The Hang Seng Index continued its strong rally last week and was hovering near its highest swing since November 2021. It has jumped to a high of $25,330 on Friday, up sharply from a low of $14,627, its lowest swing in 2022.
The Hang Seng Index will react to new calls that Chinese stocks were in a bubble and top earnings by companies like Alibaba and BYD.
Analyst warns of a Chinese stock market bubble
The Hang Seng Index has been in a strong bull run in the past few months, mirroring the performance of other Chinese equities. For example, the China A50 Index rose to $14,800, its highest point since 2024.
Similarly, the Shanghai Composite Index has jumpd to a decade high, while the CSI 300 Index is up by 20% from its lowest level in 2025.
The surge happened even as the Chinese economy remained under pressure as the trade war with the United States continued. The US has placed a 30% tariff on most Chinese goods as the two countries negotiate for a better deal.
At the same time, the country has failed to end the deflationary spiral that has rdd corporate pricing power. The most recent data showed that the consumer price index was flat in July, while another one revealed that the GDP deflator remained negative.
Most importantly, there are signs that Chinese earnings are slowing down, with the forward earnings estimate falling 2.5% from its highest point this year.
This performance, coupled with the intense competition in China, has pushed more investors to start warning of a stock market bubble. An analyst told Bloomberg:
“Markets might be expecting, either correctly or incorrectly, that macroeconomic fundamentals will improve. But a bull market will not be sustainable if inflation remains close to 0% and corporate pricing power faces severe headwinds from weak domestic demand.”
The other main reason why the Hang Seng Index is doing well is that analysts anticipate more stimulus from Beijing. Most importantly, following the collapse of the real estate sector, there are signs that wealthy Chinese are now investing in the stock market because of the lack of alternatives.
Additionally, the rally is part of the ongoing surge in the global stock market. A closer look at top global indices, such as the Nasdaq 100, S&P 500, DAX, and the FTSE 100, reveals that they have all reached record highs.
Top earnings ahead
The next major catalyst for the Hang Seng Index will be earnings by top companies lik Petrochina, Meituan, Ping An Insurance, Trip.com, Byd, Alibaba, CNOOC, ICBC, Bank of China, China Merchants Bank, and Bank of Communications.
These results, together with those by PDD, will provide more color on the performance of top companies in China. Alibaba’s earnings will provide more information on its business and the impact on AI.
Hang Seng Index analysis
The weekly chart shows that the Hang Seng Index has rebounded in the past few years, moving from a low of H$14,627 in 2022 to H$25,340. It has formed a golden cross pattern as the 50-week and 200-week moving averages crossed each other.
The Relative Strength Index (RSI) and the Stochastic Oscillator have all continued rising. Therefore, the stock will likely continue rising as bulls target the next psychological point at H$27,000.
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