Early this week we wrote about the Asian Bull. Below is a quick update as the indices in Asia continue climbing.
China´s CSI 300 continues moving higher and the index broke above the 50-day average for the first time this year. The index has tried establishing price action above the 50 day average several times during the down trend, but has failed. Any attempt of crossing the longer term 100-day average has been met with selling. Let´s see if this time we can see the index try for “real”?
3200 is a huge level to watch.
The main China ETF, FXI US, has been on bullish run so far in 2019, but we are approaching some bigger negative trend lines here. 42 is the big resistance level to watch. Note the 50-day average is turning slightly positively sloping, something we have not seen in a long time.
Hong Kong is up 8.5% from January lows. The index is back to early December highs and approaching the big negative trend line. The big resistance is at the 28k level.
Our positive tilt towards Tencent continues to be intact, but less intense. The most important sentiment stock in the region continues trading well, but note we are approaching the big 350 resistance as well as the 200-day average soon.
So far, the Chinese bounce continues to be just a bounce and not a long term strategic bullish view, despite some of the crazy moves we have seen in pig related names (the year of the pig starts on Feb 5). Via Bloomberg;
Chinese stocks connected to Peppa Pig surged after a promotional clip for a film featuring the cartoon character went viral. Banbao Co., which is authorized to use the Peppa Pig image on its toys, surged by the 10 percent limit, while toymaker Alpha Group Co. jumped as much as 7.3 percent.
As we have been reasoning, the Chinese markets need speculation to kick off before any meaningful longer-term bullish move starts. So far it seems speculation has not spilled over to the masses. The chart below shows the CSI 300 (orange) and the margin trading (white).
Longer term the recent gap is not sustainable.
Source: charts by Bloomberg
