The CSI 300 declined 1.79% in the four-day trading week. It remains in an
Uptrend Under Pressure with four distribution days. Trade friction is still
lingering, and the market is not as optimistic about economic fundamentals as
it has been. Trading volume continues to fall as wait-and-see sentiment rises.
The CSI 300 declined below 100-DMA support, with the next level of support
at ~3,556, which the index is currently testing. We are waiting to see if support
holds going forward. The major indices now face strong resistance at their 20-
DMA, and we expect the market to continue consolidating in the near term.
Pharmaceutical stocks experienced a strong correction following reports that
China’s regulator will investigate whether pharmaceutical companies, including
Hengrui, have accepted kickbacks. Investors are advised to stay cautious and pick
leading stocks with robust earnings that are resilient to trade friction.
Symbol: BPC.BR
Global Focus Emerging
The CSI 300 rose 1% for the week on slightly higher volume and remains in an Uptrend Under Pressure with five distribution days. The overseas environment is still uncertain. China’s manufacturing PMI fell to 49.4 in May from 50.1 in April, much worse than expected and suggesting that the trade conflict is exerting pressure on China’s manufacturing activity. Lower-than-expected economic data indicates a resumed economic slowdown. External negative factors have intensified, and investors’ risk appetite has declined since May. The index now faces resistance at the 20-DMA (~3,659), and we believe the market will continue to consolidate with increasing volatility. We recommend that investors remain cautious and watch stocks leading the market with good fundamentals that are resilient to the trade war. The previous gap at ~3,556 still provides the CSI 300’s next support.
Global Focus Emerging
The CSI 300 dropped 1.50% for the week on decreased volume and remains in an Uptrend Under Pressure with five distribution days. The U.S.-China trade conflict is becoming increasingly fierce as the U.S. targets Huawei and other Chinese technology enterprises on the grounds of information security. The index fell for a third week in a row, but trading volume was lower. In our view, trade tensions won’t affect the market as much as they did last year and investors need not be too pessimistic. However, the market’s risk appetite still needs to improve and confidence needs to be restored, so the index is expected to continue to be weak and volatile in the near term. Look for support at 3,520– 3,574 next week. We would downgrade the market to a Downtrend if this support level failed; the next support would be the 200-DMA. We recommend that investors stay cautious and patient, focusing on leading defensive stocks with good fundamentals.
Global Focus Emerging
The CSI 300 declined 2.54% on lower-than-average volume for the week and remains in an Uptrend Under Pressure with five distribution days. It erased the week’s gains on Friday after three up sessions. April real estate investment data was still resilient, but industrial production, retail sales, and fixed asset investment fell short of expectations. No improvement has been seen in the overall economy, and the market’s long-term direction is still not clear amid an intensifying Sino-U.S. trade war and global uncertainties. An upward move faces strong resistance at ~3,791, but a downward move could find support at ~3,575. The market could keep consolidating in the near term, and investors are advised to wait and see. Next week, the FTSE Russell will announce the first batch of A-share names being added to its key indices.
LATAM Weekly Summary
Key points from this week’s report:
- Brazil’s Bovespa index fell 1.8% last week and is still expected to remain range-bound near the 50-DMA until clear progress is made on pension reform. It is still in a Rally Attempt.
- Mexico’s benchmark index fell 2% last week. It was moved to an Uptrend Under Pressure and has four distribution days.
- Actionable Focus List recommendations include Localiza ( LOC.BR; RENT3:BZ ).
- Focus List stock Grupo NotreDame Intermédica ( GNI.BR; GNDI3 BZ ) reported double-digit Q1 revenue and net profit growth Friday. Add to positions when the stock breaks above BRL 35. Other Focus List stocks that reported in the week include Banco do Brasil ( IO3.BR ) – Q1, Bco BTG Pactual ( BPC.BR ) – Q1, B3 Brasil Bolsa Balcao ( BMF.BR ) – Q4, Sul America ( SUA.BR ) – Q4, and Interconexion Electrica ( ISA.CO ) – Q1.
WON Global View
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq staged upside reversals yesterday, undercutting 50-DMA support before rallying to close above that level and near the highs of the session. Despite the reversal, both indices recorded a distribution day, taking the count to four days on the S&P 500 and five on the Nasdaq.
Global Focus Emerging
The CSI 300 dropped 4.67% for the week on below average volume and the market was downgraded to an Uptrend Under Pressure, with four distribution days. It declined below key 50-DMA support (~3,900) on increased volume;
the next support is at 3,520–3,574, while 3,791–3,885 will serve as the next resistance.
Global Focus Emerging
China’s market remains in a Confirmed Uptrend with three distribution days.
The CSI 300 took a pause for the short trading week and will reopen Monday. In
the coming weeks, we are paying close attention to the clustering of distribution
days and whether the index continues to hold above its 50-DMA (~3,800).
Failure to do so would warrant a downgrade to an Uptrend Under Pressure.
Global Focus Emerging
The CSI 300 declined -5.6% on lower-than-average volume this week, erasing gains made since the beginning of April. It is right above support at ~3,880. Four of five trading days were down days. The market remains in a Confirmed Uptrend with two new distribution days with lowerthan- average volume for a total of three.
LATAM Weekly Summary
Key points from this week’s report:
Brazil’s Bovespa index bounced back last week but remains below key resistance levels. The Brazilian market is still attempting to rally, and we believe it could remain range-bound until clear progress is made regarding approval of the government’s proposed pension reform.
Mexico’s IPC35 index rallied last week and managed to break above its 200-DMA. The market remains in a Confirmed Uptrend despite negative macro headlines.
Actionable Focus List recommendations include Banco BTG Pactual ( BPC.BR; BPAC11 BZ ), Interconexion Electrica ( ISA.CO; ISA CB ), and IRB Brasil ( IRB.BR; IRBR3 BZ ).
On Thursday, April 18, we removed PagSeguro ( PAGS ) from our Focus List due to changes to the competitive landscape of Brazil’s payments industry and technical deterioration.
