Is the Hang Seng Index Oversold—Could It Bottom Out in the Short Term?

According to market commentary, U.S. stocks plunged sharply overnight, with tech stocks suffering particularly heavy losses, which could weigh on Hong Kong shares. Meanwhile, the Singapore HSI50 index—often referred to as the "black futures"—was trading at 24,588 points around 8 a.m., down 377 points, suggesting that Hong Kong stocks will open lower by about 400 points this morning. Notably, Hong Kong's tech sector also saw a broad sell-off yesterday (the 3rd), mirroring the downward move in U.S. markets; barring another dip today, the sector has now risen for several consecutive sessions, making it difficult to predict when this round of declines will come to an end. It is expected that short-sellers' current rebound attempt could push the index as low as the 24,000 level.

As of the close on September 3, total market turnover stood at approximately HKD 146.569 billion. According to technical indicator analysis, bearish signals currently predominate for the Hang Seng Index. The Relative Strength Index (RSI) stands at 47, down from 49 in the previous session, indicating that the index is currently in a weak position and suggesting a relatively high probability of further declines. Meanwhile, the Williams %R has risen to 85, up from 59 previously, signaling entry into oversold territory; consequently, the stock price may bottom out in the near term.

The Hang Seng Index closed at 25,007.6 points. The 10-day simple moving average stands at 25,283.62, while the 20-day SMA is at 25,148.93. With the index trading below both the 10-day and 20-day SMAs, this suggests that short-term volatility or a continued correction may be in play.

Based on technical system analysis, the Hang Seng Index is expected to trade within a daily range of 2.1%, with support at 24,590 points and resistance at 25,476. If the index falls below the support level of 24,590, it could test 24,394; conversely, if it rises above 25,476, it may challenge 25,735.

In the derivatives space, for Hang Seng Index put warrants, investors may consider out-of-the-money put warrant 25503, which expires in January next year with a strike price of 24,800; alternatively, warrant 28469, with a strike price of 24,444 and expiration in October, is another option—though given its October expiry, it is best suited for short-term positioning. In addition, warrant 14078, offering an even further-out strike, is also worth considering.

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