Hong Kong's Hang Seng index rises 20% from January lows, heading into a bull market

(Bloomberg) — Hong Kong's stock index headed for a technical bull market as the city's stocks continued this month's stellar recovery fueled by foreign inflows.

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The Hang Seng Index rose almost 2% on Monday, rising from the low of January 22 to more than 20%. If these levels close, the gauge will meet the definition of a bull market and join a cohort of other indices in China and Hong Kong that have achieved such a milestone in recent weeks.

Hong Kong stocks are among the world's best performing in April after recovering on strong inflows from mainland Chinese investors, who some strategists say are looking to diversify their currency exposure amid ongoing depreciating pressure on the yuan. There are also signs that foreign funds are moving money from expensive technology stocks in the US and elsewhere to buy Chinese internet names, which have a high weighting in Hong Kong's stock benchmark.

“Some positive developments have emerged: better macro data in the first quarter, solid corporate profits so far, government support in the stock market, slightly better relations with the US,” said Vey-Sern Ling, managing director of Union Bancaire Private. “Volumes are high and if the rally continues it could be self-sustaining as more funds come in for fear of missing out.”

Read more: China pledges to support Hong Kong IPOs to strengthen Hub's position

On Monday, real estate stocks led gains in the broader market, boosting sentiment after a major developer worked with bondholders to resolve its liquidity problems. A Bloomberg Intelligence gauge for construction stocks rose 10%, the highest level since September. Shares of casino operators in Macau also rose after the introduction of measures to streamline the entry and exit process for Chinese citizens.

Technical winners

Food delivery giant Meituan and Tencent Holdings Ltd. – China's largest internet company – are the biggest contributor to the Hang Seng's advance since its Jan. 22 low, data compiled by Bloomberg show.

With a rise of almost 9% in April, the HSI is among the best performers in a group of more than 90 global stock indexes tracked by Bloomberg. The gauge is now more than 5% higher in 2024, after an unprecedented four-year losing streak.

Stocks in China and Hong Kong are recovering after a year-long slump, thanks to cheap valuations, some green shoots in the world's second-largest economy and corporate profits, and measures by authorities to revive investor confidence. However, persistent risks of geopolitical tensions and doubts about the sustainability of the economic recovery still prevent investors from going all-in on this asset class.

“The HSI has successfully breached the key resistance level of the 250-day moving average,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “It will probably reach the next target of 18,300 within the second quarter.”

–With help from John Cheng and Sangmi Cha.

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©2024 BloombergLP

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