Author: Midhun Parameswaran

The CSI 300 gained 0.39% on lower and below average volume in this year’s last trading week and remained in an Uptrend Under Pressure with three distribution days. The index traded around its converging 50- and 100-DMA (4,912, -0.6%) with short-term support at November 10’s low of ~4,754 (-3.8%) and immediate resistance at its 200-DMA (~5,005, +1.3%). Investors parsed lower November industrial profit growth (+9.0% y/y, previous 24.6%) and below-consensus official December manufacturing PMI (50.3, consensus 50.5). Traditional Chinese medicine stocks were boosted by policy support in a five-year development plan for drug safety and files from the National Healthcare Security Administration. Solar and defense led on a robust long-term outlook. Lithium stocks rebounded on strong prices after digesting supply chain disruption worries. Liquor companies were hit by rumors of a consumption tax. Power stocks retreated from recent strong upward moves. Long-term leading auto-related stocks underperformed on profit-taking pressures with rich valuations and less EV subsidies in 2022. Wait-and-see sentiment continued to rise amid increasing domestic COVID infections ahead of year-end. The market remained volatile with strong sector rotation. Investors should stay patient and adopt a disciplined and selective approach as annual earnings clues start to come out.

The CSI 300 closed with a narrowed loss of 0.12% as of Thursday this week. The market was shifted to an Uptrend Under Pressure following Monday’s heavy selloff. The current distribution day count is three. The index found support at and then traded around its converged 100- and 50-DMA (~4,912, -0.7%). Next support lies at previous lows of ~4,663 (-5.8%). Agricultural stocks led gains on positive expectations fueled by upcoming festival spending with the approaching year-end. Property developers and building material companies outperformed amid the government’s loosening control over the sector, but with gains pared. Power stocks were strong on a better outlook amid the country’s continuous shift toward green energy. Tourism stocks underperformed with sporadic domestic outbreaks of COVID. Semiconductor, solar, and headline-rattled lithium stocks were among the top losers. A slowing domestic economy is expected in 2022. Wait-and-see sentiment is increasing as we head into year-end. Investors should stay patient amid the volatile market with strong rotation. Adopt a disciplined and selective approach and avoid chasing highs.