The Hang Seng index pulled back slightly after the stronger-than-expected China GDP data. The blue-chip index retreated by ~0.75% and was trading at H$20,580, which was a few points below this month’s high of H$20,793. It is ~9.17% above the lowest level this year.
China GDP data
The Chinese economy is firing on all cylinders after the country removed the Covid-zero policies. According to the statistics agency, the economy expanded by 2.2% in Q1 as was widely expected. On a QoQ basis, the economy grew by 4.5%, higher than the median estimate of 4.0%.
Additional data revealed that the country’s unemployment rate dropped from 5.5% in February to 5.3% in March. This decline was better than the estimated 5.5%. The retail sales sector grew by 10.6% as Chinese and foreigners boosted their spending.
Industrial production rose by 3.5% while fixed asset investments increased by 5.1%. These numbers mean that the economy was recovering well, which is a good thing for the country. There have been doubts about the pace of the recovery.
Flash estimates were showing that the economy would do well in Q1. A report by Nomura showed that electricity consumption increased sharply during the quarter. Another report revealed that housing sales have been growing rapidly.
The Hang Seng index decline was mostly because of specific companies. ANTA Sports stock price plunged by more than 7% after the company raised cash by selling its stock. In most cases, companies drop when they raise equity because it dilutes their shares.
Other top underperformers in the Hang Seng index were SMIC, Sunny Optical, Lenovo, and Xiaomi. All these companies dropped by more than 2%. On the other hand, insurance companies like China Life Insurance and Ping An were the best performers. Ping An shares jumped after the company insisted that it wants HSBC to split its business.
Hang Seng index forecast
HSI chart by TradingView
The daily chart shows that the Hang Seng index has been in a slow recovery after it tumbled to a low of H$18,825 in March. On the daily chart, the index has jumped above the 25-day and 50-day exponential moving averages (EMA). The index has also retested the key resistance point at H$20,766, the highest point on March 7.
At the same time, the Relative Strength Index (RSI) is approaching the overbought level of 70. Therefore, the index will likely continue rising, as buyers target the key resistance point at H$22,000.
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