Hang Seng Index News: Fed Cut Bets and China Services Boost Fuel Bullish Momentum

Hang Seng Index Climbs on Services Sector PMI Boost

Can China’s services sector take on the slack from the manufacturing sector? The Hang Seng Index edged higher on Tuesday, August 5, extending its gains from the Monday session. Expectations of a September Fed rate cut and China’s services sector PMI data lifted sentiment.

This week, US-China trade headlines, China’s trade data (out on August 7), and stimulus news from Beijing will dictate market sentiment. These key drivers will determine whether the Index drops below 24,500 or breaks above 25,000.

Hang Seng Index and Mainland Markets in Sync

The Hang Seng Index gained 0.27% to 24,800 in morning trading, recovering from an early drop to a low of 24,687. Mainland China’s CSI 300 and the Shanghai Composite Index rose 0.34% and 0.53%, respectively.

Overnight (August 4), US equity markets rebounded from Friday’s sell-off. Surging bets on a September Fed rate cut drove demand for risk assets. The Dow and the S&P 500 climbed 1.34% and 1.47%, respectively, while the Nasdaq Composite Index rallied 1.95%. July’s US Jobs Report fueled speculation about a September Fed policy move.

According to the CME FedWatch Tool, the chances of a September Fed rate cut jumped from 80.3% on August 1 to 92.2% on August 4.

China’s Service Providers and Manufacturers See Mixed Fortunes

China’s services sector took center stage this morning. The S&P Global China General Services PMI rose from 50.6 in June to 52.6 in July, beating a consensus drop to 50.4. The July survey revealed several key trends:

• Both external demand and overall new work increased in July, contrasting with weaker domestic and external orders for goods.
• Service providers increased staffing levels to handle higher demand while manufacturers cut jobs.
• The services sector reported higher input costs and rising selling prices for the first time in six months. In contrast, manufacturers reduced output prices despite higher input costs amid intensifying competition.

The S&P Global China General Composite Index fell to 50.8 in July (June: 51.3), reflecting the greater impact of China’s manufacturing sector on the broader economy.

Tech and Real Estate Stocks Advance on Fed Rate Cut Bets

The continued rise in expectations of a Fed rate cut boosted demand for real estate and tech stocks. Tencent (0700) rose 0.55% in the morning session, contributing to the Hang Seng Tech Index’s 0.33% gain. The Hang Seng Mainland Properties Index advanced 0.19%.

However, electric vehicle (EV) stocks had a mixed start to the day. BYD (1211) fell 1.57% as investors continued to react to July’s 10% drop in monthly sales. In contrast, Li Auto (2015) rallied 2.87% as sector headlines influenced share prices. CN Wire reported:

“China’s Li Auto: Lower price of new electric SUV I8 with 720km range to 339,800 Yuan, a week after its launch”

Technical Setup: Hang Seng Edges Toward the 25,000 Level

The Hang Seng Index continued to move away from its July congestion zone and the 50-day Exponential Moving Average (EMA), suggesting bullish momentum.

Easing trade tensions, a US-China trade deal, and fresh stimulus from Beijing may send the Hang Seng Index toward 25,000. A breakout above 25,000 could enable the bulls to target the July 24 high of 25,736.

On the other hand, an escalation in US-China trade tensions and the absence of fresh stimulus could hit sentiment. A break below the 24,500 level may pave the way to the 50-day EMA and bring the crucial 24,000 support level into sight.

Hang Seng Technical Outlook

• Resistance: 25,000, 25,736, then 26,000.
• Support: 24,500, the 50-day EMA (24,286), then 24,000.
• The short-term bias remains bullish, but is contingent on US-China trade talks, Beijing’s stimulus plans, and upcoming Chinese trade data.

Hang Seng Forecast: Will the Index Break Below 24,500 or Hit 25,000?

Despite the morning gains, the Hang Seng Index trades below the July 24 high of 25,736. US trade policies and weaker manufacturing PMI data have fueled uncertainty about China’s economic outlook. However, upbeat Services PMI data suggest Beijing’s domestic demand-focused measures gained traction, offsetting the effect of tariffs on China’s economy.

Additional stimulus and tangible progress on a US-China trade deal could send the Hang Seng Index to 25,000. However, stalled trade talks may push the Index below 24,500, exposing the 50-day EMA and 24,000.

Stay informed with real-time updates. US-China trade headlines will continue to drive sentiment. Follow our live coverage and consult our economic calendar.