Analyzing the Hang Seng (Hong Kong 50 at FXOpen) chart, we wrote on January 30th that the price was near an important support level formed by the lower boundary (shown in orange) of a long-term channel, which has been relevant since 1995.

According to Reuters, Goldman Sachs representatives noted in a client note that hedge funds were actively buying Chinese stocks – the period from January 23 to 25 saw the largest capital inflow in 5 years.

As of the beginning of May, price action suggests that hedge fund purchases are justifiable – with the Hang Seng 50 index (Hong Kong 50 at FXOpen) rising by over 13% in the past two weeks.

This was partly driven by:

• Economic stimulus from Beijing.
• The Hong Kong Monetary Authority's (HKMA) decision to keep the base rate unchanged at 5.75%. As reported by the South China Morning Post, HKMA's decisions correlate with the Federal Reserve's policy since 1983, reflecting the local currency's peg to the US dollar.

Technical analysis of the Hang Seng (Hong Kong 50 at FXOpen) weekly chart shows signs of bullish strength:

• The HSI price (Hong Kong 50 at FXOpen) remains within the orange long-term channel. After fluctuations in January 2024 around the psychological level of 16,000 points, the price stabilized above this level.
• In mid-April, bears attempted to breach the psychological level of 16,000 points but failed.
• The last two closed candles on the chart were bullish, with wide bodies closing near the highs – indicating demand dominance.

If bulls maintain control, the HSI price (Hong Kong 50 at FXOpen) could break above the upper boundary of the descending channel (shown in red) and open up prospects for a significant rally.

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