The post-pandemic recovery of the world's second largest economy is faltering, as indicated by a constant stream of poor data over the past several months, while fears around the troubled property sector have resurfaced.
These factors throw into question the government's 5% growth target for the year and weigh on equity markets, with CHN50 falling back to negative territory for the year, slumping around 6% this month. The central bank (PBoC) has been slashing a series of rates, but yesterday's LPR cut was conservative and limited only to the one-year rate.
Although authorities have vowed to support the economy, their actions are modest so far, showing reluctance to implement big stimulus, especially on the fiscal side. Monday's timid PBoC rate cut highlighted this conservative approach and sent CHN50 to a poor start to the week.
The index is now in risk of fresh 2023 lows (12,261), although further losses that would breach 19,908 would need fresh catalyst. On the other hand, the drop looks stretched and CHN50 rises today, having the opportunity to push for the EMA200 (at around 11,800). Daily closes above it would pause the downside momentum, but we are cautious for larger rebound that would challenge (13,480-13,601) under current conditions. Sustained recovery would need stepping up in the stimulus efforts.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.