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Hang Seng Index could hold firm in the weekend markets

Traders appear to be overlooking China’s plunging GDP, with the Hang Seng Index surging during Friday’s trading. Will it remain bullish this weekend?

Hang Seng Index Source: Bloomberg

The Hang Seng Index, the biggest indicator of overall market performance among Hong Kong’s leading corporations, vaulted during Friday trading despite the grim revelation of China’s GDP contraction in Q1 2020.

The benchmark Hang Seng Index rose by 554.08 points, up by 2.31% at the start of Friday’s trading session. It reached a high of 24,666.64 on Friday, before retracting to 24,380.00, ending the session up 1.56%.

China’s GDP shrinks for the first time since 1976

The surprising bounce for the Hang Seng Index occurred on the same day that China confirmed its economy had contracted year-on-year for the first time in 44 years.

Gross domestic product (GDP) in China shrank by as much as 6.8% in the year’s first quarter, which was slightly worse than the 6% drop that experts had predicted. Retail sales were the worst hit, falling by 15.8%, while factory output also declined by 1.1% last month.

Many independent economists also warn that the figures could be much worse than the 6.8% publicly revealed by the government on Friday.

Furthermore, the World Bank predicts that China’s overall growth could fall from 6% in 2019 to just 2% in 2020. Should the outlook worsen further still, the World Bank thinks its growth could bottom out at 0.1% this year, effectively warning that the Chinese economy could grind to a complete halt.

Traders look beyond economic reports due to positive pandemic signs

Despite these bleak forecasts, traders of the Hang Seng Index seemingly looked beyond the economic figures on Friday. Investors had already priced a GDP contraction into the index, and with the shrinkage not too far away from initial predictions, reactions have been somewhat muted.

There is also the small matter of the COVID-19 pandemic. There has been worldwide hope regarding a potential vaccine for the coronavirus since the revelation of data from a modest clinical trial by US-based pharmaceutical company Gilead Sciences. The group’s use of an experimental antiviral drug called Remdesivir was reported to have had a largely positive effect on patients.

The trial saw 125 COVID-19 patients administered with the Remdesivir drug, with 113 of these individuals categorised as having severe coronavirus symptoms. In less than a week, almost all patients recovered from their symptoms after daily intake of Remdesivir and were discharged.

It remains to be seen whether there will be a negative impact on the Hang Seng Index this weekend after Wuhan’s prevention and control taskforce revised up its death toll by 50%. The revelation sparked fears that Chinese officials had not been wholly honest about the overall picture of the COVID-19 outbreak in its epicentre and beyond.

How to trade the Hang Seng Index this weekend

Are you feeling confident about the prospects for the Hang Seng Index this weekend as the Far East eases its coronavirus lockdown measures? You can use CFDs to trade the value of the Hang Seng Index long or short on Saturday and Sunday using our very own first-class trading platform.

If you’d like to buy (long) or sell (short) the Hang Seng Index this weekend, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account

  • Enter ‘Hang Seng Index’ in the search bar and select it

  • Choose your position size

  • Click on ‘buy’ or ‘sell’ in the deal ticket

  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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