Hang Seng Index News: 23,500 or 24,500? Geopolitics and China Data Guide Direction

Israel-Iran Conflict Impacts Risk Sentiment

The Israel-Iran conflict intensified over the weekend after Iran retaliated against Israel’s June 12 attacks. However, hopes of a ceasefire rose on reports of Iran being open to ending the attacks if Israel ceased targeting Iranian sites. Nonetheless, Israel continued carrying out attacks on Iran, raising uncertainty about a swift end to the conflict.

A further escalation in the Israel-Iran war could lead to a broader regional conflict, potentially sending crude oil prices toward $100. Elevated oil prices may drive inflationary pressures, impacting central bank policy moves, and trigger global economic uncertainty, impacting demand for risk assets.

Economic data from China drove demand for Mainland stocks. Despite the upbeat data, the Hang Seng Index extended its losses from Friday, with tech and EV stock losses offsetting real estate stock gains.

Market focus will remain on the Israel-Iran war, trade developments, and Beijing’s stimulus-related news. These factors could dictate whether the Hang Seng Index drops below 23,500 or retargets 24,500.

Hang Seng Index Slips as EV and Tech Stocks Extend Losses

US equity markets tumbled on June 13, with the Nasdaq Composite Index sliding 1.30%, as investors reacted to Iran’s retaliation to Israel’s attacks. Investors remained cautious in early trading on June 16 as the Hang Seng Index fell 0.14% to 23,859. However, Mainland China’s markets advanced, with the CSI 300 and Shanghai Composite Index posting early gains of 0.16% and 0.19%, respectively.

EV and Tech Stocks Under Pressure

Reports of further attacks in the Israel-Iran conflict weighed on demand for EV and tech stocks. An extended conflict may add to the trade-driven uncertainties plaguing tech-related stocks. Tech giants Baidu (09888) and Tencent (00700) dropped 0.29% and 0.30%, respectively.

EV stocks had a mixed start to the morning, with BYD (01211) sliding 1.60% while Geely Automobile (00175) gained 0.61%. A prolonged Israel-Iran conflict could impact EV sales, potentially fueling an already scrutinized price war between key players. However, May’s retail sales data provided much-needed support to the EV sector.

Israel-Iran Conflict and Ceasefire Rhetoric

The Israel-Iran conflict intensified over the weekend, setting the global markets up for a test start to the week. However, reports of Iran’s willingness to negotiate a ceasefire if Israel stops attacking Iranian sites eased fears of a prolonged conflict.

Initial reports suggested Iran was open to a ceasefire if Israel ceased attacks. However, later statements denied readiness for talks while under fire.

While a ceasefire could boost demand for risk assets, failure to reach an agreement may revive fears of crude oil supply disruption. Prolonged disruption could fuel inflation, affect central bank policy, and impact the global economy.

Overnight, the Kobeissi Letter remarked on the economic implications of an Israel/Iran conflict. Notably, oil prices could rise as high as $130/barrel (per JPMorgan), likely doubling US CPI to around 5%, leading to further interest rate cut delays.

China Data Underscores Effectiveness of Beijing’s Policy Measures

Key Chinese data eased fears that the US-China trade war materially affected the economy. Retail sales soared 6.4% year-on-year in May, up from 5.1% in April, while the unemployment rate fell from 5.1% to 5.0%. Industrial production numbers also reflected economic resilience, suggesting Beijing’s stimulus measures continued to gain traction.

Brian Tycangco, editor at Stansberry Research, remarked on the data, stating:

“The Chinese consumer is alive and well. May retail sale +6.4% vs. est. 4.9%. BUT, more importantly, online retail sales jumped 11.5% to RMB 1.3 trillion for the month on a year-on-year basis.”

Key Levels: 23,500 Support or 24,000 Breakout?

On June 16, the Hang Seng Index eased toward its mid-May to early June congestion zone, briefly dropping below 23,750 for the first time since June 5. The Israel-Iran conflict and lingering US-China trade uncertainties remained headwinds.

A sustained fall below 23,750 may open the door to testing the 23,500 support level and potentially the 50-day Exponential Moving Average (EMA). Conversely, a breakout above 24,000 could signal a move toward the June 11 high of 24,439. Any stimulus moves from Beijing or easing Middle East tensions would likely accelerate a move toward 24,500.

Hang Seng Technical Outlook

• Resistance: 24,000, then 24,439.
• Support: 23,750, 23,500, then the 50-day EMA at 23,171 and 23,000.
• Short-term Bias: Bullish, dependent on trade news, Middle East risks, and stimulus chatter.

Forecast Summary: Will Iran and Israel Agree to a Ceasefire, or Will 23,500 Give Way First?

The Hang Seng Index hovers at the top of its May-June congestion zone. Concerns about an escalation in the Middle East conflict and regional stability remain a headwind. However, sentiment could improve if Iran agrees to attend ceasefire talks. Resistance at 24,000 will likely cap any upside until there is a defined path to stability in the region.

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