The Hang Seng index has had a relatively good year as it jumped by almost 20%, its best performance in a long time. It has continued to underperform its American peers, such as the Dow Jones and the Nasdaq 100 indices, which have soared by over 25%.
The index has also erased some of the initial gains made this year as it moved into a technical correction after falling by 14% from the highest level this year.
Hang Seng index forecast for 2025
The weekly chart shows that the Hang Seng index bottomed at H$14,540 in 2022 and has been attempting to bounce back since then. Most of its rebound happened in 2024 after the index formed a falling wedge chart pattern between January 2023 and January this year.
Wedges are some of the most bullish chart patterns in the financial market since they signal that an asset is dropping at a slower pace in a certain period.
The Hang Seng index has rebounded and moved slightly above the crucial resistance level at H$19,622, its highest swing in May 20. It has also received substantial support at the 50-week and 100-week moving averages.
There are signs that the index is slowly forming a double-top chart pattern at H$23,228. This is a notable level since it is slightly above the 50% Fibonacci Retracement level. For this pattern to form, the current level must rise by about 16.8%. A double-top is one of the most bearish chart patterns in the market.
Therefore, the Hang Seng index forecast is moderately bullish in 2025, with the initial target being at H$23,228. A break above that level will invalidate the double-top chart pattern and lead to more gains, potentially at $24,000.
These gains will become invalid if the Hang Seng dropped below the 50-week EMA at H$18,778. Such a move will increase the chances of the index falling to H$18,000.
Hang Seng index chart | Source: TradingView
Top Hang Seng companies in 2024
Hong Kong stocks had a mixed performance in 2024. Real estate giants continued to shrink as demand and prices fell. Hang Long Properties stock plunged by 42% in 2024, while China Resources Land fell by 20%. Link Real Estate slipped by 21%, while Wharf Real Estate crashed by 24.7%.
Casino stocks like Galaxy Entertainment and Sands China crashed, and so did Budweiser, Shenzhou International, Li Ning, and Zhongsheng.
On the positive side, companies like Geely Automobile, China Merchants Bank, SMIC, Tencent Holdings, Bank of China, Xiaomi, Meituan, and Trip.com surged by over 60% this year.
Catalysts for Hong Kong stocks in 2025
The Hang Seng index will have several catalysts in 2025. The most important one will come from Washington, where Donald Trump will be sworn in on January 20th. Trump campaigned with a pledge to be a highly hawkish president on China, a country he believes is stealing from the United States because of the high deficit.
He has also appointed some highly hawkish leaders in the government, including Senator Marco Rubio who will become the Secretary of the State. Also, Trump has already pledged to impose major tariffs on Chinese goods.
Therefore, a trade war will likely hurt the Hang Seng and other Chinese indices like Shanghai and Shenzhen.
The Hang Seng index did fairly well and even surged to a record high in the first years of Donald Trump’s presidency. It peaked at H$33,466 in 2018. It then suffered a big reversal as the president started the trade war, bottoming at H$21,000 in 2021.
The Hang Seng index will likely benefit from the ongoing Chinese stimulus. Beijing has announced a series of measures aimed at boosting the struggling economy. Most of these stimulus funds will go to local governments that have struggled following the real estate market’s collapse.
Read more: Here’s one reason why the Hang Seng Index could rebound soon
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