CHNComp withdraws from crucial resistance
CHNComp retreated from 6-month highs as Chinese markets resumed activity after a week-long Lunar New Year holiday, potentially ending a recent rally driven by hopes of a quick reopening of China. Even stronger consumer spending expectations failed to sustain market optimism. Over the weekend, Chinese authorities said they would promote a recovery in consumption as a major economic driver and seek to boost imports, bolstering the outlook for Asia’s largest economy.
The PBoC has expanded 3 targeted lending tools. A loan tool to support the reduction of carbon emissions has been extended until the end of 2024, while loan tools to promote the clean use of coal, as well as a loan tool for the transport and logistics, have been extended until the end of 2023.
Analysts also remain optimistic about the outlook for Chinese markets. Ahead of the weekend, Goldman raised its end-of-year target for the MSCI China index for the third time since November and expects the CSI 300 to hit 4,800 points from the previous forecast of 4,500. points. Goldman analysts believe that China is moving from a “reopening” to a broader “resumption of growth” theme and that there is still attractive upside potential.
“The current market rally is not just consumer and service recovery trade, but a broader growth rebound spanning a wide range of industries,” Goldman strategists said.
Additionally, robust spending and a significant decrease in Covid-related deaths during the festive season are also optimistic signs. Tourism receipts jumped 30% to 375.8 billion yuan ($55.6 billion), accounting for 73% of revenue in 2019, according to Chinese authorities. Covid-19 deaths fell sharply 50.0% to 6,364 from the previous week.
“With herd immunity occurring faster than expected, undemanding valuations and policy support likely to provide support for growth, we continue to have a positive view of the Chinese market,” wrote James Wang, chief financial officer. UBS Chinese strategy.
CHNComp launched a massive upward correction in November, but buyers failed to overcome major resistance at 7765 pts, which coincides with a 38.2% Fibonacci retracement of the downward wave launched in February 2021 The index fell nearly 3% and is approaching the local uptrend line. In the event of a downside breakout, a downward move could deepen towards major support at 6700 pts, marked by previous price reactions, the SMA50 (green line), SMA200 (red line) and the retracement of 23.6%. A bearish divergence has also appeared on the Momentum indicator, indicating increasing selling pressure. Source: xStation5
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