Hang Seng Index Just Shrugged Off Weak China GDP Data to Rise Again. Here’s Why

The Hang Seng Index closed today’s trading session up by 1.4%, nearing the 24,700 mark. This advance continues the upward trend that began in late June, driven by renewed investor confidence supported by domestic sector strength and positive external factors. One might reasonably ask what lies behind this movement and its sustainability.

Which Sectors Are Leading?

While financials led earlier in July, today’s gains were primarily fueled by high-growth technology stocks. Major tech companies like Tencent, Meituan, and Xiaomi saw significant buying volume, reclaiming their leadership positions.

Stocks in retail and manufacturing also gave substantial support. This is because people expect the government to take steps to boost consumption and industrial activity in China.

Companies in consumer discretionary sectors and similar industries seem to be attracting investors who are betting on an economic rebound. Biotech companies, like Innovent Biologics, also contributed to the momentum, showing specific strength in healthcare innovation.

Just a day earlier, regional markets were on edge. Tensions in the Middle East were rising, and oil prices were shooting up, which threatened to speed up inflation. But, the strong underlying demand for AI hardware and signs of stable domestic consumer spending have given tech investors a good reason to start pushing up stock prices again.

The Washington Connection

You can’t really discuss the Hang Seng’s current performance without mentioning what just happened on the other side of the Pacific. A key catalyst for today’s market party was the latest U.S. Consumer Price Index (CPI) report, which dropped on Tuesday.

Lower-than-expected U.S. inflation rate has eased concerns about aggressive interest rate hikes by the Federal Reserve, leading to a positive spillover effect on Asian equities. Increased risk appetite on Wall Street often translates to higher demand for Hong Kong-listed stocks, many of which have substantial international ties.

However, geopolitical issues involving the U.S., such as those in the Middle East, can still introduce volatility that impacts market sentiment. Nevertheless, today’s session highlighted market resilience, with investors prioritizing monetary policy signals over other news.

Is 25,000 Points a Realistic Near-Term Support?

With the Hang Seng Index trading just below 24,700, a key question is whether it can surpass the 25,000 level and establish it as a support level. From a technical perspective, this is a plausible scenario, though it may require some consolidation in the short term.

The index recently held its support level around 24,000, and a sustained daily close above 24,500 could pave the way toward 24,800 and eventually 25,000. Given the uptrend since late June, reaching 25,000 in the near term seems achievable under favorable conditions, though broader challenges related to China suggest a need for tempered expectations.

China’s second-quarter GDP growth of 4.3% year-on-year, while below expectations, has not derailed the positive session tone, as investors appear to focus on targeted policy responses. The Hang Seng’s performance suggests a careful balance between domestic economic conditions and international investor sentiment.