The CSI 300 gained 1.71% on higher and above average volume. The market remains in a Confirmed Uptrend with the number of distribution days decreasing to three. The index made a new high of ~5,090 (+0.5%) Wednesday, with no clear resistance until June 2015’s high (5,380, +6.2%).
Symbol: CMT.CN
China A Shares
The CSI 300 gained 0.76% on slightly higher volume. The market remains in a Confirmed Uptrend with the number of distribution days decreasing to four. The index made a new high of ~5,030 Monday but trended downward the following two sessions and reversed back to hold above the 10- DMA. The index faced resistance at Monday’s high (5,030, +1.0%) and support lies at the 21-DMA (4,890, -1.8%). Industrial profits in October rose 28.2% y/y, significantly higher than September’s 10.1%, mainly due to accelerating chemical product manufacturing growth. Low-valuation sectors Financial and Energy led the market this week. Health Care lagged on the news of a second round of collective medical supply purchases. Consumer Cyclical underperformed mainly due to the pullback of home appliance stocks. Sector rotation has been quick and there has been no consistent leadership after the index retreated from 5,030 Tuesday. We expect the CSI to remain in consolidation and advise investors to adopt a selective approach amid current strong sector rotation.
Global Focus Emerging
The CSI 300 gained 0.76% on slightly higher volume. The market remains in a Confirmed Uptrend with the number of distribution days decreasing to four. The index made a new high of ~5,030 Monday but trended downward the following two sessions and reversed back to hold above the 10-DMA. The index faced resistance at Monday’s high (5,030, +1.0%) and support lies at the 21-DMA (4,890, -1.8%).
China A Shares
The CSI 300 gained 1.78% on slightly lower but above average volume. The market remains in a Confirmed Uptrend with five distribution days. The index consolidated around its 50-DMA, with resistance at recent highs of ~5,000 (+1.1%) and support at the 21-DMA (4,830, -2.3%). Sentiment hurt by recent bond market defaults improved on optimism about the Regional Comprehensive Economic Partnership signed last weekend and mixed but improving economic data Monday. Property developers, with relatively low valuation, led the gain as improving starts, completions, and sales data increased its attractiveness. Financials outperformed, with banking and insurance rallying on a better domestic economic outlook. Materials and energy were strong on hopes of improving demand strengthened by recent vaccine progress. Consumer cyclical was up, driven by automobile stocks after the government launched fresh stimulus to encourage auto consumption. Selling pressure in long-term leading COVID-19 beneficiaries, mainly health care and information technology, continued. We expect the CSI to remain in consolidation and recommend that investors stay patient and adopt a selective approach amid current strong sector rotation.
Global Focus Emerging
The CSI 300 gained 1.78% on slightly lower but above average volume. The market remains in a Confirmed Uptrend with five distribution days. The index consolidated around its 50-DMA, with resistance at recent highs of ~5,000 (+1.1%) and support at the 21-DMA (4,830, -2.3%).
China A Shares
The CSI 300 fell 0.59% on slightly higher volume. The market was shifted to a Confirmed Uptrend Monday, with the number of distribution days increasing to five. Next support is at the 21-DMA (4,805, -1.1%) and resistance lies at Monday’s new high of ~5,000 (+9.0%). The index gapped up to break above resistance at August’s high (~4,900) on much larger volume Monday, as Joe Biden’s victory in the U.S. presidential election raised hopes about U.S.-China relations. However, it trended down the following four sessions and fell below 4,900 again Friday, as October M2 and incremental RMB loans were lower than consensus and September data, lifting concerns about shrinking liquidity. Defaults of some AAA-rated credit bonds also pressured market sentiment. Basic Material and Energy led this week on expectations of a global economic recovery, boosted by stronger-than-consensus October exports. Health Care continued to underperform due to centralized medicine procurements and profit-takings on positive news about the Pfizer vaccine. Consumer Cyclical lagged as automobile stocks retreated after recent strong gains and media stocks, which had benefited from stay-at-home trends, fell. We expect the CSI to consolidate in the near term and investors should adopt a patient and selective approach.
Global Focus Emerging
The CSI 300 fell 0.59% on slightly higher volume. The market was shifted to a Confirmed Uptrend Monday, with the number of distribution days increasing to five. Next support is at the 21-DMA (4,805, -1.1%) and resistance lies at Monday’s new high of ~5,000 (+9.0%). The index gapped up to break above resistance at August’s high (~4,900) on much larger volume Monday, as Joe Biden’s victory in the U.S. presidential election raised hopes about U.S.-China relations.
China A Shares
The CSI rose 4.05% on higher volume. The market remains in an Uptrend Under Pressure with the distribution day count decreasing to four. The index trended up throughout the week, retook its 50-DMA (4,725; -3.3%) and 21-DMA (4,774; -2.3%), but failed to break above key resistance of the previous high (~4,900; +0.3%). Market sentiment was boosted as U.S. election results showed a firming lead for Biden, leading to expectations of easing Sino-U.S. relations. Both official and Caixin PMI data in October were better than consensuses. Ant Group’s IPO was halted, encouraging market liquidity. Consumer Cyclical led this week as Household Appliances and Automobile showed strong momentum due to the resumption of domestic demands after two years of decline. Basic Material also posted strong performance on improving demand of coal, petro, and nonferrous metals. Health Care lagged due to centralized medicine procurements. We expect the market to be more bullish if the CSI 300 can break above resistance of 4,900. We recommend that investors stay patient and focus on quality stocks breaking out of proper bases.
Global Focus Emerging
The CSI rose 4.05% on higher volume. The market remains in an Uptrend Under Pressure with the distribution day count decreasing to four. The index trended up throughout the week, retook its 50-DMA (4,725; -3.3%) and 21-DMA (4,774; -2.3%), but failed to break above key resistance of the previous high (~4,900; +0.3%).
China A Shares
The CSI 300 fell 0.49% on higher volume. The market remains in an Uptrend Under Pressure with five distribution days. The index gapped lower Monday, trending higher to hit a weekly high Thursday but fell below its 21-DMA and 50-DMA (~4,715, +0.4%) again on Friday. The next support is at the gap (4,640, +1.2%) of October 9. China’s fourteenth five-year plan (2021–2025), approved by the Communist Party meeting Thursday, aims to realize sustained and healthy economic development on the basis of a marked improvement in quality and efficiency. Health Care and Consumer Cyclical were leading this week, boosted by a resurgence of COVID-19 and upbeat Q3 results from consumer cyclical stocks, while Financial and Real Estate lagged. We expect the market to continue to consolidate in the near term before breaking above key resistance of 4,900. We recommend investors stay cautious about market volatility next week due to the U.S. presidential election on November 3 and focus on quality stocks breaking out of key resistance.
