Hang Seng Index is soaring as Kospi and Nikkei 225 implode: here’s why

The Hang Seng Index has outperformed its major Asian peers this year, even as the Kospi and Nikkei 225 have come under pressure. The index has rebounded nearly 14% from its lowest level this year, while the Nikkei 225 and Kospi have fallen about 15% and 40%, respectively, from their year-highs.

Investors rotate to Chinese tech giants

The ongoing retreat in the Kospi and Nikkei 225 indices has been driven by semiconductor and memory companies. In South Korea, the Samsung Electronics and SK Hynix stocks have plunged by over 45% and 55% from the year-to-date high.

Similarly, in Japan, companies like Kioxia, Softbank, Tokyo Electron, and Advantest have all plunged during the ongoing unwinding of the artificial intelligence trade.

There are signs that investors are now rotating to Chinese companies that have underperformed the market in the past few months. One reason for this is that many of China’s biggest names like Alibaba, Meituan, and Xiaomi have become bargains.

At the same time, market participants are waiting for a potential Chinese stimulus after the recent macro data disappointed. A report showed that the country’s GDP expanded by 4.3% in the last quarter, the slowest rate in years. 

China is also making strong progress in the AI industry. Apple has selected Alibaba’s Qwen to power its AI goals, while Moonshot’s Kimi K3 has become one of the most advanced AI models in globally.

Most recently, China’s CXMT has become one of the top names in the memory industry. Its stock jumped by over 500% when it went public in Hong Kong recently. 

Top Chinese technology companies have rebounded

Xiaomi stock has led the recent surge, rising by over 45% in the last month as investors bought the dip. Despite the surge, Xiaomi remains significantly lower than its all-time high as its growth stalled and profits narrowed amid the soaring memory costs. 

Meituan stock has soared by over 37% in the last month, making it the best-performing Hang Seng constituent. Like Xiaomi, Meituan has been under pressure because of the ongoing price wars. Top companies like Alibaba and JD are all attempting to take market share in the food delivery industry.

Other top companies like Li Auto, Trip.com, BYD, and Tencent have jumped by double digits in the past few days.

Companies in other sectors have also bounced back in this period. The most notable ones are CSPC Pharmaceuticals, JD Logistics, JD Health, Tingyi, Orient Pharmaceuticals, and Sino Biopharmaceuticals

Only four companies in the Hang Seng Index have dropped in the last month. This includes companies like Laopu Gold, Semiconductor Manufacturing International, Sunny Optical, and Lenovo Group.

Hang Seng Index technical analysis

HSI Index chart | Source: TradingView

The daily chart shows that the Hang Seng Index has been in a strong bullish trend in the past few weeks. It has soared from the year-to-date low of 22,526 to the current 25,623. 

Notably, the index has already jumped above the 200-day moving average, a sign that bulls are prevailing. It has also jumped above the Major S/R pivot point and is slowly approaching the strong, pivot, reverse level.

Therefore, it will likely continue rising as investors rotate from other Asian indices. If this happens, the next key target to watch will be at 26,000.