Hang Seng at New 2023 Lows as China’s Deflationary Pressures Intensify

  • HKG33
    (${instrument.percentChange}%)

HKG33 Analysis

China's Consumer Price Index fell by 0.5% y/y in November, as data over the weekend reveled, shrinking by the most in three years. Even though the central bank (PBoC) governor had recently said that CPI is gradually bottoming out [1], the data show that consumers continued to cut back. Deflationary pressures intensified on the producer side as well amidst weak business activity, as PPI came in at -3% y/y, marking the fourteenth straight month of contraction.

Beijing has been taken measures to support the ailing economy and the Politburo last week pledged to revitalize the economy and boost domestic spending [2]. There have been signs of stabilization recently, but the economy remains in perilous state, factory activity contracted again last month, the crucial property sector is in shambles and Moody's lowered China's A1 debt rating outlook to negative [3]. Fraught relations with the US and the advanced tech trade export curbs also add to the woes.

Saturday's inflation report was another testament to the fact that Beijing's piecemeal approach is not enough to promote the recovery and has definitely failed to inspire markets. HKG33 runs its fifth consecutive losing month and sets new 2023 lows today, bringing the 2022 multi-year lows in the spotlight (14,576). Although we can see a reaction, the upside appears hostile. Daily closes above the EMA200 (17,220) would be needed for the bearish momentum to pause, but that looks like a toll order.

Nikos Tzabouras

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.

References

1

Retrieved 11 Dec 2023 http://www.pbc.gov.cn/en/3688110/3688172/4756445/5150664/index.html

2

Retrieved 11 Dec 2023 https://english.www.gov.cn/news/202312/08/content_WS657314a4c6d0868f4e8e200f.html

3

Retrieved 24 Jul 2024 https://www.reuters.com/world/china/moodys-cuts-chinas-credit-outlook-negative-2023-12-05/

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