Struggling Chinese equities calls for caution

Once again, China is not showing the same kind of optimism we have seen elsewhere around the world, with equities there closing lower overnight to extend the recent run of losses. In contrast, the UK’s FTSE 100 today hit a new record high. On Wall Street, equities have remained overall supported on hopes of peak inflation. Last year, we saw China lead the global markets lower. The fact that equities at the world’s second largest economy are falling again, this calls for caution for investors around the world. When China sneezes, the rest of the world tends to catch a cold. That said, it is not yet clear whether Chinese equities are simply in consolidation mode after their impressive recent gains, or it is something more significant. I would err on the side of caution, regardless, even if we have seen Chinese data respond positively to the re-opening.

Anyway, here’s a daily chart of our China A50 index, derived from the underlying FTSE China A50 Index:

As can be seen from the chart, the index has been trending lower for the last couple of weeks, after the rally on re-opening optimism faded. The index has lost more than 6% from its high last week.

The attempted bounce from support around 13500 has already faded. Next level down is 13310 to 13330, where old resistance meets the 200-day average. Lose that and a drop the next support a 13050 would be on the cards.

At this stage, the bulls need to see a clear sign of reversal before potentially looking for buying opportunities. A closing break above resistance around 13600 could be the trigger.

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.