The Hang Seng index continued its recovery this week as Hong Kong and Mainland China announced a fresh round of Covid-zero easing. It jumped to a high of H$20,000, which was the highest level since August 30. It has jumped by more than 36% from its lowest level in 2022.
Covid-zero policies easing
Hong Kong stocks have done well since November as Hong Kong and China attempt to unwind their Covid strategy. For the most part of the year, China has had some of the toughest Covid rules in the world.
For example, the country required that all international arrivals to quarantine for 5 days in a hotel and another 3 days at home. There were also rules on people entering public places. Further, Chinese plants could be closed at any time if new cases were reported.
After experiencing the first major strike in decades, Chinese authorities have started easing their Covid-19 rules. The government announced that it will end its quarantine measures soon. It also said that most parts of the Covid-zero strategy will be done away with soon.
In a statement, John Lee, Hong Kong’s chief executive, said that he would end other Covid rules like mandatory PCR tests for inbound travelers. The city will also end social distancing measures, a ban of social gatherings, and cancel the vaccine pass scheme.
Therefore, the Shanghai and Hang Seng indices have done well as investors anticipate a resurgence of the Chinese economy. This is important since most Hang Seng constituent companies have a lot of exposure to both Hong Kong and mainland China.
The Hang Seng index’s 2023 performance will depend on the recovery of the Asian economy and policies from Beijing. A return to these Covid measures will have a negative impact on the index. Similarly, regulations on technology will affect its performance,
The top Hang Seng stocks to watch in 2023 will be tech giants like Alibaba, JD.com, Meituan, and Tencent. Gambling stocks like Sands China and Galaxy Digital will also be watched. Finally, property groups like Country Garden, New World, and Wharf Real Estate will also be monitored.
Hang Seng index forecast
The daily chart shows that the HSI index has been in a strong bullish trend since November. It has managed to cross the 50-day moving average and is currently stuck at the 200-day MA. The index also moved above the important support level at $19,155 while the Relative Strength Index (RSI) has moved above 50.
Therefore, the index will likely continue rising as buyers focus on the next key resistance point at $22,000. A drop below the support at $19,100 will invalidate the bearish view.