Hang Seng Index: At inflection zone for bullish reversal, medium-term uptrend intact

[Redator]

Key takeaways

• The Hang Seng Index remains in a medium-term uptrend, despite a recent 9% pullback triggered by renewed US-China trade tensions.
• China’s core CPI rose to a 19-month high of 1% in September 2025, easing deflation fears and boosting market confidence.
• Technical indicators show bullish momentum, with key short-term support at 25,140 and upside resistance near 27,500.
• A sustained yuan appreciation continues to underpin Hong Kong’s equity market recovery.

This is a follow-up analysis and an update of our prior publication, “Hang Seng Index Technical: Bullish consolidation above 26,200 on China housing recovery”, published on 15 September 2025.

The price actions of the Hong Kong 33 CFD Index (a proxy of the Hang Seng Index futures) have staged the expected bullish movement and rallied by 4.25% from 15 September 2025, surpassing the 26,940 resistance highlighted in our previous report, and hit an intraday high of 27,401 on 2 October 2025 (just whisker away from a major resistance of 27,500).

Thereafter, the Hong Kong 33 CFD Index tumbled by 9% (high to low) from 2 October 2025 to print an intraday low of 24,918 on Friday, 10 October 2025, due to renewed trade tensions between the US and China.

Let’s now examine the key macro factors that are likely to support the continuation of the medium-term bullish trends in the China and Hong Kong stock markets since April 2025 (ex-post US “Liberation Day” tariffs announcement).

China's core CPI continues to recover, reducing the risk of a deflationary spiral

Fig. 1: China CPI, Core CPI & PPI as of Sep 2025 (Source: TradingView)

China’s headline CPI prices dropped by 0.3% y/y in September 2025, steeper than the consensus estimates of a 0.1% decline but slightly less than a 0.4% drop in August 2025.

However, China’s core CPI inflation rate (stripping out food and energy) has continued to increase; it rose by 1% year-over-year (y/y) in September 2025, from 0.9% in August 2025, marking the highest reading in 19 months (see Fig. 1).

Additionally, the deceleration in China’s producer prices (PPI) has begun to slow, as they fell 2.3% year-over-year (y/y) in September 2025, easing from a 2.9% drop in August 2025, in line with consensus estimates, marking the mildest contraction since February 2025.

These latest inflationary data prints have reduced the risk of a deflationary spiral in the Chinese economy; in turn, this may see an uptick in consumer confidence in Q4 2025, which can trigger a positive feedback loop back into the China and Hong Kong stock markets.

Now, let's turn our attention to decipher the latest short-term (1 to 3 days) trajectory, key levels, and elements to watch on the Hang Kong 33 CFD Index from a technical analysis perspective.

Hong Kong 33 CFD Index minor trend as of 15 Oct 2025 (Source: TradingView)

Fig. 3: Hong Kong 33 CFD Index medium-term & major trends as of 15 Oct 2025 (Source: TradingView)

Preferred trend bias (1-3 days) – Bullish reversal at gap support

Tuesday, 14 October 2025’s minor corrective decline of 2.9% (high to low) has stalled and reversed right at the gap support formed at the start of Monday’s 13 October 2025 Asia session.

Bullish bias above 25,140 key short-term pivotal support and a clearance above the 25,860/26,060 (upside trigger level) sees the next intermediate resistance coming in at 26,935 before a test on the 27,500 major resistance (see Fig. 2).

Key elements

• The hourly RSI momentum indicator of the Hong Kong 33 CFD Index has staged a bullish momentum breakout condition on Tuesday, 14 October 2025, US session (see Fig. 2).
• The major uptrend phase of the Hong Kong 33 CFD Index has been in place since 22 January 2024 low remaining intact, supported by a steady appreciation of the offshore yuan (CNH) against the US dollar (see Fig. 3)
• The major resistance of the Hong Kong 33 CFD Index stands at 27,860, defined by the major descending trendline from the 29 January 2018 all-time high, and the upper boundary of a major ascending channel from the 22 January 2024 low.

Alternative trend bias (1 to 3 days)

Failure to hold at the 25,140 key short-term support invalidates the bullish reversal scenario on the Hong Kong 33 CFD Index for the continuation of the corrective decline sequence to expose the next intermediate supports at 24,820 and 24,260.

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