The Hang Seng index is still struggling as the crisis among Chinese developers coincide with the ongoing crackdown on technology companies. The index crashed to h$25,200, which is close to the lowest level since November last year.
Hong Kong stocks struggle
This has been a difficult year for Hong Kong stocks. The Hang Seng index has crashed by almost 20% from its highest level this year and is trading at the lowest level since November. In the same period, its peers in New York have risen by more than 20% this year.
There are two main reasons why Hong Kong stocks have declined. First, China has been focusing on the technology sector by targeting some of the biggest players. For example, this week, the Financial Times reported that the government will recommend that Ant Financial to separate its business. The government has also targeted other Hang Seng tech firms like Meituan and Tencent.
Second, Hang Seng has declined because of the woes facing Evergrande. This week, the real estate company hired Houlihan Lokey, an American company to help it restructure its business. The firm has a debt of more than $300 billion. Its collapse would have a negative impact on other property groups, including Hang Seng constituents like New World, Country Garden, and Hang Lung.
Today, the index is falling mostly because of casino companies. Shares of companies like Sands China and Galaxy Entertainment have crashed as investors react to the new Covid wave in Macau. There are rumors that the Chinese government will also target the gaming sector.
Hang Seng forecast
The daily chart shows that the Hang Seng index has been in a strong bearish trend in the past few weeks. The index has formed a bearish flag pattern and is slightly below the 25-day moving averages. The Stochastic oscillator has moved below the oversold level.
Therefore, the path of the least resistance for the index is to the downside for now. The next key level to watch will be h$24,000.