Hang Seng Index nears golden cross as Meituan, Lenovo, Alibaba stocks jump

The Hang Seng Index has rebounded, moving from the June low of 22,516 to a high of 26,200. It has jumped to its highest level since May 15, and is about to form a golden cross pattern as technology companies recover. 

Key technology stocks in Hong Kong have jumped

The Hang Seng Index has done well as investors have rotated to Hong Kong technology companies that underperformed the market earlier this year. 

This rotation happened as cracks emerged in other key indices like South Korea’s Kospi and Japan’s Nikkei 225. 

A closer look shows that the best performers in the last month were some of the top laggards earlier this year. Meituan, the top food delivery company in China, has jumped by 30% in this period.

JD Logistics and Lenovo Group have jumped by over 20% in this period. Other top gainers are companies like Xiaomi, Trip.com, and Tencent. 

Alibaba, a top Chinese e-commerce and cloud computing giant, has also jumped by over 40% from its lowest level this year, helped by its growing AI investments. Just this week, the company released a new AI model whose performance aligns with that of other top names like Kimi and Claude.

In addition to the ongoing rotation, the Hang Seng Index is jumping as investors hunt for bargains. Some of the top constituent companies are trading at a significant discount compared to other regional and global peers.

A good example of this is Lenovo, whose trailing price-to-earnings ratio of 20 is much lower than Dell’s, its top competitor. Xiaomi has a PE ratio of 19, while Tencent has 17. In total, the estimate is that the Hang Seng Index has a forward P/E ratio of 14, lower than other global indices.

Meanwhile, there is a likelihood that Beijing will provide a stimulus package after a recent report showed that the economy slowed dramatically in the last quarter. Still, recent reports suggest that Beijing has little appetite for such a move as it works to curb the ongoing industrial overcapacity. 

Top China companies to publish earnings

Looking forward, the next key catalyst for the Hang Seng Index will be key earnings. Sands China, a top constituent company, will release its earnings on August 7. Tencent, a top company in the fund releases the second quarter numbers on August 12, while NetEase, JD, and Lenovo will release a day later. 

Later this month, top companies in the index like Ping An Insurance, China Telecom, and CITIC Securities will release their numbers. 

Hang Seng Index technical analysis

HSI Index chart | Source: TradingView

The daily chart shows that the Hang Seng Index has been in an uptrend in the past few weeks, moving from a low of 22,516 in late June to the current 25,881. Most notably, the index is about to form a golden cross pattern as the spread between the 50-day and 200-day Exponential Moving Averages (EMA) narrow. If this happens, it will be the first time it has happened since September 2024. 

The index is in the process of forming the bullish pennant pattern, which is characterized by a vertical line and a symmetrical triangle. Therefore, there is a likelihood that the index will continue rising, possibly to the key resistance level of 26,840. 

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