The CSI 300 dropped 1.28% this week and remains in a Confirmed Uptrend with two distribution days added for a total of four. A significant amount of important financial and economic data was released during the week, impacting market sentiment. China’s new yuan loans and year-over-year money supply growth in April beat expectations, indicating that monetary easing had been effective in maintaining liquidity. A larger-than-expected PPI decline (-3.1% versus -2.6% y/y consensus) and weaker-than-expected retail spending (-7.5% versus -7% y/y consensus) in April suggest greater-than-expected pressures on growth. The market is watching the upcoming “two sessions” meeting next week and expecting fiscal stimulus. Meanwhile, rising China-U.S. trade frictions have also damaged investors’ appetite for risk. We recommend investors stay moderately cautious amid clustering distribution and low trading volume. Avoid ideas that would be vulnerable to a trade war. The CSI 300 failed to hold above its 100-DMA and we see immediate support at the 200-DMA (3,900, -0.3%), followed by the 50-DMA (3,837, -1.9%) and ~3,738 (-4.4%). Resistance remains at the gap of ~4,028 (+3.0%), followed by ~4,135 (+5.7%).
Symbol: CMT.CN
Global Focus Emerging
The CSI 300 dropped 1.28% this week and remains in a Confirmed Uptrend with two distribution days added for a total of four. A significant amount of important financial and economic data was released during the week, impacting market sentiment. China’s new yuan loans and year-over-year money supply growth in April beat expectations, indicating that monetary easing had been effective in maintaining liquidity. A larger-than-expected PPI decline (-3.1% versus -2.6% y/y consensus) and weaker-than-expected retail spending (-7.5% versus -7% y/y consensus) in April suggest greater-than-expected pressures on growth.
China A Shares
The CSI 300 rose 1.3% this week in three trading sessions due to the holiday. The market remains in a Confirmed Uptrend with two distribution days. The index broke above key resistance at the 100-DMA on higher volume Friday, boosted by positive headlines that China and the U.S. are talking about the phase-one trade deal and that China is further opening up its financial market. The CSI 300 has hit a new high since March’s low and retaken all key moving averages. We are becoming more bullish and recommend investors buy ideas that have broken out of solid bases or bounced off key support levels with good volume. Meanwhile, focus on names with strong fundamental profiles. The CSI 300 is on track to test resistance near the upper gap (3,987‒4,028). We see immediate support at the 100-DMA (-0.58%), followed by the 200-DMA of ~3,896 (-1.7%) and the 50-DMA of ~3,848 (-2.9%). Most sectors recorded gains this week, with Consumer Staple and Technology outperforming while Financial and Transportation lagged.
Global Focus Emerging
The CSI 300 rose 1.3% this week in three trading sessions due to the holiday. The market remains in a Confirmed Uptrend with two distribution days. The index broke above key resistance at the 100-DMA on higher volume Friday, boosted by positive headlines that China and the U.S. resumed talking about the phase-one trade deal and that China is further opening up its financial market. The CSI 300 has hit a new high since March’s low and retaken all key moving averages
China A Shares
The CSI 300 rose 3.04% this week on a four-day gaining streak and rose 6.14% this month. The market remains in a Confirmed Uptrend with three distribution days (two expired). The index retook its 50- and 200-DMA in two successive days and volume picked up although remained below average. We would like 200-DMA support to hold to remain constructive. The CSI 300 is testing immediate resistance at its 100-DMA (+0.6%), followed by the gap at ~4,028 (+3.0%). Beijing has eased its epidemic control measures and the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference will be held May 22, raising expectations that economic recovery will speed up and more fiscal stimulus will be imminent. China’s official manufacturing PMI in April slipped to 50.8 from March’s 52.0, while the Caixin survey, which focuses mostly on small and export-oriented businesses, fell to 49.4, suggesting the pandemic shattered global demand. Our conviction has increased following Thursday’s resistance break and we recommend buying ideas that emerged from sound bases or key support levels with volume.
