Hang Seng Index analysis ahead of key Chinese earnings

The Hang Seng Index jumped by nearly 1% on Monday morning as global stocks jumped following the weekend meeting between Chinese and American officials. It jumped to H$26,400, its highest level since October 13, and 42% above the year-to-date low.

Hopes of a China-US trade deal

The main catalyst for the ongoing Hang Seng Index deal is that there are hopes of an agreement between the US and China after a series of meetings in Malaysia.

Officials from the two countries, including Treasury Secretary Scott Bessent, said that a deal that prevents immediate escalation had been reached. 

Some parts of the agreement are on China buying soybeans worth billions of dollars and delaying the implementation of export controls on rare earth materials, which are widely used in the US manufacturing industry.

The next important event will be a meeting between Donald Trump and Xi Jinping to ratify the trade agreement at the APEC Summit in South Korea on Thursday. 

The best-performing companies in the Hang Seng Index are those with some exposure to the US, including Wuxi AppTec and Wuxi Biologics. Other top gainers were Baidu, Xinyi Glass, Alibaba, and Orient Overseas.

Potential HKMA interest rate cuts

The Hang Seng Index jumped as market participants boosted the probability of interest rate cuts by the Federal Reserve and the Hong Kong Monetary Authority (HKMA).

These odds jumped after the US published its consumer inflation report last week. This report showed that the country’s inflation  rose slightly from 2.9% in August to 3.0% in September. Core inflation, which excludes volatile food and energy, fell from 3.1% to 3.0%.

Data on Polymarket shows that the odds of a Fed cut jumped to 97%. The same is true on Kalshi and the CME Fed Futures tool. The HKMA always follows in the Federal Reserve's footsteps because of the Hong Kong dollar peg.

Key Chinese earnings ahead 

The next important catalyst for the Hang Seng Index will be earnings by some of the biggest companies in the index.

The first major constituent company to publish its results is HSBC Bank, which recently acquired Hang Seng Bank. HSBC is expected to report strong results as its turnaround measures continues.

Bank of China, which is valued at over $159 billion, will publish on Tuesday, followed by Ping An Insurance on Wednesday. 

The other notable Hang Seng companies to publish their results are Agricultural Bank of China, which will release on Thursday. It is the third-biggest bank in the world after JPMorgan and Bank of America. ICBC, the fourth-biggest bank globally, will also release its results on the same day.

Firms like Kweichow Moutai, China Merchants Bank, Sinopec, Bank of Communications, Petrochina, and CNOOC will also publish their results later this week.

Hang Seng Index technical analysis 

The daily timeframe chart shows that the Hang Seng Index has been in an uptrend and is now hovering near its highest level this year. 

It has bounced back from this month's low of H$25,124 to the current H$26,420 and is now above the 50-day and 100-day Exponential Moving Averages (EMA).

The Relative Strength Index (RSI) has just crossed the important point at 50 and is pointing upwards. Therefore, the index will keep rising as bulls target the year-to-date high of $27,305. A move below the support at $25,125 will invalidate the bullish outlook.