Author: Midhun Parameswaran

The CSI 300 gained 3.52% on modestly lower but above average volume this week. The market remained in an Uptrend Under Pressure with seven distribution days. The index retook its 50-DMA (~4,962, -1%) after breaking above resistance at the 21-DMA (~4,885, -2.6%). Next resistance lies at the high (~5060, +0.9%) of August’s rally, followed by the 100-DMA (~5,065, +1%). Next support is at the low of July 28 (~4,664, -7.0%). China’s consumer prices stayed muted in August while factory-gate prices rose by the fastest pace (+9.5% y/y) since 2008, boosted by higher commodity costs. M2 and new RMB loan growth fell short of consensus, although total social financing was slightly above expectations (RMB 2.96T versus expectations of RMB 2.75T). Cyclical mining, steel, non-ferrous, chemical, and shipping companies continued outperforming as strong demand amid tight supply drove up prices. Sold-off tourism stocks rallied. Brokers came off highs after advancing on news of the Beijing stock exchange. Clean energy led the loss. Real estate and home appliances were weak. Agricultural stocks lagged on weak pork prices. We observed highly mixed performance in terms of both stock benchmarks and sectors. The market is volatile with strong sector rotation. We recommend investors stay patient and adopt a selective approach.

The CSI 300 gained 0.33% on higher and above average volume this week. The market remains in an Uptrend Under Pressure with six distribution days. The index regained its 5-DMA (~4,840, -0.1%) but faced persistent resistance at the 21-DMA (~4,888, +0.9%). Support lies at July 28’s low (~4,664, -3.7%) followed by July 2020’s low (~4,500, -7.1%). August’s manufacturing PMI fell further, with official data slowing to 50.1 from 50.4, missing consensus of 51.2, and Caixin data falling to 49.2 from 50.3. Power stocks outperformed on expectations of an electricity price hike, and investors were revaluating some companies expanding into clean energy businesses. Cyclical stocks were mixed after a volatile week, with mining and steel stocks ending higher and chemical and non-ferrous companies closing lower. Semiconductor, auto, and defense retreated. Health care weakened further to hit a low since July 2020. Sentiment, hurt by intensive regulation, remained weak, but expectations of policy support rose following the slowing domestic economy. The market was volatile and highly mixed with strong sector rotation. Inflation, financial, and trade data will be released next week. We recommend investors stay patient and watch macro policy signals and regulatory intentions. Be selective and focus only on quality stocks.