Global Focus Emerging
The CSI 300 rose 3.04% this week on a four-day gaining streak and rose 6.14% this month. The market remains in a Confirmed Uptrend with three distribution days (two expired). The index retook its 50- and 200-DMA in two successive days and volume picked up although remained below average. We would like 200-DMA support to hold to remain constructive. The CSI 300 is testing immediate resistance at its 100-DMA (+0.6%), followed by the gap at ~4,028 (+3.0%). Beijing has eased its epidemic control measures and the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference will be held May 22, raising expectations that economic recovery will speed up and more fiscal stimulus will be imminent. China’s official manufacturing PMI in April slipped to 50.8 from March’s 52.0, while the Caixin survey, which focuses mostly on small and export-oriented businesses, fell to 49.4, suggesting the pandemic shattered global demand. Our conviction has increased following Thursday’s resistance break and we recommend buying ideas that emerged from sound bases or key support levels with volume.
Won Global View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq gapped up and closed in the upper half of the sessions range, however, volume was slightly below average. The Nasdaq regained short-term resistance at its 100-DMA while the S&P 500 continues to trade above its 50-DMA. Distribution remains low on each index.
China A Shares
The CSI 300 fell 1.11% this week on lower volume. The market remains in a Confirmed Uptrend with five distribution days. The index has hit resistance at its 50-DMA and is consolidating after hitting highs following March’s low of 3,503 (-7.7%). With consistently thin trading volume, we expect the market to trade sideways between resistance and the gap of ~3,738 (-1.5%) in the near term. We would like it to stay above 21-DMA support to remain constructive, followed by support at ~3,627 (-4.5%). China further cut its benchmark lending rate this week to support the economy amid the pandemic and raised expectations of a comprehensive rate cut. However, since the coronavirus spread overseas has not yet peaked and unprecedented oil price declines boosted fears of a recession, the domestic market is in a wait-and-see mood. As volatility picks up and rotation speeds up, investors are advised to stay cautious and focus on ideas that benefit from policy support, mainly targeted at stimulating domestic consumption. The Consumer Staple, Health Care, and Retail sectors are outperforming while Technology lagged over the last four weeks. With earnings to continue next week, we recommend watching closely.
Global Focus Emerging
The CSI 300 fell 1.11% this week on lower volume. The market remains in a Confirmed Uptrend with five distribution days. The index has hit resistance at its 50- DMA and is consolidating after hitting highs following March’s low of 3,503 (-7.7%). With consistently thin trading volume, we expect the market to trade sideways between resistance and the gap of ~3,738 (-1.5%) in the near term. We would like it to stay above 21-DMA support to remain constructive, followed by support at ~3,627 (-4.5%). China further cut its benchmark lending rate this week to support the economy amid the pandemic and raised expectations of a comprehensive rate cut. However, since the coronavirus spread overseas has not yet peaked and unprecedented oil price declines boosted fears of a recession, the domestic market is in a wait-and-see mood. As volatility picks up and rotation speeds up, investors are advised to stay cautious and focus on ideas that benefit from policy support, mainly targeted at stimulating domestic consumption. The Consumer Staple, Health Care, and Retail sectors are outperforming while Technology lagged over the last four weeks. With earnings to continue next week, we recommend watching closely.
China A Shares
The CSI 300 rose 1.87% this week on higher but below average volume after falling 0.62% on low volume last Friday. The market remains in a Confirmed Uptrend with three distribution days. China’s GDP fell 6.8% y/y in Q1 2020, larger than the -6% forecast and reversing Q4 2019’s 6% expansion. This marks the first contraction on record in China. Factory production fell less than expected, -1.1% versus the -5.2% forecast. The market expects the economy to remain under pressure in the second quarter because consumption slumps and the pandemic is devastating demand from its major trading partners, so we would watch China’s further policy support. This week’s trading volume was higher than last week’s but remained under the 50-day moving average, so we believe it’s still too early to be aggressive. We recommend a disciplined and selective approach, focusing on stocks with high RS breaking out from a sound base. The CSI 300’s next support is at ~3,627 (-5.5%), followed by ~3,503 (-8.7%). Resistance is at the 50-/200-DMA at ~3,890 (+1.3%), followed by the 100-DMA at ~3,940 (+2.6%).
