Hang Seng extends recovery despite China's economic turmoil

The Hang Seng and China's stock market returned from the long weekend with the risk-on sentiment as global investors await the US consumer price data for August.

Hang Seng weekly review

Hong Kong stocks made a spectacular recovery after plummeting for weeks. Falling to the five-month-low last Wednesday, the Hang Seng Index jumped more than 2.70% on Friday, the best day in two weeks.

Chin's CPI On September 9th, China reported its consumer prices for August. Prices rose at a slower-than-expected pace and an 18-month-low reading for producer inflation. The CPI increased 2.5% from the same month a year earlier, slower than 2.7% in July and the 2.8% average forecast. The reading was in line with the ascending prospect that the world's second-largest economy has been plagued by weakening domestic demand as the country continues to commit to its zero Covid policy.

On the bright side, a lower inflation print is leaves more room for the People’s Bank of China to further ease its monetary policy, going in the opposite direction to most developed countries, in order to support local economic growth.

Hang Seng technical analysis

Despite last week’s strong rebound, the Hang Seng Index is still placed below the 20-day SMA, which could hold as resistance for the near term. Looking at the bigger picture, the downtrend stays enacted as illustrated in the sliding trajectory. If the momentum remains, a breaking higher will see the price retest the 50-day line near the 20000 key mark. However, in the event of a backfoot, key support appears to 19158, where the May low sits.