Hang Seng: Bullish flag emerges ahead of Shein IPO, Baidu and Alibaba earnings

The Hang Seng Index rose to 25,517 on Monday as investors waited for the highly anticipated Shein IPO and key earnings by some of the biggest constituent companies. It has soared by 13% from its lowest level this year.

Shein IPO is the top Hong Kong story this week

Hong Kong stocks will be in the spotlight this week as Shein launches its IPO. According to Reuters, the company may go public in the Hong Kong Stock Exchange as soon as this week after getting the regulatory approval. It is targeting a valuation of between $30 billion and $40 billion in this offering. At its peak, the company was valued at over $98 billion.

The IPO comes at a difficult time for Shein, a company known for cheap clothing sales. Its revenue growth has stalled, partly because of the end of de minimis in the United States. This provision allowed American buyers to buy small packages from China and not pay any import tariffs. 

There are also concerns about weak core earnings and shrinking margins. It made a $99 million loss in the last quarter as challenges continued. As a result, it will be interesting to see how the stock performs when it launches its IPO.

Alibaba and Baidu earnings

The other key catalyst for the Hang Seng Index will come from Alibaba, the giant technology company. First, the stock is reacting to a story that Qwen, its AI models, are firing on all cylinders and have hit 3 billion downloads. They are beating those made by companies like Meta Platforms and Google. 

The stock will also be in focus as the company publishes its financial results, which will provide more color on its business. Its last financial results showed that the company’s business was doing well, helped by its AI segment. However, the rising costs dragged its earnings, with a key profit metric falling by over 80%.

Baidu, China’s answer to Google, will also release its financial results this week, shedding more color on its growth. These results come at a time when the stock has plunged by over 30% from the year-to-date high.

The numbers will provide more hints on how it is benefiting from the AI sector. Also, it will likely shed color on the planned Kunluxin IPO, which is expected to value it at over $50 billion, higher than Baidu’s valuation of $35 billion.

The Hang Seng Index will also react to more earnings by companies like Ping An Insurance, China Telecom, and NetEase.

Hang Seng Index technical analysis

HSI Index chart | Source: TradingView 

The daily chart shows that the Hang Seng Index has pulled back in the past few days, moving from a high of 26,190 to 25,522. A closer look shows that the index has held steady above the 50-day moving average. 

It has also formed a bullish flag pattern and is now on the flag section. The Relative Strength Index (RSI) has pointed upwards to the current 54. Therefore, the path of the least resistance is upwards, with the initial resistance level to watch being at 26,190. A move above that level will point to more gains in the near term.