The Hang Seng Index jumped to its highest level since June 15, even after China published a weak macro report. It soared to 24,692, up by 9.7% from its lowest level this year, with healthcare and biotechnology-related stocks being the biggest gainers.
Hang Seng jumps after weak China macro data
Hong Kong shares soared by over 1% after China’s National Bureau of Statistics (NBS) published a weak GDP report. The report showed that the economy grew by 4.3% in the second quarter, lower than the expected growth rate of 4.5%. It was also a significant deterioration from the first quarter’s growth of 5.0%.
Fixed asset investments dropped by 5.7% in Q2 after falling by 4.1% in Q1. Analysts were expecting the figure to show that these investments dropped by 5.0%.
The economy grew by 4.7% in the first half of the year, higher than the expected 4.5%. More data showed that house prices dropped by 3.3% in June, continuing a weakness that has been going on for years.
On the positive side, industrial production rose by 5.3% in June as the US and Iran signed their ceasefire agreement. The unemployment rate dropped from 5.1% to 5.0%, while retail sales rose by 1.0%. As such, the Hang Seng Index likely jumped because of signs that the economy is starting to tick up.
READ MORE: Top 4 catalysts that will drive the Hang Seng Index this week
These numbers came a day after Beijing released a strong trade report. This number showed that China’s exports jumped by 27% in June, higher than the expected 18.2%. Imports also soared by 36% in June after growing by 27.4% in the previous month, with the trade surplus jumping to $125 billion.
Healthcare and biotech stocks soar
The ongoing Hang Seng Index rally is being driven by companies in the healthcare and biotech sectors, which are making substantial progress in the country.
Innovent Biologics jumped by 8.50%, while WuXi AppTec soared by 5.4%. CSPC Pharmaceutical Group, Hansoh Pharmaceuticals, Sino Biopharmaceutical, and Wuxi Biologics were all up by over 4%.
China’s healthcare and biotech industries have done well such that US policymakers are wondering on how to respond. According to Axios, the life science community is divided on whether to introduce protectionist policies to preserve American dominance. A recent Evaluate report said:
“China is now the main source of licensing assets for Western pharma, and for a growing class of built-to-buy biotechs.”
That report predicted that Chinese assets will make up more than two-thirds of total industry deal value this year, up by 42% YoY.
Meanwhile, companies like China Hongqiao, Aluminium Corporation, Xiaomi, and China Life Insurance were the top laggards today.
Hang Seng Index technical analysis
HSI stock chart | Source: TradingView
The daily chart shows that the Hang Seng Index has jumped in the past few weeks. It has soared from a low of 22,504 in June to 24,692 today. Most importantly, it has crossed the important resistance level of 24,185, its lowest swing in March this year. Moving above that level confirmed the bullish outlook.
The index has jumped above the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) is nearing the key level of 70. Therefore, the path of the least resistance is upward, with the next key target being at 25,000.
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