Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Technical Analysis

Shanghai Stock Exchange Composite Index / Technical Analysis

Shanghai Stock Exchange Composite Index (SHCOMP INDEX)

This note is a follow up from an earlier one titled <a href="https://www.smartkarma.com/insights/china-equities-time-for-a-rebound" target="_blank" data-smartkarma-citation="insights:53440" rel="noopener">China Equities – Time for a Rebound?</a> Over the past several sessions we have seen relative stabilisation and what looks to be the start of a decent rally.Along the way and in the immediate term, we are now testing some levels that could lead to a brief pause. Any small pullback from here should be seen as an opportunity to add to longs.

This note is a follow up from an earlier one titled China Equities – Time for a Rebound? Over the past several sessions we have seen relative stabilisation and what looks to be the start of a decent rally.Along the way and in the immediate term, we are now testing some levels that could lead to a brief pause. Any small pullback from here should be seen as an opportunity to add to longs.

China Equities Follow Up: Pause Before Higher

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Mainland China Crackdown: Unsurprisingly, this past week mainland China has continued its steady official crackdown on cryptoccurency, reiterating its ban on providing cryptocurrency services, placing pressure on bitcoin miners, etc; and *Tether Flows: Given the mainland Chinese crackdown, it would appear that investors don't understand Tether’s systemic risks; and/or mainland Chinese-based investors are aggressively moving funds out of the country via this channel prior to it being shut down completely. If  authorities decide the shut the Tether channel over its use for moving large amounts of capital out of mainland China, cryptocurrency market liquidity would essentially dry up as Tether accounts for over 60% of global cryptocurrency daily trading volumes.

*Mainland China Crackdown: Unsurprisingly, this past week mainland China has continued its steady official crackdown on cryptoccurency, reiterating its ban on providing cryptocurrency services, placing pressure on bitcoin miners, etc; and *Tether Flows: Given the mainland Chinese crackdown, it would appear that investors don't understand Tether’s systemic risks; and/or mainland Chinese-based investors are aggressively moving funds out of the country via this channel prior to it being shut down completely. If  authorities decide the shut the Tether channel over its use for moving large amounts of capital out of mainland China, cryptocurrency market liquidity would essentially dry up as Tether accounts for over 60% of global cryptocurrency daily trading volumes. 

The lack of proper correlation between other major markets and those in China still stands out.As others markets look concerning, the Shanghai Composite is starting to look constructive again, at least in the near term.In addition, the FTSE China A50 index is also turning up after holding key levels. Considering it is already 16% off the year’s high, it really is a different picture to many other equity indices around the world.

The lack of proper correlation between other major markets and those in China still stands out.As others markets look concerning, the Shanghai Composite is starting to look constructive again, at least in the near term.In addition, the FTSE China A50 index is also turning up after holding key levels. Considering it is already 16% off the year’s high, it really is a different picture to many other equity indices around the world.

*Inflation Figures Are Wrong: The daily information be reported on inflation is simply wrong. There is actually an awful lot of inflation, and because central banks are controlling the narrative, we find the that the numbers are not being reported correctly. If energy, food, and housing costs are excluded from inflation reports, then inflation measurements are just wrong to begin with. Certainly, as consumers, we’d like to not be responsible for paying for food, energy, and housing; and*Stimulus Keeps Coming: 1Q21 GDP amounted to 6.4%, and 2Q21 GDP will be further boosted by the third round of stimulus checks. 1H21 should be boosted further by an expanded child tax care credit - becoming the fourth stimulus check of USD 110 bn - arguably even more effective if these monthly payments become a permanent source of income under President Biden’s tax plan. Infrastructure plan discussions are ongoing, and our belief is that nearly USD 2 tn in spending will be approved by Congress in late 1H21. The risk of a zero-to-negative GDP quarter for 1Q22 now becomes significant.

*Inflation Figures Are Wrong: The daily information be reported on inflation is simply wrong. There is actually an awful lot of inflation, and because central banks are controlling the narrative, we find the that the numbers are not being reported correctly. If energy, food, and housing costs are excluded from inflation reports, then inflation measurements are just wrong to begin with. Certainly, as consumers, we’d like to not be responsible for paying for food, energy, and housing; and*Stimulus Keeps Coming: 1Q21 GDP amounted to 6.4%, and 2Q21 GDP will be further boosted by the third round of stimulus checks. 1H21 should be boosted further by an expanded child tax care credit - becoming the fourth stimulus check of USD 110 bn - arguably even more effective if these monthly payments become a permanent source of income under President Biden’s tax plan. Infrastructure plan discussions are ongoing, and our belief is that nearly USD 2 tn in spending will be approved by Congress in late 1H21. The risk of a zero-to-negative GDP quarter for 1Q22 now becomes significant.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Rejection at the underside of the SPX broken wedge trendline will define the speed of the next down leg in Asia. Bear momentum below 4,150/40 would place greater odds of a harder pullback.Long bets: ASX and A50 with HSCEI next in line (for now a relative long)Short bets: Taiwan, Nikkei, Korea with India flirting with the 15k pivot. Taiwan and Nikkei are the conviction short bets to recycle while a weak bounce off of trendline makes Korea the next short target.A more volatile cycle is due in late May.

Rejection at the underside of the SPX broken wedge trendline will define the speed of the next down leg in Asia. Bear momentum below 4,150/40 would place greater odds of a harder pullback.Long bets: ASX and A50 with HSCEI next in line (for now a relative long)Short bets: Taiwan, Nikkei, Korea with India flirting with the 15k pivot. Taiwan and Nikkei are the conviction short bets to recycle while a weak bounce off of trendline makes Korea the next short target.A more volatile cycle is due in late May.

China

The FTSE China A50 Index includes the largest 50 A Share Chinese companies by total market cap. 

FTSE China A50 Index (XIN9I INDEX)

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