward trend as concerns about the Chinese and global economy continued. It crashed to a low of H$16,500, which was the lowest level since 2009. It has plunged by more than 51% from its all-time high in 2018.

A good buy for the brave

The Hang Seng index continued its bearish trend on Wednesday. This means that it has crashed in the past four straight weeks amid heightened concerns about a slowdown of the Chinese market. Analysts believe that China’s economy will go through a major slowdown this year because of the Covid-zero strategy, drought, and the ongoing crackdown on technology.

Still, some analysts believe that the Hang Seng index is close to bottoming. For example, Hao Hong, the renown analyst at Grow Investment Group, said that the index is about to hit the bottom. He believes that it is a buy now, but only for brave investors. Further, he pointed that the index was substantially oversold. He said:

“But geopolitical tensions and overseas market volatility will continue to distress Hong Kong. That is the reason why this is a trade for the brave.”

Hao Hong is one of the best-known investing pros in Hong Kong. He joined Grow from Bank of Communications, where he was awarded for his work. 

Most Hang Seng constituents are deeply in the red this year. Country Garden Services and Country Garden Holdings have slumped by more than 77%. They are followed by Sunny Optical, Xiaomi, Geely Automobile, and Wuxi Biologics. On the other hand, the top performers are China Shenhua Energy, CNOOC, China Overseas, and China Mobile.

Hang Seng index forecast

The daily chart shows that the Hang Seng index has been in a strong sell-off this year. In this period, it has crashed by more than 20%, making it one of the worst-performing indices. It has dropped below the important support level at $18,260, which was the lowest level on March 15. Oscillators like the Relative Strength Index (RSI) and Stochastic moved to the oversold level. 

Therefore, in the near term, the index will likely continue falling as sellers target the next key support at $16,000. A move above $17,000 will invalidate this view. In the long term, the Hang Seng will bounce back as bulls target the resistance at $18,000.