The Hang Seng Index drifted upwards on Monday morning as investors reacted to the latest Chinese industrial profits data and waited for the upcoming macro numbers. It rose to 24,665, a few points above this month’s low of 24,260 points. It has also formed a highly bullish chart pattern, pointing to an eventual rebound.
Hang Seng Index rises after China industrial profits data
A report by China’s statistics agency showed that industrial profits rose by 4.2% in August, bringing the year-to-date gains to 15.7%. The monthly increase was the weakest this year, partly because of the rising energy costs.
The index rose even as other global stocks pulled back as crude oil jumped. Brent, the global benchmark, rose to $98.54, while the West Texas Intermediate (WTI) spiked to $93.50. This rebound happened after President Donald Trump rejected Iran’s proposals to reopen the Strait of Hormuz.
Iran provided seven demands, including the release of its confiscated funds, end of the blockade, and the end of threats towards Iran from the US. In a television interview, Iran’s foreign minister maintained that Iran was prepared to talk with the US. He also maintained that the country was also prepared for renewed fighting.
In a statement to Axios, Trump said that talks between the two sides would continue this week. This statement was notable because it came before the global markets opened. Trump has always been highly focused on the oil and stock markets.
The Hang Seng Index is usually negatively affected by rising oil prices since it affects corporate profits in China. It also leads to higher inflation, which pushes the Federal Reserve to intervene by hiking interest rates.
The index is also reacting to last week’s meetings between President Donald Trump and Xi Jinping. While the meetings had pomp, no major decisions were made. The most notable was that the two sides agreed to continue talking on AI and slash tariffs on goods worth $30 billion.
Most companies in the index were in the green. Netease, a top Chinese gaming company, rose by 4.42%, while PetroChina, China Resources Power, China Resources Land, and China Mengniu Dairy rose by over 2.7%. Other top gainers were firms like ICBC, BOC Hong Kong, and Nongfu Springs.
On the other hand, some key companies like Hua Hong Grace Semiconductor, Lenovo Group, Sunny Optical, Innovent Biologics, and SMIC were among the top laggards in the index today.
Looking ahead, the index will react to the upcoming macro numbers from the US, including the NFP, PCE, and consumer confidence.
Hang Seng Index technical analysis
Hang Seng Index chart | Source: TradingView
Technicals suggest that the Hang Seng Index may be about to bounce back. It formed a dragonfly doji candlestick pattern on Friday. This pattern is made up of a tiny body and a long lower shadow.
Most importantly, it has formed an inverted head-and-shoulders pattern, which is a common reversal sign in technical analysis. It has remained above the lower side of the Bollinger Bands indicator.
Therefore, there is a likelihood that the index will bounce back as bulls target the important resistance level of 25,000. A move above that level will bring the resistance point of 25,600 into view.
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