Hang Seng index sits and waits ahead of Tencent earnings

The Hang Seng index crawled back slightly as the recent sell-off took a breather after American stocks jumped on Monday. The index rose to a high of H$19,180, which was a few points above this week’s low of $18,863.

Tencent earnings ahead

The Hang Seng index continued rising on Tuesday after Wall Street indices like the Dow Jones, Nasdaq 100, and Russell 100 rose on Monday. These indices jumped even as concerns of the banking sector remained following the implosion of Credit Suisse.

As I wrote in this article, First Republic Bank share price drifted downwards by more than 30% as concerns about the company remained. Just last week, the bank received a whopping $30 billion from the biggest banks in the US like JP Morgan and Goldman Sachs.

Therefore, the performance of American stocks was likely because of the rising hopes that the Federal Reserve will start going slow on rate hikes when it meets on Wednesday.

The biggest catalyst for the Hang Seng index will be the upcoming Tencent earnings that are scheduled on Wednesday. These earnings are important because Tencent stock price has jumped by over 40% from their lowest point in October last year.

The stock has jumped as investors price in strong revenue and earnings growth as Beijing dials down its tone on tech regulations. Also, the market seems to believe that Tencent will be a major beneficiary of China’s ongoing reopening.

Further, the company is set to release important games like Valorant and Pokemon Unite that will boost its income. Analysts have boosted the Tencent stock price target by about 17% this year. In a note, analysts at Arbrdn said:

“Next leg of gains I think will come from evidencing the acceleration of revenue and that’s coming hand in hand with margin expansion. A key area to watch will be contribution from video accounts, which could help surprise on the upside.” 

Hang Seng index forecast

HSI chart by TradingView

The 4H chart shows that the Hang Seng index has been in a strong bearish trend in the past few weeks. In this period, it has moved below the 38.2% Fibonacci Retracement level. It has also formed a descending channel that is shown in blue. The index also remains comfortably below the 25-period and 50-period exponential moving averages (EMA). 

Therefore, the index will likely continue falling after Tencent earnings on Wednesday. The next key target for the index will be at $18,000.