Hang Seng Index (INDEXHANGSENG: HSI) has shown a remarkable recovery since its March lows. The benchmark index of Hong Kong equities is currently 7.6%, up from the lows. After a negative price action at the start of this week, HSI turned green on Thursday.
The index closed the day at 20,331 after gaining 56.6 points during today’s trading session. Despite a strong bounce from the last month’s lows, Hang Seng Index is still 10.4%, down from its yearly highs. The recent bounce can also be attributed to the increased economic activity in China after its reopening.
Hong Kong PMI Shows Growth For The Second Month
According to S&P Global, the Hong Kong Purchasing Manager’s Index (PMI) remained at 53.5 in March. Although it was a slight decline from February’s figure of 53.9, it was still above the 50 level, which exhibits growth. The Hang Seng Index reacted positively to the PMI data.
The growth in Hong Kong’s economy can be attributed to the improved economic conditions in mainland China as the 2nd biggest global economy reopens after the pandemic. As per S&P Global, during March 2023, the demand and output both increased, which led to higher purchasing and improved employment.
Hang Seng Index Bounces Off December Lows
The daily chart of HSI shows that the recent bounce occurred from the December 2022 lows. This bounce has sent the index above its 200-day moving average, signaling strength in the Asian stock market. The index has also broken above the key psychological level of 20,000 points. A reclaim of the March high of 21,005 can make the Hang Send Index forecast very bullish.
In such a scenario, I expect the benchmark Hong Kong index to surge to the 22,500 level and retest its yearly highs. This is only likely if the Chinese economy keeps showing signs of growth. Another factor affecting the US & Asian equities is the dollar strength index, aka DXY index.
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