Symbol: CMT.CN

The CSI 300 rose 0.30% on lower volume and remains in an Uptrend Under Pressure with four distribution days. The index retook its 21-DMA (4,695, -0.5%), with the next support at its rising 50-DMA (~4,527, -4.0%) and strong resistance at July’s high of 4,878 (+4.3%). The ChiNext fell 1.36% on higher volume this week and underperformed the Shanghai Composite (+0.61%) as investors remained in wait-and-see mode before the implementation of daily up/down limit expansion to ±20% from ±10% of the ChiNext on Monday (August 24). Postponed U.S.-China trade negotiations are rescheduled to be held in the near term. We recommend investors stay cautious and focus on quality stocks bouncing off key resistance.

The CSI 300 fell 0.07% this week, trading range-bound on lower volume and remaining in an Uptrend Under Pressure with four distribution days, adding one this week. July’s macro data suggested a slower recovery in China. PPI fell 2.4% y/y while CPI rose 2.7% y/y, both beating consensus and improving from June. M2 rose 10.7% y/y while total social financing rose RMB 1.69T, both missing expectations and down from last month. Retail sales in July fell 1.1% y/y, missing consensus of 0.1% growth but better than June’s 1.8% y/y drop. Fixed-asset investment fell 1.6% y/y in January‒ July, in line with expectations but up from a 3.1% decline in 1H20. Industrial production grew +4.8% y/y in July, the same pace as June but missing consensus of +5.2%. A U.S.-China meeting to review the phase one trade agreement’s implementation will be held August 15. The CSI retook its 21-DMA (4,675, -0.6%) Friday and the next support level is its 50-DMA (~4,454, -5.3%). We expect the index to stay range-bound before it breaks above July’s high of 4,878 (+3.7%). Stay disciplined amid the recent volatility and focus on quality names coming out of proper bases.

The CSI rose 0.27% this week on higher volume and remains in an Uptrend Under Pressure with three distribution days. China’s Caixin/Markit manufacturing PMI rose to 52.8 in July from 51.2 in June, while Caixin Service PMI in July came in at 54.1 (versus expectations of 58 and 58.4 previously), remaining in expansion territory. Chinese exports jumped 7.2% y/y in July, accelerating from a 0.5% gain in June and beating market expectations of 0.2%. Imports fell 1.4% y/y in July, missing consensus of 0.5% drop following a 2.7% rise in June. The Trump administration unveiled a plan to ban U.S. transactions with Byte Dance’s TikTok and Tencent-owned WeChat. The index trended up on early sessions as the government announced that China will build a complete industrial chain for the Beidou navigation system but the CSI 300 reversed to end with a 0.27% gain following concerns of China-U.S. tensions. Immediate support still lies at the rising 21-DMA (4,688, -0.4%), followed by the 50-DMA (~4,379, -7.0%). We expect the index to stay range-bound before it breaks above key resistance at July’s high of 4,878 (+3.6%). We recommend investors stay disciplined amid recent volatility and focus on quality names coming out of proper bases.

The CSI 300 rose 4.20% this week on lower volume. The market remains in an Uptrend Under
Pressure with three distribution days. The index retook 21-DMA support on Wednesday and
we are looking for it to hold above this level to be constructive. The next support lies at the
50-DMA (~4289, -8.6%) and the next resistance is at July’s high of 4,878 (+3.9%). The official
manufacturing PMI rose to 51.1 in July from 50.9 in June, better than the estimated 50.5. The
non-manufacturing PMI was down to 54.2 in July from 54.4 in June, compared with consensus
of 54.5. Chinese industrial firms’ profits fell 12.8% y/y from January to June versus a 19.3% y/y
decline from January to May, adding to signs of an economic recovery. Stocks closed higher this
week with choppy trading amid uncertainties of a COVID-19 resurgence and rising Sino-U.S.
tensions, while market sentiment was boosted by positive macro data and long-term economic
plans discussed by policymakers. We recommend that investors stay disciplined amid recent
market volatility and focus on quality names coming out of proper bases.

The CSI 300 fell 0.86% this week on lower volume, moving to an Uptrend Under Pressure with three distribution days. The index fell below the 21-DMA at 4,568 and faces immediate resistance at last week’s high of 4,878 (+8.3%). Support lies at the 50-DMA (~4,219, -6.7%). The index closed with gains from Monday through Wednesday, buoyed by regulators’ capital market reforms. However, as China requires the U.S. to close its consulate in Chengdu as a response to the shutdown of its Houston consulate by the U.S., market sentiment soured over worries about escalating tensions. Tightening liquidity in capital markets also hurt risk appetite. We recommend investors be cautious of market volatility and focus on fundamentally sound stocks breaking out of solid bases.