How long can HK50 bulls’ explosive upward momentum last?

The HK50\’s upward move has attracted increasing market attention since mid-April.

The upward trend of HK50 since mid-April has attracted increasing market attention.
Looking at the daily chart of the HK50 year-to-date we see that the index has been trading between 16,100 and 17,200 from late February to late April after a decline in January and long covering in February.
April 19th was the turning point of this market. The bulls entered the market with strong force and successively broke through the downward channel since January 2023, the high of 17,200 points at the beginning of this year, and the important points that were continuously verified in September, October and November last year. The resistance range is 18,000 points to 18,300 points.
Bulls have pushed HK50 up 17% as of May 10.
The index is trading above 19,100, its highest level since August 2023.
If bullish momentum continues, HK50 is expected to break through the 20,000-point mark.
What factors drive HK50 to record highs? Judging from the interest rate outlook of G10 central banks, Sweden and the Swiss National Bank have each cut interest rates once. The market has repriced the Fed\’s interest rate cuts to be more dovish, while the latter has no desire to raise interest rates again but plans to cut interest rates soon, as well as expectations that the UK The central bank and the European Central Bank will adopt easing policies in June. These factors have strengthened the sentiment of the risk market.
This has led to significant gains in both US and European stock indexes since mid-April while Hong Kong stocks have also been boosted.
In addition, the relatively low valuation of the Hong Kong stock market, the relatively stable exchange rate, and the investment environment that is familiar to foreign capital are all very friendly to international capital.
Also in mid-April, China launched five policies to support Hong Kong’s capital market.
In terms of economic data, April\’s trade index exceeded expectations. Major cities are gradually lifting real estate purchase restrictions, and there are rumors in the market that there may be a 20% reduction in Hong Kong Stock Connect dividend tax, which is a major benefit to Chinese domestic investors.
The above-mentioned factors have paved the way for Hong Kong\’s technology and real estate sectors to ignite the bull market of HK50.
Since April 19th, the Hang Seng Technology Index (HSTECH) has increased by as much as 23%. During the same period, Tencent has increased by 22%, and Alibaba has increased by nearly 18%.
Meanwhile the Hang Seng Real Estate Fund Index (HSREIT) rose more than 20%.
In summary, the rise in Hong Kong stocks is the result of a more relaxed external market environment, China\’s policy support, China\’s economic recovery boosting market confidence, and the outstanding performance of Hong Kong\’s technology stocks and real estate sectors.
There may be hidden worries behind the bull market. Although HK50 currently seems to be thriving and bulls are confident, there are still some obvious risks that may limit the development of the bull market.
Back to China Macro Data Last Saturday\’s credit data was disappointing.
New loans turned negative in April for the first time since 2005 and the 8.3% credit growth rate was also significantly lower than the consensus estimate of 8.7%, reflecting continued weak credit demand.
While this weaker-than-expected set of data can be partly explained by regulatory policy changes and slow issuance of government bonds, the news that China also announced today (May 13) that it will issue $138 billion in long-term government bonds to pay for infrastructure construction can partially alleviate the market\’s worries. Concerns But sluggish real estate sales remain a major risk to China\’s economic recovery and the continued strength of Hong Kong stocks.
Although the purchase restriction policy has been liberalized, prices have generally declined. The annual growth rate of overall house prices in March has become -2.2%, but people\’s willingness to buy real estate has not increased accordingly: New home sales in 30 major cities in April fell by 39% compared with the same period last year. %.
This makes us wonder: is people\’s purchasing power reduced or people believe that the bottom of real estate prices is far beyond this? Whether the market can regain firm confidence and willingness to consume, and whether the real estate sector can achieve a \”smooth landing\” are the key to the continuation of the HK50 bull market and key factors for strengthening.
Chasing the gains or bearish: What should we focus on? Looking at economic fundamentals, China’s CPI in April was basically in line with expectations, with an annual growth rate of 0.3% higher than market expectations of 0.2%.
We can expect to see mild reflation due to base effects.
From a policy perspective, the \”government bond issuance will be accelerated\” promised at the Politburo meeting at the end of April has begun to be fulfilled.
Monetary authorities have also begun to realize that credit-driven recovery is not a high-quality recovery and instead seek to rely on exports and new energy industries to promote economic growth.
I think this change is worthy of recognition. The correction of some macro data is only the only way to transform. We should still maintain confidence in the Chinese market.
Specifically, in the short term in the Hong Kong stock market, we need to pay attention to the release of first-quarter financial reports of a series of technology stocks this week, including Tencent, Alibaba, JD.com, Baidu, etc.
Although the breadth of sectors participating in this round of growth has expanded from the Internet, electric vehicles and consumer brands to state-owned enterprises and industrial fields, there is no doubt that these technology stocks with high market capitalization, rapid development and strong momentum are still guiding the HK50 market. Key strength.
Higher-than-expected revenue and performance guidance may provide a boost for the HK50.
In addition, China\’s 1-year MLF interest rate and the relative economic conditions of China and the United States may also affect the performance of Hong Kong stocks.
Lower MLF rates could help attract more capital inflows into the Hong Kong stock market and boost the price of HK50.
On the other hand, if the \”exceptionalism\” narrative in the United States gradually fades and people are more willing to listen to the story of \”China\’s recovery,\” both market sentiment and capital inflows will greatly support the performance of the Hong Kong stock market.
In the medium and long term, the factors affecting the performance of HK50 are more complicated, such as China\’s economic growth and inflation data, monetary policy and foreign exchange attitude, new economic growth points, market consumption willingness and real estate health, etc.
In summary, I think the bullish factors are now dominant and I tend to be bullish on HK50 in the short term.
If China economic data remains strong and housing market conditions improve more I would be happy to buy a pullback after seeing \”higher lows\”.

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