China A50

With support in place and momentum trying to turn higher, we’re now looking for additional gains on the China A50 and Hang Seng.

If the Politburo wants to get Chinese markets excited about what may come out of next week’s third plenum, it better get cracking. Because with economic activity coming off the boil and with no sign of major stimulus measures in sight, not only are stock indices rolling over but breaking or threatening to break key levels on the charts.

China’s major stock market indices have been falling since the middle of May. With little in the way of a decent bounce higher, I continue to suspect one could be due.

China A50 stock futures have been hammered on Thursday, as have most other equity futures across Asia. The US dollar is breaking out as US Treasury yields push higher, seeing traders abandon riskier positions ahead of quarter-end. The baby is being thrown out with the bath water.

The Hang Seng enjoyed its best day in three months. And with key support levels for the China A50 and ASX 200 holding, perhaps they can try to close the gap this week.

The China A50 has shown early signs of stabilising around support levels after a 4-week decline. The bear case for the Nikkei is not dead, but it may be sleeping whilst it remains rangebound on the weekly chart.

China’s services sector strengthened in May, boosting Chinese equity markets and providing some respite for commodities such as copper and WTI crude oil.

Chinese stock futures have surged on the resumption of trade on Monday, finding buying support after hitting multi-week lows on Friday. If the gains stick, it points to a potential trend change in both the Hang Seng and China A50. The gains track similar moves across the Asian region and follow a late surge on Wall Street to end May.

China’s “National Team”, the nickname given to state-backed entities tasked with rescuing markets, are doubling their efforts, upping purchases of exchange-traded funds (ETFs) while restricting certain undesirable activities detrimental to stock prices. So far, indices such as the A50 are rallying.

China’s ‘National Team’ – a collection of state or quasi state-backed entities tasked by the government to smooth out financial market ructions when the prevailing price action is deemed desirable – looks like it may have been mobilised with China’s A50 ripping higher late Thursday and going on with the move today.

Global stock markets have fallen sharply so far today, led by Hong Kong and China yet again, with falls of 2.9% for Hang Seng and 1.9% for China A50 indices. The Japanese Nikkei slumped, ending its good run of form of late. The FTSE 100 in the UK was hurt badly by a surprise rise in UK inflation to 4% while growing concerns over China’s economy hurt shares of miners.

Chinese inflationary pressures remain weak, whether it be upstream or for consumers. But with expectations for further stimulus from the Chinese policymakers baked in the cake, does it have implications for China’s equity market or currency?

Welcome to the first edition of Technical Tuesday for 2024. In this report, we will get technical on the DAX, FTSE and China A50.

It’s been a rough year for Chinese markets with the A50 share index and CNH down sharply as hopes for booming economic activity coming out of the pandemic failed to materialise.

Optimism towards China’s GDP, retail sales and industrial output beats didn’t last long with the A50 and USD/CNH resuming their unwind following more data showing property market weakness.

Chinese markets are reopening after Gold Week, having to navigate heightened geopolitical risks in the Middle East, spiking US bond yields and key economic data at home.

Chinese equities have had plenty thrown at them in 2023. Yet, despite the challenges, some mainland indices such as the FTSE A50 are holding up alright.