Hang Seng Index: Bulls Eye 24,500 as US-China Trade Talks Enter Pivotal Day

US-China Trade Talks – Round 2; Bulls Eye 24,500

Hong Kong and Mainland China markets climbed higher on Tuesday, June 10. Optimism about the US and China reaching a trade agreement boosted demand for risk assets in early trading. US-China trade talks began in London on June 9 and will continue into a second day on June 10.

Weaker-than-expected trade data from China and rising deflationary pressures raised hopes of further stimulus from Beijing, contributing to early gains.

However, caution ahead of the second day of trade talks capped the upside. The Hang Seng Index built on Monday’s gains, with housing and tech stocks advancing while EV stocks stumbled.

Markets remain focused on US-China trade developments as a second day of trade talks begins later today. Stimulus cues from Beijing also need monitoring after May’s weak economic data. These key drivers could dictate whether the index drops below 24,000 or breaks above 24,500.

Hang Seng Index Advances as Real Estate Stocks Rally

US equity markets delivered mixed performances on June 10, with the Nasdaq Composite Index gaining 0.31%, as investors remained hopeful of a US-China trade deal. The Hang Seng Index rose 0.33% to 24,261 in early trading on June 10. Mainland China’s markets also climbed higher, with the CSI 300 and Shanghai Composite Index gaining 0.16% and 0.11%, respectively.

Real Estate and Tech Stocks Advance

Hopes of a further de-escalation in the US-China trade war bolstered demand for tech stocks. Tech giants Baidu (09888) and Alibaba (09988) rose 0.17% and 0.08%, respectively. However, real estate stocks led the gains, with the Hang Seng Mainland Properties Index rallying 3.06%. The potential for more stimulus from Beijing boosted demand for real estate stocks.

Meanwhile, EV stocks capped the Hang Seng’s gains. Geely Automobile (00175) and Li Auto (2015) dropped 0.23% and 1.75%, respectively. Concerns about intensifying price competition weighed on sentiment.

US-China Trade War in Focus

The US and China concluded day one of trade talks on June 9 and will resume negotiations on June 10 to address tariffs and ongoing trade restrictions. Talks reportedly lasted six hours. US National Economic Council Director Kevin Hassett raised hopes of a deal, expecting China to remove rare earth mineral restrictions and the US to release export controls on tech-related goods if talks go well.

Today’s trade talks could prove crucial for broader global market sentiment.

Further trade-related updates from round two of trade talks will influence near-term trends for Hong Kong and Mainland China-listed stocks. Tariff cuts and export restriction removals could drive demand for Hong Kong and Mainland China-listed stocks. However, setbacks in reaching a favorable agreement for both parties may pressure risk assets.

While markets remain hopeful for a trade deal, some economists are skeptical about a meaningful agreement. Natixis Asia Pacific Chief Economist Alicia Garcia Herrero said that the US and China may agree to pause export controls but doubted the chances of a meaningful agreement.

Key Levels: 24,000 Support or 24,500 Retest

On June 10, the Hang Seng Index climbed to a 12-week high of 24,297 after entering a bull market, rebounding from an April 7 low of 19,260. A meaningful trade deal could boost risk sentiment and potentially send the Hang Seng Index toward 24,500. A sustained break above 24,500 could bring the March high of 24,874 into play. Any fresh stimulus from Beijing may fuel a rally toward 24,874.

Conversely, trade deal roadblocks could weigh on market sentiment. A drop below 24,000 may bring 23,500 and the 50-day Exponential Moving Average (EMA) into sight.

Trade talk headlines will continue influencing demand for tech and EV stocks.

Hang Seng Technical Outlook

• Resistance: 24,500, then 24,874.
• Support: 24,000, 23,500, then 23,000, and the 50-day EMA at 23,026.
• Bias: Bullish in the short-term, hinged on US-China trade talks and stimulus signals from Beijing.

Forecast Summary: Will the US and China Reach a Deal, or Will 24,000 Give Way First?

Despite China’s recent economic indicators raising concerns about domestic demand, the Hang Seng Index sits well above May and early June’s trading range. Hopes of a trade deal or fresh stimulus from Beijing remain market tailwinds. However, a lack of policy signals from Beijing or failed trade talks may impact sentiment. Resistance at 24,500 will likely cap gains until markets have the details of a US-China agreement.

For real-time updates on US-China trade talks, global stimulus efforts, and central bank signals, follow our live coverage and consult our economic calendar.