Hang Seng Index could tentatively rebound this weekend
The Hang Seng Index closed the week 0.28% up - a third successive day of growth. Will the confidence of officials in the HK economy maintain HSI’s resurgence?
At the close of the final trading session of April, the Hang Seng Index ended with a 4.4% monthly gain. As we’ve edged nearer to the end of April, many Asian markets have moved to the cusp of bullish territory, with the Hang Seng Index rebounding 13.6% from its 23 March low.
Technical analysis: Hang Seng Index back in bullish mode
Out of all eight leading global equity indices, Hong Kong’s Hang Seng Index was the third-best performer on Wednesday. If you were to take a 90-day view of the Hang Seng, the general trend is considerably negative. However, the 30-day window tells a vastly different story, as the price has rebounded considerably.
During Wednesday, the price of the Hang Seng Index peaked at 24786, its highest position since 11 March when lockdowns were beginning to be initiated everywhere, not just the Far East.
Hong Kong ‘highly resilient’ to win the second coronavirus battle
The fundamentals behind the recovery of the Hang Seng Index are that the government remains confident in the city state’s economy. Financial Secretary Paul Chan believes the financial risks to Hong Kong during the coronavirus pandemic are "controllable" and that its finances are "highly resilient".
The Hong Kong government recently approved 100% guaranteed loans to businesses worth over HK$400 million, as it seeks to create stability in the economy and small business community.
Chan said: "The Hong Kong government will continue to maintain the city’s financial stability. This gatekeeping work must be done well to protect national security."
Will the threat of its worst-ever recession create a new resistance point?
There could yet be a sting in the tail for the Hang Seng Index, however. Although traders have taken a positive stance towards the fiscal firefighting of the Hong Kong government, amid the positivity there was a stark warning from Mr Chan, who admitted the city faces the threat of its worst recession on record.
Just two months after his Budget, which saw Chan anticipate GDP shrinking by 1.5%, the Financial Secretary admitted to lawmakers that its economy could be hit far worse than expected, shrinking by up to 7% in 2020.
This would result in the first back-to-back annual contractions for the Hong Kong economy since returning to Chinese sovereignty in 1997.
This sobering analysis is almost certain to keep a lid on a medium-term resurgence for the Hang Seng Index. The way in which the index contracted so sharply at 24786 on Wednesday suggests that this could be a new point of resistance in the weeks ahead.
How to trade the Hang Seng Index this weekend
Whether you feel the Hang Seng Index will rise or fall this weekend, the only platform you can use to open a long (buy) or short (sell) position on after the markets close is IG’s world-class trading platform. Using our CFDs, you can trade the value of the Hang Seng Index during the weekend before the markets reopen on Monday.
If you’d like to trade the Hang Seng Index with IG this weekend, follow these five simple 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
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