Hang Seng Index News: Stimulus vs Recession Risks – Will Bulls Regain Control?

Hang Seng Index Dips as US Recession Risks Mount

Will rising US recession risks compound concerns about the impact of tariffs on risk assets? The Hang Seng Index trended lower on Wednesday, August 6, potentially snapping a two-day winning streak. US Services PMI data signaled a sharp slowdown in sector growth, raising concerns about the US economy.

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

Hang Seng Index Drops as Mainland Stocks Struggle for Direction

The Hang Seng Index fell 0.31% to 24,824 in morning trading, pulling back from an early high of 24,955. Mainland China’s CSI 300 edged 0.04% lower, while the Shanghai Composite Index edged 0.06% higher.

Overnight (August 5), US equity markets posted losses as investors reacted to July’s ISM Services PMI, which signaled a sharper loss of momentum across the sector. The Nasdaq Composite Index slid 0.65%, while the Dow and the S&P 500 closed the session down 0.14% and 0.49%, respectively.

The ISM Services PMI fell to 50.1 in July, down from 50.8 in June. Economists had expected an increase to 51.5. Notably, labor market conditions deteriorated, with the Employment Index dropping from 47.2 to 46.4. The weaker labor market data aligned with last week’s US Jobs Report that triggered recession fears while lifting bets on a September Fed rate cut.

EV and Tech Stocks Stumble Amid Demand Concerns

Rising US recession risks raised concerns about demand, impacting electric vehicle (EV) stocks. Li Auto (2015) tumbled 3.36%, while BYD (1211) slid 1.52%. This week, BYD reported a 10% drop in monthly sales in July, highlighting the weakening demand backdrop.

Tech giants Alibaba (9988) and Baidu (9888) declined 1.40% and 0.52%, respectively, dragging the Hang Seng Tech Index down 0.62%.

PBoC and Beijing Policy Moves Under the Spotlight

However, hopes for further People’s Bank of China (PBoC) interest rate cuts cushioned the downside. The PBoC will reportedly pursue a moderately loose monetary policy over the remainder of 2025, raising expectations of further interest rate cuts.

Meanwhile, Beijing announced fresh measures to boost domestic consumption. The CN Wire reported:

“China’s State Council issues guidelines on gradually implementing free preschool education. China to waive tuition for final-year children in public preschools starting fall 2025, to reduce or waive preschool childcare and education fees.”

Brian Tycango, editor at Stansberry Research, commented on the significance of the announcement, stating:

“To those who understand… having free preschooling is a BIG incentive for couples to have children. Often costing as much as (or even more than) regular primary education, preschool requirements often put an added financial burden on young parents.”

Beijing’s policy moves will likely be crucial as economists assess the effects of US tariffs on China’s trade terms and broader economy.

Technical Setup: Hang Seng Nears the 25,000 Level

Despite edging lower in early trading, the Hang Seng Index continues to hold above the July congestion zone and the 50-day Exponential Moving Average (EMA), indicating a bullish bias.

Easing trade tensions, progress toward a US-China trade deal, and fresh stimulus measures from Beijing may drive the Hang Seng Index to 25,000. A breakout above 25,000 could pave the way toward the July 24 high of 25,736.

On the other hand, renewed US-China trade friction and the absence of effective stimulus may weigh on sentiment. A drop below the 24,500 level could enable the bears to target the 50-day EMA and potentially expose the crucial 24,000 support level.

Hang Seng Technical Outlook

• Resistance: 25,000, 25,736, then 26,000.
• Support: 24,500, the 50-day EMA (24,311), then 24,000.
• The short-term bias remains bullish, but hinges on US-China trade news, Beijing’s stimulus announcements, and upcoming Chinese trade data.

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

The Hang Seng Index trades above July’s congestion zone. China’s positive services sector PMI data and fresh stimulus announcements have bolstered demand for Hong Kong and Mainland-listed stocks. Nevertheless, uncertainties about China’s trade terms have left the Index below the July 24 high of 25,736.

Additional stimulus measures and positive US-China trade developments could send the Hang Seng Index above 25,000.

However, a breakdown in the extended 90-day trade truce may drag 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.