It was a sea of red in the Hang Seng Index on Monday, with all but two companies crashing. The index, which tracks some of the biggest companies in China, plunged by over 3.50% and reached its lowest point since September 8. It has now slipped by 7.35% from its highest point this year.

Hong Kong stocks plunge amid trade fears

The Hang Seng Index has hit a major wall as investors react to the new tensions between the US and China. These tensions have been going on behind the scenes in the past few weeks.

The US Commerce Department tightened screws of its export controls two weeks ago. In response, Beijing unveiled a new policy to limit the export of rare earth materials, a move that could halt US manufacturing.

In his statement, Donald Trump threatened that the US will impose a 130% tariff on goods from China. In a separate statement, JD Vance, the Vice President, noted that the US had more cards in the escalating conflict. 

Still, on the positive side, there are chances that the new trade war will end soon as the two sides have signaled an openness to de-escalate. In a statement, an analyst told the Financial Times said:

“China has also clarified that its export control is not an export ban and has not retaliated with an equal tariff on US goods after Trump announced 100 per cent additional tariffs on Chinese exports.”

The other potential catalyst for the Hang Seng Index is the upcoming meeting between Donald Trump and Xi Jinping at the APEC Summit in South Korea.

China’s exports are soaring

Another catalyst is that the Chinese economy is doing well. A report released on Monday showed that the country’s exports jumped by 8.3% in October, higher than the median esrimate of 6.6%.

China’s exports to the US plunged by 27%, the sixth month o double-digit declines. This plunge was offset by a surge in exports to Europe and other Asian countries. In a statement, a Societe Generale analyst said:

“China’s exports have remained resilient despite US tariffs, thanks to a diversified export market and strong competitiveness. The limited impact from US tariffs on overall trade so far has likely emboldened China to take a tougher stance in US-China trade negotiations.”

All companies in the Hang Seng Index but two were in the red on Monday. Wuxi Biologics and WuXi AppTec, which have operations in the US, were the top laggards as they plunged by over 8.2%. 

Sunny Optical Technology, Xiaomi, Xinyi Solar, BYD, Xinyi Glass, and Lenovo Group were the other top laggards as they plunged by over 8%. The other notable losers were firms like Sands China, JD.com, JD Logistics, Alibaba, and Baidu.

Hang Seng Index technical analysis 

HSI Index chart | Source: TradingView

The daily timeframe chart shows that the Hang Seng Index has been in a downtrend in the past few days. It has slumped from the year-to-date high of H$27,375 to the current H$25,375, its lowest level since September. 

The Hang Seng has moved below the lower side of the ascending channel. It has also dropped below the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has pointed downwards.

Therefore, the most likely Hang Seng Index forecast is bearish, with the initial target being at H$24,887. Falling to that level will be a bullish catalyst as it will be a break-and-retest pattern, which is a common continuation sign. 

A drop below that level will point to more downside, potentially to the psychological point at H$24,000. 

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