Hang Seng Index News: Trade Deal Boost Fades as Israel-Iran Conflict Weighs – Weekly Recap

Israel-Iran Conflict Overshadows US-China Trade Deal

A US-China trade agreement boosted demand for Hong Kong and Mainland China stocks early in the week. Offsetting the impact of China’s deteriorating trade terms and economic data on market sentiment.

The Hang Seng Index extended its gains from the previous week, advancing for the eighth time in nine weeks. Losses across EV stocks capped the weekly gains. Reports of Israel being prepared to attack Iran and news of Israel attacking Iran triggered a flight to safety, also limiting the upside.

Following last week’s weak economic data and rising Middle East tensions impacting risk sentiment, investor focus now shifts to key China data, Beijing’s potential policy response, trade developments, Middle East news, and key economic data scheduled for release on June 17.

Hong Kong and Mainland China Stocks Mixed as Israel-Iran Conflict Hits Risk Assets

US equities snapped a two-week winning streak, with the Nasdaq Composite Index falling 0.63%. Rising Middle East tensions and Israel’s attack on Iran overshadowed the US-China trade agreement, impacting Hong Kong and Mainland China-listed stocks. The Hang Seng Index gained 0.42% to end the week at 23,893. Notably, the Index dropped from a week high of 24,439. Meanwhile, Mainland China’s CSI 300 and Shanghai Composite Index both fell 0.25%.

Tech Stocks Mixed as EV Stocks Slide

The Hang Seng Tech Index dropped 0.89%, partially reversing the previous week’s 2.25% gain. Easing US-China trade tensions bolstered risk sentiment. However, silence on US restrictions on tech-related exports and the Israel-Iran conflict led to mixed performances across the tech sector. Tech giants Baidu (9888) and JD.com (9618) posted weekly gains of 1.97% and 0.85%, respectively, while Alibaba (9988) slid 3.95%.

EV stocks came under heavy selling pressure. BYD (1211) dropped 2.41%. Geely Automobile Holdings (175) plunged 8.92%, while Li Auto (2015) tumbled 5.99%. Concerns about a regional Middle East conflict and ongoing Chinese government scrutiny of automaker price strategies amid the continuing price war dragged EV shares into the red.

US-China Agree to Uphold Geneva Agreement

The US and China concluded two-day trade talks on June 10. Both sides agreed to uphold the conditions of the 90-day trade war truce, boosting demand for HK and Mainland China stocks. The agreement means China would stop delaying magnet and rare earth mineral exports to the US. However, the agreement was silent about chip and tech-related exports to China. The agreement also leaves China facing 55% tariffs while levies on US goods remain at 10%.

President Trump declared:

“Our deal with China is done, subject to final approval with President Xi and me. Full magnets, and any necessary rare earths will be supplied, up front, by China. Likewise, we will provide to China what was agreed to, including Chinese students using our colleges and universities (which has always been good with me!). We are getting a total of 55% tariffs, China is getting 10%. Relationship is excellent!”

President Trump also stated:

“Adding to the China readout, President Xi and I are going to work closely together to open China to American trade. This would be a great WIN for both countries!!!”

China Trade and Inflation Data Signal Waning Demand

Crucial economic data from China drew interest early in the week as US-China trade talks resumed on June 10. Exports rose 4.8% year-on-year in May, down from 8.1% in April. Imports dropped 3.4% in May, compared to a 0.2% decline in April. The numbers highlighted the impact of Trump’s tariff policies on global demand for Chinese goods and waning domestic consumption.

Inflation data for May underscored the effects of weakening demand. Producer prices fell 3.3% year-on-year in May, accelerating from a 2.7% drop in April. Consumer prices declined 0.1% year-on-year, mirroring April’s fall.

Key Levels to Watch: 23,500 Support or a 24,500 Test

Last week’s trade agreement drove the Hang Seng Index to within reach of 24,500 before hitting the reverse.

Easing Middle East tensions, further trade developments, and positive economic data from China could boost demand for Hong Kong stocks. A breakout above 24,000 may bring the June 11 high of 24,439 into play. A sustained move through 24,439 may enable the bulls to target the March high of 24,847. Any fresh stimulus announcements from Beijing could accelerate a return to 24,500.

Conversely, an escalation in the Israel-Iran conflict could fuel further losses. A break below 23,500 may expose the 50-day Exponential Moving Average (EMA) and 23,000.

Hang Seng Technical Outlook

• Resistance: 24,000, 24,439, and then 24,874.
• Support: 23,500, then 50-day EMA at 23,143 and 23,000.
• Bias: Neutral-to-Bullish in the short term, dependent on upcoming economic indicators, trade-related news, Middle East developments, and stimulus policy.

Forecast Summary

The Hang Seng held above its May-June congestion zone, buoyed by US-China trade developments. Upcoming economic data (due June 17) or stimulus cues from Beijing may lift market sentiment. However, trade developments and Middle East-related news will likely be pivotal.

For real-time updates on trade developments, global stimulus efforts, Middle East tensions, and central bank signals, follow our live coverage and consult our economic calendar.