FXCM's China 50 basket gapped up on news that a state fund will boost stock purchases. China's Central Huijin Investment, a sovereign fund that owns China's state-run banks and other government enterprises, said it will step-up its purchases of stock index funds to support the market. The fund tends to buy big state banks and companies to counter the selling pressure in the Chinese market, largely due to China's property crisis and slowing economy.
However, it is uncertain if Beijing's latest efforts will stop the rout in the Chinese stock market. Despite the positive price action for February, CHN50 is still in a primary downtrend, with its green 5-month EMA below its orange 10-month EMA and its monthly RSI firmly on the bearish side of 50.
Despite being one of the most affordable globally, the Chinese stock market has not attracted enthusiastic investors. To regain their trust, authorities must go beyond prohibiting short selling, cautioning against "negative market tactics," and restricting the application of algorithmic and automatic trading. In effect, the fundamentals on the ground need to improve.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.