Hong Kong Stocks Still Looking for a Key Breakout

The Hang Seng is poised at an important long-term level, and a potential breakout higher could pave the way for a significant long-term , offering a promising outlook for investors. 

HK50 – Daily Chart

HK50 – Daily Chart

The HK50, currently trading at 16,723, has demonstrated resilience by finding a double bottom at the 16,000 level. The support at the late-2020 dip remains in play, with a more robust downtrend resistance line at around 17,000. A push above that level can propel the market towards the 20,000 level again, showcasing its stability. 

Asian stocks were lower on Friday, alongside a broader retreat in Asian markets, after hawkish comments from a Federal Reserve official reduced bets on an interest-rate cut as early as June this year. 

The Hang Seng Index weakened by less than 0.1% on Friday, and selling pressure has eased, regardless of the Federal Reserve’s moves. 

A strong jobs report disappointed rate cut bettors on Friday, and stubborn inflation may close the door on US rate cuts this year, according to Neel Kashkari, president of the Minneapolis Federal Reserve Bank. 

“If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all,” said Kashkari, who last month projected two rate cuts in 2024. “There’s a lot of momentum in the economy right now.” 

According to data from the CME Group based on Fed fund futures, the expectation for a rate cut at the Fed’s June meeting stands at 54.3% as of Friday, compared with 61.8% on Thursday. US consumer prices rose at an annual pace of 3.2% in February, up from 3.1% in January. 

The Hang Seng may fluctuate depending on the rate of cut obsession. However, holding the current support levels and breaking above the downtrend resistance could lead to a rally in Hong Kong stocks. A break above the 17,000 level would be a good start for the index.

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