The Hang Seng Index remains in a deep bear market and is hovering at its lowest level since July 17th as the crisis between the US and Iran escalates. It dropped to 24,570, down by over 11.65% from its highest level this year.
Crude oil prices are raising inflation concerns
The Hang Seng Index dropped today, mirroring losses across other major global indices, including the Dow Jones, Nasdaq 100, and S&P 500. In the US, the Dow Jones fell by 316 points, while the S&P 500 and Nasdaq 100 declined by 45 and 171 points, respectively. Asian markets followed suit, with the Nikkei 225 and Kospi both falling by over 1%.
The Hang Seng Index is falling as investors remain concerned about the rising crude oil prices as the crisis in the Middle East escalates. Iran and the US launched major attacks against Jordan, while Saudi Arabia and Houthis continued fighting. Houthis have attacked some major oil plants and taken a major strategic port.
Soaring oil prices are negative for the Hang Seng Index because of the rising cost of doing business. It also means that inflation will remain at an elevated level, pushing the Federal Reserve to hike interest rates. The ECB has already delivered its rate hike in response to the elevated inflation.
Analysts are now boosting their expectations that the Federal Reserve will hike interest rates next week. Odds of a rate hike happening have jumped to 62% on Polymarket.
Top Chinese stocks have slipped
The Hang Seng Index has been dragged by several notable companies. JD Logistics stock has plunged by 26% in the last month as the rising costs have affected its profitability. Its last results showed that its revenue jumped by 24% in the June quarter to over 64.1 billion yuan, while its profit rose by just 2.5% to 2.4 billion yuan.
Kuaishou Technology stock has also dropped by 26% in the same period, while WH Group, Meituan, Shenzhou International, and Trip.com have plunged by over 18%. All these companies have faced substantial challenges. Meituan has dropped because of the rising competition in the food delivery industry.
On the other hand, there have been some strong performers in the past few months. For example, Lenovo Group has jumped by 11% in the last month as demand for its products continued rising amid the AI boom. The other top gainers were companies like Sunny Optical, CITIC, CK Infrastructure, and Power Assets.
Hang Seng Index technical analysis
Hang Seng Index chart | Source: TradingView
The daily chart shows that the Hang Seng Index has pulled back in the past few months, moving from a high of 28,058 in January to the current 24,824.
Most recently, it has dropped from a high of 26,180 on August 4. As a result, it has moved below the 50-day Exponential Moving Average (EMA). It also sits below the Supertrend indicator.
Therefore, the path of the least resistance for the index is downwards, with the next key target to watch being at 24,000. On the other hand, the index has formed an inverted head-and-shoulders pattern, which often leads to a rebound.
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