The Hang Seng Index rose to the highest level since April 2 as investors waited cautiously on the upcoming US and China trade talks in Switzerland. The index, which tracks some of the top Chinese companies, rose to $23,170 and then pulled back to $22,773. This article provides a forecast for the index and what to expect.
US and China trade talks
The Hang Seng Index rose after it was revealed that Scott Bessent and Jamieson Greer will travel to Switzerland to meet with their Chinese counterparts. He Lifeng will lead the Chinese delegation.
This is the first time that the US and Chinese officials are meeting since Donald Trump announced his tariffs. Since then, the two superpowers have boosted their tariffs, with the US raising levies to 145% and China implemented tariffs to 125%.
The market hopes that the new trade talks will help to address the key issues between the two countries. Precisely, the US wants China to help it reduce its trade deficit, which surged to $140 billion in March.
However, these talks may not have a major impact, at least initially, because of the uncertainty surrounding what Trump wants.
For one, Trump has claimed that the US was collecting ‘billions and billions’ of dollars from tariffs, meaning that he sees them as a revenue generator. As such, lowering the tariffs the US is charging on Chinese goods will likely lower the revenue that the US is collecting.
Also, lowering tariffs on these goods means that the US will continue purchasing more goods from China, leading to a higher trade deficit.
Most notably, a deal will likely lead to lower investments by foreign companies in the US as they will continue sourcing goods from the country. In a statement, Beijing expressed about the sincerity of these talks, saying:
“If you say one thing and do another, or even attempt to continue to coerce and blackmail under the guise of talks, China will never agree, let alone sacrifice its principled position and international fairness and justice to seek any agreement.”
Read more: Top reasons why the Hang Seng Index may surge in 2025
China stimulus measures
The Hang Seng Index also rose after Beijing announced more stimulus measures as it seeks to hit the 5% target. The People’s Bank of China (PBOC) reduced a key policy rate, a move that it hopes will make capital more accessible in the country.
Further, China reduced the reserve requirement ratio from 9.50% to 9%. These actions happened the same day the Federal Reserve delivered its interest rate decision.
Economists believe that the bank will decide to leave interest rates unchanged in this meeting. Some of the top experts expect the bank to start cutting rates either in June or in July.
Many Hang Seng Index constituents have done well this year. The top gainers were firms like Chow Tai Fook Jewellery, Alibaba Health Information, Semiconductor Manufacturing International, Alibaba Group, BYD, Xiaomi, and Hanso Pharmaceutical Group.
Hang Seng Index technical analysis
The weekly chart shows that the Hang Seng Index has been in a strong bullish trend in the past few months. It has moved from a low of $14,787 last year to $23,000. It has remained above the 50-week moving average.
The index has formed an ascending channel, which resembles to a giant megaphone pattern. Also, the Relative Strength Index (RSI) has continued rising.
Therefore, the index will likely continue rising as bulls target the key resistance at $24,835, up by about 9% above the current level. A move below the key support at $22,000 will invalidate the bullish outlook.
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