Hang Seng Downbeat on China’s Deflationary Pressures

  • HKG33
    (${instrument.percentChange}%)

HKG33 Analysis

China's post-pandemic recovery has faltered after the strong start to the year, although recent data have offered signs of stabilization, as authorities have been taking target action to support the rebound, including domestic demand.

The first October stats have disappointed though, with factory activity slipping back to contraction and today's figures showing an escalation in deflationary pressures. The consumer price index (CPI) has been hovering around zero for the past few months and contracted by 0.2% y/y in October and by 0.1% m/m, despite including the Golden Week holiday that typically boost spending. On the producer side, prices shrunk by 2.6% y/y, from -2.5% prior. Although off its lows, PPI has stayed in deflationary territory for a year.

Meanwhile, the country's important real estate market remains in distress, creating uncertainty. Reuters reported this week that authorities have asked financial giant Ping An to take over troubled property developer Country Garden [1]. Ping An however denied receiving such requests. [2]

HKG33 rebounded from its late-October 2023 lows (16,855) and although further gains could follow, it does not inspire confidence for sustained recovery. The upside is hostile technically and Beijing's piecemeal approach to stimulus fails to inspire markets. The frivolous recovery was stopped by the thick daily Ichimoku Cloud and the index returned below the EMA200, facing more pressure after today's poor inflation figures. This sustains risk for lower lows, although 16,127 is distant.

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 09 Nov 2023 https://www.reuters.com/world/china/china-authorities-ask-ping-an-take-controlling-stake-country-garden-sources-say-2023-11-08/

2

Retrieved 01 Mar 2024 https://www1.hkexnews.hk/listedco/listconews/sehk/2023/1108/2023110800965.pdf

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