Investor

High investor expectations see Hang Seng Index (HSI) up +3.0% after another rate cut

HSI analysis

  • China’s strategic lending rates fell again.
  • Revival of the Hang Seng index.

BASIC CONTEXT OF THE HANG SENG

Earlier today, China’s central bank announced rate cuts on 1- and 5-year LPRs by 10bps and 5bps respectively. This comes in response to the economic challenges facing the country by reducing borrowing costs and boosting growth. Omicron outbreaks have further dampened economic activity as China takes a zero-tolerance approach to COVID-19. The property sector has been the bane of China’s financial system lately, following the Evergrande debacle, but the current easing rotation could help convert China’s troubled property market.

Tech stocks rallied after the announcement, while the only sector in the red today was energy due to falling crude prices (see chart below). The likelihood of further declines over the next few months is highly likely, leaving an extremely supportive environment for Chinese equities in the near term.

HSI SECTOR SUMMARY

TECHNICAL ANALYSIS

HANG SENG INDEX DAILY CHART

HSI daily chart

VSheart prepared by Warren Venketas, GI

price action on the daily HSI chart shows bulls approaching 23.6% Fibonacci at 25040 (taken from January 2018 high to March 2020 low). A break above this key confluence zone will in turn open up subsequent resistance targets and with the accommodating fundamental conditions it is hard to see why this will not happen.

Resistance levels:

  • 26000
  • 100 days EMA (Yellow)
  • 25040

Support Levels:

Contact and follow Warren on Twitter: @Wenketas

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