Hang Seng Index Re-Tests 24,500 Into Weekend, Could A Breakout Be Brewing?

The Hang Seng Index (HSI) is carving out solid gains in today's session, up 0.65%, and having retested the 24,500 resistance earlier in the day. While the index has demonstrated a strong recovery over the past year, boasting a 35.9% gain, and a year-to-date increase of 23.5%, it now finds itself navigating a challenging landscape of uneven economic recovery and geopolitical uncertainty.

The recent performance of the HSI reflects a period of consolidation and accumulation after a strong rally earlier in the year. The index peaked mid March, hitting a high of 24,874.39, a mark that has proven difficult to reclaim, as evidenced by the 24,500 resistance level. This suggests a market taking a breather, reassessing its position in light of evolving economic data and global events.

A key driver of the HSI's resurgence has been the revival of Hong Kong's financial sector. The city has emerged as a leading global venue for IPOs, raising $13.9 billion in the first half of 2025, driven by prominent Chinese companies. This influx of capital has fueled investor sentiment and contributed to the overall gains in the index.

Furthermore, Hong Kong's commitment to becoming an artificial intelligence hub, backed by substantial investment, has injected further optimism into the market, particularly benefiting the technology sector. This commitment was underscored in late February, when the announcement of a 1 billion Hong Kong dollar investment in AI research and development led to a notable surge in the HSI.

However, beneath the surface of these positive developments lie some significant headwinds. While Hong Kong's stock market has outperformed mainland China this year, the broader economy remains sluggish. Consumer spending and business confidence have yet to fully recover to pre-pandemic levels, creating a drag on overall economic growth.

This divergence between the performance of the stock market and the real economy raises questions about the sustainability of the current rally.

Global factors are also playing a crucial role in shaping the HSI's trajectory. The ongoing trade tensions between the U.S. and other countries, while seemingly excluding China in some recent instances, continue to create uncertainty in the market.

The imposition of new tariffs by the U.S. on imports from 14 countries, excluding China, sparked hopes of trade redirection benefiting Chinese and Hong Kong exporters, leading to a temporary boost in the index. However, the ever-present risk of escalating trade disputes remains a concern for markets. Earlier this year, escalating global trade tensions triggered a significant decline in the HSI, highlighting the market's sensitivity to these external shocks.

A re-test of the 24,500 level, whilst initially rejected could be a sign that more is to come, with sentiment building in the Hang Seng. A look at the 1 year chart in isolation could show an index that is coiling for a breakout, although the fundamentals, and geopolitics will likely drive the next move.