The index of the top 50 Hong Kong shares is heading for resistance after a recent rally.
HK50 – Daily Chart
The price of the HK 50 index has initial resistance ahead at the 18,379 level after a sharp rally over the last week. A breakout here could lead to a move for the 20,000 level.
The Hang Seng Index was up 2.5% on Thursday, marking a technical bull market, even with mainland Chinese buyers on holiday. The Hang Seng Tech Index surged 4.4%, while property developers and casino operators also fared well.
Hang Seng’s strong performance comes after global money managers adjusted their portfolios according to the Federal Reserve’s policy path. Hopes of early rate cuts have disappeared, and Hong Kong’s dollar peg makes the country’s stocks attractive to overseas managers.
“Global investors take profit from US, Japanese or global tech holdings and move into Chinese stocks to capitalise on a swift rebound,” said Richard Tang at Julius Baer. “Traditionally, Hong Kong stocks see higher participation from global investors and this is likely to drive its near-term outperformance over the A-share market.”
The FOMC held US interest rates steady on Wednesday, and Chair Jerome Powell said that inflation was still too high. Comments from Treasury Secretary Janet Yellen also said that the country’s budget deficit was a headwind and would need attention. That could lead to efforts to stabilise the fiscal outlook and the US dollar.
Chinese investors have been a significant driver of Hong Kong stocks, with inflows from the mainland last month making up a third of all turnover, the highest on record. Chinese investors have already bought HK$213 billion of Hong Kong this year, which is two-thirds of last year’s total, and last week marked net inflows for 22 straight sessions.
The Hang Seng is looking to test some initial resistance, but the rally could continue if inflow trends keep up.
