Hang Seng index slips as energy stocks lead, real estate lags

By:
on May 16, 2023
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  • The Hang Seng index has been in a consolidation phase since March.
  • Energy stocks like Petrochina and China Petroleum have jumped.
  • Real estate and technology stocks have lagged.

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The Hang Seng index has moved sideways since March this year even as its global peers like the Topix and the Nasdaq 100 indices jumped. The index was trading at H$20,000, where it has been in the past few months. This price is about 36% above the lowest point in 2022.

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Hong Kong stocks hit a wall

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The Hang Seng index started the year well as investors focused on the great China comeback. The expectation among investors was that China would have a spectacular comeback as it reopened its borders and ended the Covid-zero policies.

Recent data shows that the situation has not been as expected. As I wrote in this article, data published on Tuesday showed that the economy is not doing well. Industrial production jumped by 5.6% on a year-on-year basis, lower than the estimate of 10.9%.

Additional data showed that youth unemployment rate jumped despite the reopening. Retail sales rose by 18.4% in April on a year-on-year basis. This annual increase was mostly because of a low base since the country was in a lockdown in April last year,

Hong Kong’s economy is also recovering at a slower pace than expected. Data published on Friday revealed that the economy expanded by 2.7% on a YoY basis, helped by tourism and retail. The government expects that the economy will expand by between 3.5% and 5.5% this year.

The best Hang Seng constituents this year are PetroChina, China Petroleum & Chemicals and CNOOC. These oil and gas companies have done well even as the prices of oil and gas retreated this year. Other top performers in the index are China Unicom and China Mobile, which are telecommunication companies. The two have jumped by over 25% this year.

The other top performers in the Hang Seng index are BYD, HSBC, China Shenhua Energy, and Citic Pacific. On the other hand, real estate companies like Country Carden, Longfor Properties, and Hang Lung have been the worst performers. Technology companies like Alibaba and Meituan have also slipped.

Hang Seng index forecast

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HSI chart by TradingView

The 4H chart shows that the Hang Seng index has moved sideways in the past few days. This price remains below the important resistance point at H$20,766, the highest point on April 24. It is also consolidating at the 25-period and 50-period exponential moving averages (EMA).

The Relative Strength Index (RSI) has moved slightly above the neutral point. Therefore, the index will likely remain in this range in the near term. More upside will be confirmed if the price moves above the key resistance at H$20,766.

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