Here’s what’s driving the Hang Seng Index rally today

The Hang Seng Index continued its strong bull run on Thursday as investors cheered the new developments in China, where officials are considering measures to boost the property market. It jumped to a high of H$27,870, its highest level since July 2021, and 90% from the 2022 low.

China to Ease the “Three Red Lines” policy

One major catalyst for the ongoing Hang Seng Index rally is a report that Beijing was considering ending the Three Red Lines policy that led to the collapse of companies like Evergrande, Country Garden, Kaisa, and Fantasia Holdings.

According to Bloomberg, developers are no longer required to submit metrics designed to rein in their debt buildup. The three red lines forced companies to submit data on the liability-to-asset ratio, net gearing ratio, and cash-to-short-term debt ratio.

Developers are required to have a liability-to-asset ratio of less than 70%, net gearing ratio of less than 100%, and a cash-to-short-term debt ratio of at least 1. These measures were introduced to ensure China's real estate sector was healthy.

As a result, property stocks were among the top gainers on Thursday. Longfor Group stock jumped by over 5%, while China Overseas Land, China Resources Land, and Henderson Land stocks jumped by over 4.5%.

The ongoing rally also helped to lift copper to a record high as investors anticipated renewed demand from Chinese developers.

Casino stocks slump after weak Macau results 

The rally in the property sector was offset by a big decline in casino stocks. Sands stock plunged by 7.38%, while Galaxy Entertainment fell by 3.50%.

The crash happened after Las Vegas Sands published weak financial results, which it attributed to its Macau operations. Its EBITDA from Macau came in at $608 million, lower than the median estimate of $628 million. Also, the adjusted profit margin dropped to 28.29%, the lowest level in a decade.

The main reason for this is the rising competition in Macau, which is squeezing margins as companies pivot away from high rollers towards mass market gamers. Also, China has continued to crack down on VIP bettors.

The Hang Seng Index jumped after the Federal Reserve delivered its interest rate decision, which was in line with what analysts were expecting. 

Hang Seng Index technical analysis 

HSI stock chart | Source: TradingView

The weekly timeframe chart shows that the Hang Seng Index has rebounded in the past few years. It jumped from a low of $14,825 in January 2024 to the current $28,000.

The index has moved above the key resistance level at $27,165, invalidating the forming double-top pattern, a common bearish reversal sign. 

It has remained above the 50-week and 100-week Exponential Moving Averages (EMA), a sign that bulls remain in control. The index has remained above the Supertrend indicator.

Therefore, the most likely scenario is where the index will likely continue rising as bulls target the next key resistance level at $30,000. A drop below the key support level at $27,164 will invalidate the bullish outlook.