Hang Seng index is in a bull market helped by these stocks
The Hang Seng index has staged a strong recovery this year as investors bought the dip in Chinese equities. It has moved into a bull market as it jumped by over 28% from its lowest level this year. It is also hovering near its highest swing since August 2023.
China equities bottomed
Hang Seng is not the only Chinese index that is in a strong bull market. China A50 has soared by over 18% from its lowest swing this year. The same is true with other popular indices like the Shanghai and Shenzhen composites.
This performance is happening as signs emerge that the property market and the Chinese economy are stabilising. The most recent economic data revealed that China’s economy expanded by 5.3% in Q1, helped by its strong manufacturing sector.
China has emerged as the biggest manufacturer globally, taking a substantial market share in key sectors like clean energy and electric vehicles. A company like BYD has overtaken Tesla as the biggest EV manufacturer in the world.
The Hang Seng index has risen because investors believe that its stocks are a bargain. Besides, the index is about 40% below its highest level this year. It has a price-to-earnings ratio of about 10.98, which is significantly lower than the S&P 500 index’s 23.
A look at Hang Seng’s companies shows that the divide between the gainers and losers is even this year.
China Hongqiao, a leading aluminium producer with a capacity of over 6 million tonnes per year is the best-performing Hang Seng stock this year. It has jumped by over 84% this year as aluminium demand and prices rose.
Trip.com, a leading travel site, has soared by over 52% this year, making it the second-best-performing company in the Hang Seng. It has jumped because of the booming local and international travel. Other companies like TripAdvisor, Expedia, and Booking.com have also soared.
Energy companies like CNOOC and PetroChina have also soared by over 50% this year. The other notable gainers in the Hang Seng index this year are Meituan, Haier, China Resources Power, Tencent, and Xiaomi.
On the other hand, the top laggards in the Hang Seng index are firms like WuXi Biologics, WuXi AppTech, Sunny Optical, Li Auto, and Hang Lung. All these companies have tumbled by over 30% this year.
Hang Seng index technical analysis
Turning to the weekly chart, we see that the HSI index has jumped for four straight weeks and is now hovering to a multi-month high. This rebound happened after it formed a falling wedge pattern. It has also jumped to the 23.6% Fibonacci Retracement level.
Notably, the index has jumped above the 50-week and 100-week Exponential Moving Averages (EMA). The Relative Strength Index (RSI) and the Stochastic Oscillator have all pointed upwards.
Therefore, the outlook for the index is bullish, with the next point to watch being at H$22,702, its highest swing on January 26th.
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