The Hang Seng Index remained steady on Thursday as investors reacted to the latest developments in trade and Chinese economic data. It was trading at H$24,465, a few points below the year-to-date high of H$24,868, and 31% above its lowest level this year.
US-China tensions are cooling
The Hang Seng Index, which tracks some of the biggest Chinese companies, reacted positively to the US-China relationship. For example, the US allowed semiconductor companies like NVIDIA and AMD to start shipping some of their semiconductors to the country.
Trump has also hinted that he will change his approach towards the country. He told the media that he will start fighting China in a friendly fashion going forward. Most importantly, he is considering delaying a 145-day deadline when tariffs are set to go back up to 145%.
According to Bloomberg, Trump is undertaking these actions in his bid to secure a meeting with Xi Jinping. Analysts expect the two leaders to meet in the fourth quarter.
The Hang Seng Index also steadied after China published strong economic numbers earlier this week. These numbers showed that the economy expanded by 5.1% in the second quarter, bringing the first half growth rate to 5.3%. The data was comfortably above Beijing’s annual target of 5%.
The Chinese economy benefited from Trump’s tariffs, which led to more buying by American companies in advance. As a result, its trade surplus jumped to a record high in the year’s first half.
Top catalysts for Hong Kong stocks
The next key catalyst for the Hang Seng Index will be an upcoming meeting of the Communist Party’s Politburo on July 21. This is an important meeting where Beijing officials will decide on whether to continue its stimulus package or not.
These officials will likely adopt a wait-and-see approach and implement incremental stimulus. A continuation of the stimulus measures announced last year will boost the Hang Seng Index.
The other potential catalyst for the index is an interest rate cut by the People’s Bank of China. Citi and Nomura Holdings economists expect the bank to deliver a 10 basis point this year. They also expect the bank to cut the banks’ reserve requirement ratios by the end of the year.
The Hang Seng Index will also react to the upcoming earnings by the biggest constituents that start in the coming weeks.
Hang Seng Index analysis
Hang Seng Index chart | Source: TradingView
The daily chart shows that the Hang Seng Index has been in a slow uptrend in the past few months, mirroring the surge in other global indices.
It jumped from a low of H$19,263 on April 9 to a high of H$24,868, a notable level since it was the highest point on May 19.
The Hang Seng Index has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control. Therefore, the path of least resistance is bullish, with the next point to watch being at H$25,000. A drop below the support at H$24,000 will invalidate the bullish outlook.
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