The Hang Seng index has been in a strong bearish trend in the past few weeks, even as its global peers like the Nasdaq 100, Dow Jones, and DAX rebound. The index, which is made up of the top blue-chip Hong Kong stocks, declined to a low of H$19,652 this week. This price was about 13% below the highest level in July this year.
Alibaba earnings ahead
The Hang Seng index has come under a lot of pressure in the past few days as investors watch the imploding housing sector in China. Evergrande, the second-biggest developer in the country, has struggled to pay debts worth over $300 billion. This week, the company failed to deliver its debt restructuring strategy it had promised last year.
Other property developers in China are also under pressure. This includes companies like Country Garden. Shimao and Sunac all defaulted on their obligations. Foreign investors are on the hook for over $37 billion of these bonds. At the same time, many Chinese homebuyers have failed to pay mortgages for their homes, pushing the PBOC to announce plans to rescue the sector.
The main Hang Seng stock to watch will be Alibaba. The giant e-commerce company will publish its results on Thursday. Analysts expect that the firm will report its first revenue decline as the e-commerce and cloud businesses struggled. As a result, they expect the firm’s revenue to be 203.23 billion yuan, which is about 1.2% below the same quarter last year.
Still, the Alibaba stock price rebounded as investors anticipate a swift recovery this year. Alibaba Health Information shares rose by 4.90%. Other tech companies in the index like Jd.com, Meituan, Xiaomi, and Tencent rose by over 4%.
Hang Seng forecast
The four-hour chart shows that the Hang Seng index has been in a strong bearish trend in the past few weeks. This sell-off started when the shares rose to a high of $22,471, where it formed a double-top pattern. It has dropped below the 25-day and 50-day moving averages, while the Relative Strength Index has tilted lower.
The index has also moved below the important support at $20,700, which was the lowest level on June 17th. Therefore, the index will likely continue falling as sellers target the next key support at H$19,152. A move above the resistance at $20,500 will invalidate the bearish view. Subscribe to our S&R indicator for up-to-date Hang Seng signals.
