Hang Seng Index News: Pullback Toward 25,000 as US-China Trade Talks Fuel Uncertainty

Hang Seng Index Drops as US-China Trade Talks Loom

The Hang Seng Index tumbled in early trading on Friday, July 25, potentially snapping a five-day winning streak. Investors took profits after the run-up to a November 2021 high. Optimism over a trade agreement turned to caution ahead of trade negotiations set to begin on Monday, July 28.

Private sector PMI data on July 31, along with trade headlines and Beijing policy updates, will continue to influence sentiment. These factors will determine whether the Index breaks below 25,000 or rises above 26,000.

Hang Seng Index Drops toward 25,000

Market angst ahead of the highly anticipated trade talks weighed on Hong Kong and Mainland China-listed stocks. The Hang Seng Index dropped 1.01% to 25,409 in morning trading on July 25. The pullback threatened to end a five-day rally.

Mainland China markets also trended lower. The CSI 300 and the Shanghai Composite Index declined 0.39% and 0.22%, respectively.

US equity markets had a mixed session overnight on Thursday, July 24. The Dow fell 0.70%, while the Nasdaq Composite Index rose 0.18%. Alphabet (GOOGL) gained 1.02% after topping earnings estimates, boosting demand for AI-linked stocks. Advanced Micro Devices (AMD) rallied 2.19%. However, Tesla (TSLA) plunged 8.2% after reporting a slump in revenue and net income, capping the Nasdaq’s gains.

EV and Tech Stocks Lead Hang Seng Decline

Electric vehicle (EV) and tech stocks led the losses in Friday’s morning session. Tech giants Alibaba (9988) and Baidu (9888) dropped 1.22% and 1.42%, respectively, leaving the Hang Seng TECH Index down 1.62%.

EV stocks BYD (1211) and Li Auto (2015) slid 2.5% and 1.85%, contributing to the tech sector’s pullback.

The losses came despite Beijing’s planned measures to tackle price wars impacting the EV-Tech space, underscoring market apprehension ahead of talks. Higher tariffs could impact external demand for Chinese goods, company profits, and the broader economy.

CN Wire reported:

“China’s NDRC seeks feedback on draft amendments to China’s price law. To strengthen regulation of pricing practices by business operators. To improve dumping standards, regulate market pricing, and curb cutthroat competition.”

Technical Setup: 26,000 Resistance or 25,000 Support?

Despite the morning pullback, the Hang Seng Index continued to trade well above its July congestion zone and the 50-day Exponential Moving Average (EMA).

A trade agreement, including reduced tariffs and easing trade restrictions, could drive the Hang Seng Index toward 26,000. A breakout above 26,000 could pave the way toward 27,000. However, the risk of a sharp reversal lingers, with 25,000 the next key support level. Stalled US-China trade talks would likely weigh on risk appetite, potentially exposing the 24,500 level.

Hang Seng Technical Outlook

• Resistance: 25,500, 26,000, then 27,000.
• Support: 25,000, followed by 24,500, and the 50-day EMA (24,061).
• Short-term bias remains bullish but hinges on a US-China trade deal and fresh policy announcements from Beijing.

Hang Seng Index Forecast: Will the Index Break Above 26,000 or Drop to 25,000?

The Hang Seng Index pulled back toward its July congestion zone and the 50-day EMA. Easing Chinese restrictions on rare earth mineral exports and US control of chip exports preceded the trade talks. However, this was insufficient to offset broader trade deal uncertainty.

An imbalanced trade deal, in which China imposes zero tariffs on US goods while the US maintains levies on Chinese shipments, could challenge Beijing’s 5% GDP growth target. Under this scenario, Beijing may respond with stimulus measures to counter any effects of tariffs by targeting domestic demand.

Nevertheless, the Hang Seng Index may drop toward 25,000 due to economic uncertainty. On the other hand, a balanced trade deal, with a reduction in tariffs on China, could drive the Index toward 26,000.

Momentum will hinge on clarity from trade talks and Beijing’s next moves. Stay informed with real-time updates. Geopolitical risks and US-China developments continue to drive sentiment. Follow our live coverage and consult our economic calendar.