Hang Seng Index News: Tech Sell-Off and Deflation Fears Stall Rally Below 25,000

Hang Seng Index Dips on Earnings Woes

Is there an end in sight to China’s deflation troubles? The Hang Seng Index fell in early trading on Friday, August 8, as investors shifted their focus to corporate earnings.

US-China trade developments, China’s key inflation data, and stimulus measures from Beijing are likely to fuel sentiment. These factors may determine whether the Index will drop below 24,500 or will target 26,000.

Hang Seng Index Winning Streak at Risk

The Hang Seng Index declined 0.56% to 24,941 in morning trading, potentially snapping a four-day winning streak. Chinese chipmaker Semiconductor Manufacturing International Co. (0981) dropped 5% after releasing disappointing earnings results, weighing on the broader tech sector. Meanwhile, Mainland China’s CSI 300 and Shanghai Composite advanced 0.06% and 0.03%, respectively.

Investor caution ahead of Saturday’s crucial inflation and producer price numbers tempered demand for risk assets. Economists forecast consumer prices to fall 0.1% year-on-year in July after rising 0.1% in June. Producer prices are expected to decline 3.3% year-on-year, following June’s 3.6% drop. Intensifying competition and deflationary pressures may impact corporate earnings and share prices.

Overnight (August 7), US equity markets posted mixed performances as US economic data and corporate news influenced sentiment. The Nasdaq Composite Index gained 0.35%, while the Dow fell 0.51% and the S&P 500 edged down 0.08%.

Eli Lilly (LLY) plunged 14.14% following disappointing trial data on its oral weight-loss drug. Apple Inc. (AAPL) rallied 3.18%, extending its gains from Wednesday, on relief that the US tech giants will avoid 100% tariffs on chips and semiconductors.

However, weaker US labor market data weighed on risk sentiment while also bolstering expectations of a September Fed rate cut. Initial jobless claims rose from 219k (week ending July 26) to 226k (week ending August 2). Unit labor costs increased 1.6% quarter-on-quarter in the second quarter, easing from a 6.9% increase in Q1.

Tech and EV Stocks Pull the Hang Seng Index into the Red

Disappointing earnings results sent the Hang Seng Tech Index down 1.08%. Tech giants Alibaba (9988) and Baidu (9888) fell 1.51% and 1.15%, respectively, with Tencent (0700) down 0.62%.

Electric vehicle (EV) stocks had a mixed morning session. Li Auto (2015) gained 0.67%, while BYD (1211) fell 0.53%.

Technical Setup: Hang Seng Dips Below 25,000 as Earnings Weigh on Sentiment

Despite Friday’s losses, the Hang Seng Index remained above the July congestion zone and the 50-day EMA, maintaining a bullish bias.

Progress toward a trade deal, easing deflationary pressures, and fresh stimulus from Beijing could drive the Hang Seng Index toward the July 24 high of 25,736. Sustained buying may enable the bulls to target the 26,000 level.

Conversely, renewed US-China trade friction, rising deflationary pressures, and the absence of new stimulus from Beijing could weaken risk sentiment. A drop below the 24,500 level may bring the 50-day EMA into play. If this support is breached, bearish momentum could drive the Index toward the 24,000 level.

Hang Seng Technical Outlook

• Resistance: 25,000, 25,736, then 26,000.
• Support: 24,500, the 50-day EMA (24,368), then 24,000.
• The short-term bias remains bullish, but it hinges on a US-China trade deal, Beijing’s stimulus measures, and incoming Chinese inflation data.

Hang Seng Forecast: Will the Index Drop Below 24,500 or Revisit 25,736?

After the morning losses, the Hang Seng Index edged toward July’s congestion zone. Nevertheless, hopes of a US-China trade agreement, a Fed rate cut, and Beijing’s continued policy support cushioned the downside. However, trade uncertainties remain as US tariffs on transshipments expose China’s efforts to bypass levies. These uncertainties continue to leave the Index below the July 24 high of 25,736, exposing the 24,500 level.

Higher tariffs may impact exporters and intensify domestic competition, further impacting profit margins. Weaker profits may affect the labor market and broader Chinese economy.

However, further stimulus measures and a US-China trade deal could send the Hang Seng Index toward 25,736, bringing the 26,000 level into sight.

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