Chinese Stocks: Riding the Bull Market Wave Amidst Economic Dynamics

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It seems that the positive momentum for Chinese stocks will prevail in the next stage, as many factors may support these stocks, including:

  • Most of the Chinese economic data exceeded analysts’ expectations, such as the manufacturing purchasing managers’ index, which according to the official body recorded a growth of 50.4 points, and according to Caixin, 51.4 points.
  • Increased appetite and investment flows for Chinese stock-traded funds.
  • Chinese stock valuations are considered very low compared to other global stocks, such as Japanese and American stocks. For example, the P/E ratio for the Hang Seng Index is approximately 10.

 

However, despite these positive factors, there are negative factors that may put pressure on the Chinese economy, such as:

  • The CPI on an annual basis, which recorded a growth of 0.1% in March, is still very far from the 3% inflation target.
  • The real estate sector, which represents approximately 30% of China’s GDP, remains volatile.
  • Tensions still exist between China and the United States of America regarding trade and technology and the restrictions they impose on each other regarding chips.

 

Analysts are closely awaiting the release of the consumer and producer price indices in China at the end of this week, as these indices will have a direct impact on the Chinese financial markets, specifically the stock markets.

 

Regarding Chinese stocks, the Hang Seng Index has risen by about 25% since the bottom of January 22 of this year, which recorded 14,794 points, to the peak that it recorded today, May 7, of 18,638 points, meaning this index has entered the bull market zone, with expectations of its upward trend continuing. The index is currently hovering near the 18,500 points level. It seems that technical indicators may support the Hang Seng Index in the next stage for several reasons:

 

First: The 50-day moving average in blue, which stands at 16,865 points, approached the 200-day moving average in yellow, which stands at 17,273 points, and the gap began to narrow further between them. Any bullish crossover or Golden Cross that occurs between them could indicate an upward trend for the Hang Seng Index.

Second: The Relative Strength Index (RSI), which currently records 74 points, meaning that it is in the overbought area, indicates the upward momentum of the Hang Seng Index.

Third: The MACD indicator is in blue, which exceeds the SIGNAL LINE in orange.

 

 

 

 

 

 

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

*All trading involves risk