Hang Seng and Shanghai Composite indices jump as China's GDP surges

Chinese stocks continued their uptrend on Wednesday after an encouraging GDP report by a top statistics agency. The Shanghai Composite Index jumped to CNY 4,637 its highest level since March 18, while the Hang Seng soared to HKD 26,185. The two have jumped by nearly 10% from the lowest level this year.

China GDP soared in the first quarter

The Chinese economy did modestly well in the first quarter as US officials were planning their plans to launch a war against Iran. 

Data released by the National Statistics Bureau (NSB) showed that the economy expanded by 5% in Q1, a major improvement from the previous quarter’s 4.5%. This growth was higher than the average estimate of 4.8%. The GDP expanded by 1.3% on a QoQ basis. 

More data revealed that the country’s fixed asset investments rose by 1.7% in March, while the industrial capacity utilization rose to 73.6%. Export growth also continued as demand for its products rose.

Still, the main blemish in the report was on the unemployment rate and the housing market. Data showed that the house price index dropped by 3.4% in March, while the unemployment rate rose from 5.3% to 5.4%.

These numbers mean that the Chinese economy did well in the first quarter as Beijing works to achieve a 5% growth rate. On the other hand, the FedNow tool estimates that the US economy expanded by between 0.5% and 2.6% during the quarter.

The Hang Seng and Shanghai Composite indices also jumped as hopes that the US-Iran war will end soon. In a statement on Wednesday, Trump noted that he hoped that the war would end. The two sides are considering extending their truce as they work on an agreement.

These hopes explain why American stock indices have continued rising, with the blue-chip S&P 500 Index jumping to a record high, as we predicted. The Nasdaq 100 and Dow Jones are also approaching their highs.

Hang Seng Index technical analysis

The blue-chip Hang Seng Index crashed to a low of H$24,210 in March as the panic of the Iran war spread. Its lowest level this year was down by 14.6% from its highest point this year. 

Like other global indices, this decline marked a new bottom and it started to climb, eventually reaching a high of $26,155 today. It has moved above the 23.6% Fibonacci Retracement level and the 50-day moving average.

Therefore, the most likely continue rising as bulls target the year-to-date high of $27,960, which is about 7.40% above the current level. 

The bullish outlook will become invalid if it drops below the support at H$24,225. Such a move will point to more downside, potentially to the 50% retracement level at H$23,645.

HSI chart | Source: TradingView

Shanghai Composite Index analysis 

The closely-watched Shanghai Composite Index has also rebounded after bottoming at a low of CNY 4,350 in April. Its performance has mirrored that of the Hang Seng and most Chinese indices.

HSI Index chart | Source: TradingView

It has recently crossed the 50-day moving average. Also, it has filled a gap that it formed when the war started. Therefore, the index will likely continue doing well as investors target the next key level at CNY 4,800.