Hang Seng Index Holdings are Cruising: Time to Buy?

The Hang Seng index continued its remarkable comeback on Wednesday as demand for Hong Kong shares rose. It jumped to a high of $18,250, which was about 28% above the lowest level this year. Most stocks in the index have jumped sharply in the past 30 days. 

Hang Seng constituents rebound

The Hang Seng index has rallied for two main reasons. First, the rally is in sync with other global peers like the Dow Jones, Nasdaq 100, and DAX index. These indices have jumped after signs emerged that inflation was starting to cool down in the past few weeks. 

Data published by the American government on Tuesday showed that the producer price index (PPI) declined slightly in October. Therefore, there is a high likelihood that the Federal Reserve and other central banks will start slowing down their rate hikes. 

The Hang Seng index has also recovered because of the ongoing reopening in Hong Kong and mainland China. Last week, China decided to reduce the number of its quarantine days while Hang Seng has mostly reopened to foreigners. Finally, there is a sense in which investors believe that Hong Kong stocks have become a bargain.

Most Hang Seng constituents have rallied recently. Country Garden and Alibaba Health shares have soared by over 90% in the past 30 days. Most of Country Garden’s gains have happened in the past seven days, when the stock soared by over 70%. 

Other giant companies like JD.com, Xiaomi, Tencent, Lenovo, and Sands China have all rallied by more than 15% in the same period.

Only a few companies have been in the red in the past 30 days. WH Group and China Shenhua Energy shares have fallen by over 5% while BOC Holdings and Baidu have fallen by more than 3%. Baidu stock price has pared back some of those losses by rising by 20% in the past week.

Hang Seng index forecast

A few weeks ago, I wrote that the Hang Seng index was a great buy for the brave, The four-hour chart reveals that the HSI index has made a strong recovery in the past few days. It has formed a mini golden cross as the 20-day and 50-day moving averages have made a crossover. The stock’s Relative Strength Index (RSI) has managed to move to the overbought level. It is also attempting to move above the important resistance at $18,130, the highest point on October 5.

Therefore, the index will likely continue rebounding as buyers target the key psychological level of H$20,000. A drop below the support at $17,600 will invalidate the bearish view.