Hang Seng Index Primed For Further Gains On Better China Prospects

Summary:
• The Hang Seng Index is floating on news of China's improved economic outlook and a potential cut by the Federal Reserve.

Hong Kong’s Hang Seng Index stayed up on Wednesday, propelled by favourable outlook on China’s economic trajectory. The Index was up by 0.1% and at 24,771 during the closing hours of the Asian session, with investors’ confidence rejuvenated by an OECD economic report.

The news came on the heels of China’s government’s move to roll out a new economic stimulus package aimed at boosting domestic consumption. China Res Beer (+5.4%) and BYD (+3.8%) were two of the biggest gainers in the Hang Seng Index. BYD, the Chinese EV maker is on a roll following its launch of a revolutionary fast-charging battery charging system.

According to the OECD Economic Outlook Interim Report, China’s GDP will likely grow by 4.8%, up from an earlier forecast of 4.7%. Many Hong Kong-listed stocks have strong rooting in mainland China, and an upbeat performance by the world’s second-largest economy augurs well for the Hang Seng Index.

Elsewhere, the Federal Reserve will announce its interest rate decision later on Wednesday, with a potential interest rate cut on the cards. However, the Fed finds itself in a trying situation, having to balance between inflationary pressures triggered by trade tariff wars and boosting an economy flashing multiple signs of weakness.

Nonetheless, median analysts forecasts expect that FOMC members will vote to retain interest rates at 4.5%. However, a rate cut could be a welcome surprise by equities markets grappling with risk aversion. The Hang Seng Index could benefit from such an outcome.

Hang Seng Index

Hang Seng Index pivots at 24,653 points and the upside will prevail if action stays above that level. With the buyers in control, the index will likely head higher to encounter the first resistance at 24,888 points mark. Breaking above that level could strengthen the upside narrative and potentially test 25,050 points.

On the downside, the momentum will shift to the downside if the Index breaks below 24,653 points. With that, action will likely go downward to find the first support at 24,400. The upside narrative will be invalid if the Index breaks below that level. An extended control by the sellers could send action lower to test 24,210 points.