How much higher can the Hang Seng Index go amid hefty China stimulus?
China has finally announced a series of substantial stimulus measures to revive its sluggish economy and boost domestic demand.
The policies include:
Cutting lending rates, mortgage rates, and banks' required reserve ratios.
Lowering the down payment for second home purchases from 20% to a historical low of 15%.
Introducing a 500 billion yuan swap program to provide funds, insurers, and brokers with easier access to money for stock purchases, along with a 300 billion yuan loan program offering commercial banks cheap funds for share purchases and buybacks.
Conclusion:
The Hang Seng Index may edge toward 22,080 points based on technical analysis. A short squeeze could occur if the index surpasses 19,706 (the May high).
Over the past 20 years, the Hang Seng Index has generally returned 0.51%, 1.64%, 1.06%, and 0.81% in October, November, December, and January, respectively. I reckon the index could potentially rally from now until January based on positive seasonality.
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Hang Seng Index Chart
Source: Bloomberg, 25 Sep 2024
Hang Seng Index 20-year Average Performance
Source: Bloomberg 25 Sep 2024
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