Hang Seng Drops as China’s Rate Cuts Underwhelmed Markets
HKG33 Analysis
The index posted a relief rally from February to May on encouraging economic data, Beijing's measures to support growth and strong earnings from tech giants, but that did not last as it runs its second straight losing month. Recent releases sparked renewed concerns around the economy, as the 4.7% y/y Q2 expansion was the smallest in over a year, factory activity remains subdued, consumer spending weak and the property sector in distress. Renewed Sino-Western frictions added to the woes.
Reacting to the situation, the country's central bank slashed a series of short and long term interest rates this week, signaling stronger willingness to prop the bumpy recovery. These action included a 10 basis point cut to the five-year Loan Prime Rate (LPR) [1] which determines mortgage pricing that could support the real estate market. On the fiscal side, authorities announced a program to replace old consumer goods, in an effort to spur domestic demand. [2]
But this urgency to ease monetary conditions, appears to have rubbed markets the wrong way, likely interpreted as a sign of fear around the economy. Despite the barrage of cuts, these were mostly small and not enough to impress markets. Furthermore, these actions are not without drawbacks. Treasury yields slumped and there is risk of further Yuan weakness, which can undermine confidence and aggravate capital outflows.
As a result, HKG33 extends its losses this week, despite the stimulus efforts. It is now vulnerable to the April lows (16,008), although fresh impetus would be needed for a breach. On the other hand, the supportive measures can help the economy and sentiment. On the technical side, the RSI points to oversold condition that can contain the fall and give HKG33 the chance to bounce. However the upside is unfriendly and strong catalyst would be needed for moving past the critical cluster, comprising of the EMA200, the daily Ichimoku Cloud and the descending trend line form the 2024 peak.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 26 Jul 2024 http://www.pbc.gov.cn/en/3688229/3688335/3883798/5410113/index.html | |
| Retrieved 17 May 2026 https://english.www.gov.cn/news/202407/25/content_WS66a2385ec6d0868f4e8e9738.html |
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