How high can Hong Kong stocks surge?

The Hang Seng (HSI) index has staged a strong recovery as investors reflect on the ongoing Hong Kong’s and Chinese reopening. It rose to a high of H$19,518, the highest level since September 13. It has jumped by more than 33.5% from the lowest level this year.

Hong Kong stocks surge

The Hang Seng index has surged recently, helped by the strong comeback of the property, casino, and technology companies. Real estate companies have rallied as Beijing and local governments implement measures to support the sector.

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Country Garden Holdings and Country Garden Services shares have surged by more than 130% in the past 30 days. They remain down by over 50% this year. Longfor share price has rallied by over 103% in the past month. Country Garden and Longfor are believed to be among the best real estate companies in China. Evergrande share price has soared by over 38% from the lowest level this year.

Meanwhile, casino stocks like Sands China, and Galaxy Entertainment rallied as investors reacted to the easing Covid-19 restrictions in the country. Other companies with an exposure to the Chinese market has done relatively well in the past few weeks.

Technology companies like Alibaba, JD.com, Baidu, Alibaba Health Information Technology, have rallied by more than 20% in the past 30 days.

Meanwhile, the Hang Seng index has surged because of the change of tune by central banks like the Federal Reserve, as we wrote here. Economists polled by Reuters expect that the Fed will hike interest rates by 50 basis points in December after hiking by 0.75% in the past four meetings straight.

Further, the index has rallied because of the view that Hong Kong stocks were significantly undervalued after falling by more than 50% from the highest level in 2021.

Hang Seng forecast

The Hang Seng index has risen sharply in the past few weeks and is now sitting at the highest level since September. Along the way, the stock has rallied about the 25-day and 50-day moving averages.

The MACD has rallied above the neutral level while the Relative Strength Index (RSI) has moved close to the overbought level. The stock has risen above the important resistance level at $18,484, which was the highest level on November 16.

Therefore, the Hang Seng index will likely continue rising as bulls target the next key resistance level at $20,000. A move below the key support at $18,480 will invalidate the bullish view.