The Hang Seng Index, a key barometer of Hong Kong's economy, is currently hovering around 24,130 points. However, a number of fundamental, technical and policy factors suggest the possibility of a rebound towards 26,253 points. This analysis explores the main reasons for this possible recovery, integrating recent market information and the Chinese government's strategy to stimulate consumption.
Macro Context
a) Support from Mainland Investors: One of the most decisive dynamics is the growing participation of investors from mainland China. According to Reuters, recent weeks have seen strong buying activity through the Stock Connect mechanism, driving the market rally and contributing to increased liquidity in the Hong Kong index. This increase in participation suggests a shift in investor sentiment that could set the stage for a sustained recovery.
b) Stimulus Measures and Economic Recovery: The macroeconomic environment has been favored by stimulus policies implemented in 2024, such as interest rate cuts, home purchase incentives and financing schemes. These measures have contributed to reversing historical downward trends, achieving remarkable annual growth in the Hang Seng index and reviving market confidence.
Impact of China's Consumer Stimulus Actions
This recent announcement adds a new dimension to the country's recovery outlook, especially with regard to Chinese indices and the Hang Seng in particular. This measure will seek to increase household income by raising wages, and opening up new forms of wealth generation especially in the rural environment. It also seeks to reduce the economic burden per family in terms of education, health care and elderly care expenses, while offering subsidies for child care and education, thus stimulating the pending account with the Chinese population curve. Finally, fostering a favorable environment for consumption by improving commercial infrastructure, protecting labor rights and reducing spending restrictions. This strategy reflects a shift in the public spending model, prioritizing social welfare and strengthening domestic demand. The plan, which includes the issuance of approximately 300 billion yuan in bonds to boost the renovation of household appliances and electronics, seeks to counteract the low demand and deflationary pressures that have affected the economy. Strengthening domestic consumption may translate into greater dynamism for Hong Kong-listed companies, contributing to the index's recovery.
Technical Analysis:
In the 2 sessions of Thursday and Friday the index closed in positive, piercing today the 24,663 points zone without much strength. If we review the zone of the last quarter of 2021 and first quarter of 2022, the current price is fluctuating in this range, testing the possibility of a perforation towards 25,082 points. If this situation is strongly generated the next milestone of 26253 points. If the price consolidates above 24,071 points we will be able to see the mentioned climb, if this price does not hold it is possible that the price will fall towards 21,000 with strength and subsequently seek to test 19,937 points which is the support zone of the last price climb. The control point (POC) is now located around 19974 points. If we look at the most traded range between the last quarter of 2023 and the beginning of 2025, movements have moved from the low of 14,566 points to 19,437 points.
Risks and Considerations
Although the outlook is positive there are certain risks to consider. Regulatory interventions and international tensions with China may negatively influence market sentiment on the index. The risk of a slowdown in consumption if the domestic consumption initiative does not succeed is still there. Finally, the sustainability of the recovery will depend on whether investors support the initiative in the long term and improvements in month-on-month economic indicators are perceived. In other words, the combination of solid support from mainland investors, economic stimulus policies and the new action plan to boost consumption in China create a favorable scenario for the index's recovery. Overcoming the 26,253-point barrier will depend on the materialization of expectations on both the macroeconomic and technical fronts. The key now is to keep an eye on these and other regulatory and geopolitical developments affecting the Chinese market, as well as the evolution of these policies, in order to take advantage of the opportunities that arise in this context of economic transformation.
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Macro Context
a) Support from Mainland Investors: One of the most decisive dynamics is the growing participation of investors from mainland China. According to Reuters, recent weeks have seen strong buying activity through the Stock Connect mechanism, driving the market rally and contributing to increased liquidity in the Hong Kong index. This increase in participation suggests a shift in investor sentiment that could set the stage for a sustained recovery.
b) Stimulus Measures and Economic Recovery: The macroeconomic environment has been favored by stimulus policies implemented in 2024, such as interest rate cuts, home purchase incentives and financing schemes. These measures have contributed to reversing historical downward trends, achieving remarkable annual growth in the Hang Seng index and reviving market confidence.
Impact of China's Consumer Stimulus Actions
This recent announcement adds a new dimension to the country's recovery outlook, especially with regard to Chinese indices and the Hang Seng in particular. This measure will seek to increase household income by raising wages, and opening up new forms of wealth generation especially in the rural environment. It also seeks to reduce the economic burden per family in terms of education, health care and elderly care expenses, while offering subsidies for child care and education, thus stimulating the pending account with the Chinese population curve. Finally, fostering a favorable environment for consumption by improving commercial infrastructure, protecting labor rights and reducing spending restrictions. This strategy reflects a shift in the public spending model, prioritizing social welfare and strengthening domestic demand. The plan, which includes the issuance of approximately 300 billion yuan in bonds to boost the renovation of household appliances and electronics, seeks to counteract the low demand and deflationary pressures that have affected the economy. Strengthening domestic consumption may translate into greater dynamism for Hong Kong-listed companies, contributing to the index's recovery.
Technical Analysis:
In the 2 sessions of Thursday and Friday the index closed in positive, piercing today the 24,663 points zone without much strength. If we review the zone of the last quarter of 2021 and first quarter of 2022, the current price is fluctuating in this range, testing the possibility of a perforation towards 25,082 points. If this situation is strongly generated the next milestone of 26253 points. If the price consolidates above 24,071 points we will be able to see the mentioned climb, if this price does not hold it is possible that the price will fall towards 21,000 with strength and subsequently seek to test 19,937 points which is the support zone of the last price climb. The control point (POC) is now located around 19974 points. If we look at the most traded range between the last quarter of 2023 and the beginning of 2025, movements have moved from the low of 14,566 points to 19,437 points.
Risks and Considerations
Although the outlook is positive there are certain risks to consider. Regulatory interventions and international tensions with China may negatively influence market sentiment on the index. The risk of a slowdown in consumption if the domestic consumption initiative does not succeed is still there. Finally, the sustainability of the recovery will depend on whether investors support the initiative in the long term and improvements in month-on-month economic indicators are perceived. In other words, the combination of solid support from mainland investors, economic stimulus policies and the new action plan to boost consumption in China create a favorable scenario for the index's recovery. Overcoming the 26,253-point barrier will depend on the materialization of expectations on both the macroeconomic and technical fronts. The key now is to keep an eye on these and other regulatory and geopolitical developments affecting the Chinese market, as well as the evolution of these policies, in order to take advantage of the opportunities that arise in this context of economic transformation.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.