Hang Seng Index: China Data Beats and Stimulus Hopes Drive Bullish Breakout – Weekly Recap

Hang Seng Index: Upbeat China Data and Beijing Stimulus Pledges Boost Sentiment

Trade and GDP data from China topped forecasts this week, lifting market sentiment. Beijing added to the positive mood, pledging further support measures to bolster domestic consumption. Meanwhile, economic data from the US eased fears of a tariff-induced economic recession.

The Hang Seng Index extended its gains from the previous week, while Mainland China markets extended their winning streaks to four weeks.

Following last week’s trade and GDP data, the focus will shift to the People’s Bank of China, Beijing’s stimulus cues, and US-China trade talks.

Hong Kong and Mainland Markets Rally on Strong Data and Stimulus

US equities had a mixed week ending July 18. The Nasdaq Composite Index and the S&P 500 gained 1.51% and 0.59%, respectively, while the Dow dropped 0.07%. Corporate earnings and easing US restrictions on chip exports to China raised demand for tech stocks. However, threats of between 15 and 20% tariffs as part of a US-EU trade deal left the Dow in the red.

Meanwhile, China’s economic indicators and stimulus news sent the Hang Seng Index up 2.84% to end the week at 24,853. Mainland China’s CSI 300 and Shanghai Composite Index closed the week up 1.09 % and 0.69%, respectively.

While China’s upbeat data supported sentiment, concerns over US tariffs capped the upside.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on the economic outlook, highlighting the need for fresh stimulus, stating:

“But, second half of the year, that’s in a way where things could really get worse, both in terms of exports but also in terms of the whole sentiment. Because the second half of the year is expected to be much worse, I think they need to stimulate further. They have started already, it’s just a question of how much more they will do.”

US tariffs targeting transshipments through ASEAN countries may impact demand for Chinese goods in the second half of the year.

Hong Kong Tech and EV Stocks Shine

Tech and Electric Vehicle (EV) shares led the gains. Investors reacted to reports that NVIDIA is planning to resume H20 chip sales to China, and AMD aiming to resume MI308 chip sales.

Tech heavyweight Alibaba (9888) soared 10.18%, with Tencent (0700) gaining 4.51%, taking the Hang Seng Tech Index up 5.53%.

EV shares benefited from the news, coupled with Beijing’s pledge to target domestic consumption. Geely Automobile (00175) jumped 7.62%, while Li Auto (02015) surged 14.54%.

In contrast, the Hang Seng Mainland Properties Index slid 2.08% on renewed concerns about the housing sector.

China Exports and GDP Numbers Impress

Exports rose 5.8% year-on-year in June after increasing 4.8% in May, with imports up 1.1% compared with May’s 3.4% fall. Exports rebounded despite US tariffs, easing fears of a sharp slowdown in GDP growth.

China’s economy grew by 5.2% year-on-year in the second quarter, suggesting Beijing could achieve its 5% GDP target for 2025. While the headline data was upbeat, weaker retail sales raised concerns about domestic demand. Retail sales rose 4.8% YoY in June, slowing from a 6.4% rise in May.

The softer numbers triggered a response from Beijing. Beijing pledged to introduce policies to boost consumption and demand for services. In the first half of the year, trade-in programs reportedly led to over 2.9 trillion in sales, with 400 million people benefiting from subsidies. A pickup in demand could ease ongoing pressures on company profit margins.

US Economic Data Ease Recession Risks Amid Renewed Tariff Threats

US retail sales and labor market data distracted markets from hotter US inflation numbers, lifting sentiment. Retail sales rose 0.6% month-on-month in June, following May’s 0.9% fall. Labor market data also signaled a resilient US economy. Initial jobless claims fell to 221k (week ending July 12), down from 228k (week ending July 5).

According to Polymarket, the chances of a US recession fell to 18% on July 18, the lowest level of the year to date.

While US data lifted sentiment, reports of President Trump pushing for tariffs of between 15% and 20% weighed on US markets on July 18.

Hang Seng Faces Key Test Between 24,500 Support and 25,000 Resistance

Sentiment towards the Chinese economy and Beijing’s policy support plans drove the Hang Seng Index to a four-month high of 24,868. Despite pulling back from 25,000, the Index closed the week above the crucial 24,500 level. Additionally, the Hang Seng Index continued to trade above its 50-day Exponential Moving Average (EMA), signaling bullish momentum.

US-China trade talks or Beijing’s stimulus announcements could send the Hang Seng Index above last week’s high of 24,868 and 25,000. A sustained move through 25,000 may pave the way to 26,000.

Conversely, an escalation in US-China trade tensions and the absence of policy support could push the Index toward 24,500, exposing the 50-day EMA.

Hang Seng Technical Forecast

• Resistance: 24,868, 25,000, and then 26,000.
• Support: 24,500, 24,000, and 50-day EMA at 23,773.
• Short-term Bias: Bullish, hinged on US-China trade developments, Fed signals, and Beijing’s stimulus moves.

Forecast Summary

The Hang Seng traded well above its July congestion zone and 50-day EMA, signaling a bullish bias. In the week ahead, trade headlines and Beijing will drive risk sentiment. However, US-China trade talks could be crucial for market trends.

For real-time updates on US-China trade talks, global stimulus efforts, and central bank signals, follow our live coverage and consult our economic calendar.