The CSI 300 rose 3.64% on higher and above average volume this week. The market was shifted to a Confirmed Uptrend Tuesday with the number of distribution days rising to 6. The index broke above two-month resistance at its 100-DMA (~5,250, -1.6%) with no clear resistance until January’s consolidation are at 5,300–5,600. Next support lies at the 21-DMA (5,145, -3.3%). Industrial profits rose 106% y/y in January through April and increased 49.6% compared with same period of 2019. Securities stocks led due to the recent active trading. Food & Beverage followed the gains, mainly driven by Baijiu. Agriculture stocks lagged due to expectations of falling pork prices. Market sentiment was supported by the appreciation of the RMB to USDCNH 6.36, a three-year high, and lessening worries about inflation as commodities prices fell. Our conviction increases as the CSI 300 retook and holds above key support at its 100-DMA. We advise investors to gradually increase risk exposure and be selective about quality stocks breaking out of solid bases. Avoid chasing highs. Northbound trading via the HK-China Stock Connect posted a net inflow of RMB 46.8B this week, and Tuesday’s inflow of RMB 21.7B was the largest daily inflow in history.
Author: Midhun Parameswaran
US Focus
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq have regained their 21- DMA (4,168) and 50-DMA (13,611) respectively and continue to consolidate in a constructive fashion above support. The distribution day count stands at eight and four respectively with one day expiring one each index next week.
European Focus
On Thursday, the Stoxx 600 ended 0.45% above last Friday’s close. Of the 17 indices we cover, 10 are in a Confirmed Uptrend and seven in an Uptrend Under Pressure. This week, we upgraded Switzerland and Italy to a Confirmed Uptrend after they reclaimed their prior rally high
Global Focus Developed
Australia’s ASX All Ordinaries Index gained 2.2% this week, closing at a new 52-week high. The index is in a Confirmed Uptrend with five distribution days, after adding one distribution day this week.
Global Focus Emerging
The CSI 300 rose 3.64% on higher and above average volume this week. The market was shifted to a Confirmed Uptrend Tuesday with the number of distribution days rising to 6. The index broke above two-month resistance at its 100-DMA (~5,250, -1.6%) with no clear resistance until January’s consolidation are at 5,300–5,600. Next support lies at the 21-DMA (5,145, -3.3%).
Global Focus Frontier
Ho Chi Minh City Development Joint Stock Commercial Bank (HD Bank) is one of the top banks in Vietnam and is a constituent of the VN30 Index. Its industry-leading growth and key financial ratios, along with its exposure to the consumer finance industry, will drive its growth.
China A Shares
The CSI 300 rose 0.46% on lower and less-than-average volume this week. The market remains in an Uptrend Under Pressure with the number of distribution days rising to five. The index remained above the 50-DMA (5,067, -1.3%) and 21-DMA (5,098, -0.7%), and is facing strong resistance at its 100-DMA (5,235, +2.0%). Economic data slowed in April and mostly missed consensus. Fix asset investment rose 19.9% y/y for January through April, slowing from January through March’s 25.6%. Social retail increased 17.7% y/y in April, down from 34.2% in March. Industrial output increased 9.8% y/y in April, lower than March’s 14.1%. Steel, energy, and metals lagged, as the government will strengthen management to stabilize commodities prices. New energy vehicle-related stocks led the market, due to U.S. President Biden’s proposal to invest $174B. Recent lagging sectors such as home appliances and automobiles rebounded. The index has been range-bound around its 100-DMA and 200-DMA for more than two months. We’ll have more conviction if the CSI 300 retakes its 100-DMA, and we advise investors to stay patient and disciplined before that happens. Take a cautious approach in the highly volatile market with very quick sector rotation. Be selective and focus on companies with strong earnings and improving technical profiles.
US Focus
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 is testing resistance at its 21-DMA (4,166) after a sharp pull back to and subsequent bounce off support at its rising 50DMA. The Nasdaq is testing resistance at its 50DMA (13,578) after a rally across oversold growth constituents. The distribution day count remains elevated at nine and five however next week two days will expire on the S&P 500 and one on the Nasdaq.
European Focus
On Thursday, the Stoxx 600 closed 0.14% lower compared with last Friday’s close. Of the 17 indices that we cover, eight are in a Confirmed Uptrend, including the U.K., France, and the Stoxx 600, and the remaining are in an Uptrend Under Pressure. We upgraded Belgium to a Confirmed Uptrend on Monday after it reclaimed its prior high.
Global Focus Developed
Australia’s ASX All Ordinaries Index gained 0.4% this week. It is trading between its 21- and 50-DMA and is slightly off its 52-week high. The index is in a Confirmed Uptrend with six distribution days after adding one distribution day this week. Two distribution days will expire next week.
