China & HK Archives - Page 52 of 61

March 19, 2012

Selling pressure warns of correction

Medium-term selling pressure, signaled by bearish divergence on 21-day Twiggs Money Flow, continues to warn of a correction in US and Asia-Pacific markets. The Dow Jones TSM (formerly “Wilshire”) Asia-Pacific Index displays a bearish divergence since mid-February. Reversal below 1280 would confirm a correction.

Dow Jones TSM Asia-Pacific Index

Dow Jones Industrial Average shows a similar bearish divergence, though the latest down-turn was exaggerated by triple-witching hour [TW] on Friday. Reversal below 12750 would confirm a correction.

Dow Jones Industrial Average

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

March 18, 2012

Hong Kong & China

Hong Kong’s Hang Seng Index is in a primary up-trend. Having retraced briefly, it appears to have found support at 21000. Recovery above 21500 would signal an advance to 22500*.

Hang Seng Index

* Target calculation: 20000 + ( 20000 – 17500 ) = 22500

The Shanghai Composite Index, however, remains in a primary down-trend. Breakout above 2500 would, however, suggest that the trend is weakening. Respect of support at 2300 would suggest reversal to a primary up-trend, while failure of support would warn of another decline.

Shanghai Composite Index

* Target calculation: 2100 – ( 2500 – 2100 ) = 1700

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 14, 2012

Hong Kong & Shanghai

Hong Kong’s Hang Seng Index retreated Wednesday in response to a sharp fall in Shanghai. Bearish divergence on 21-day Twiggs Money Flow warns of a correction, but as long as the lower trend channel at 20,000 is respected the primary up-trend remains intact.

Hang Seng Index

* Target calculation: 20000 + ( 20000 – 17500 ) = 22500

Dow Jones Shanghai Index fell sharply to test support at 295. Failure of support would warn of a correction.

Dow Jones Shanghai Index

Shanghai Composite Index shows a similar fall. Follow-through below 2380 would signal a correction to primary support at 2150.

Shanghai Composite Index

March 5, 2012

China’s growth model running out of steam – FT.com

For the first time in eight years, the Chinese government’s annual growth target has been lowered, to 7.5 per cent GDP growth for all of 2012…..

The new number represents Beijing’s recognition that the investment-driven, export-dependent growth model that has propelled it from an impoverished backwater to the world’s second-largest economy in just three decades is running out of steam……

The goal is to shift growth away from investment in polluting, energy-intensive, unsustainable industries and towards domestic consumption, particularly of services and “green goods”, such as energy-efficient vehicles and environmentally friendly building materials.

“We will move faster to set up a permanent mechanism for boosting consumption,” Wen Jiabao, the premier, said at the opening session of China’s rubber stamp parliament on Monday. “We will vigorously adjust income distribution, increase the incomes of low- and middle-income groups and enhance people’s ability to consume.”

via China’s growth model running out of steam – FT.com.

Comment:~ The trap China faces is that raising wages in order to promote domestic consumption will reduce competitiveness in export markets and harm its current export-driven growth model. Not only are exports likely to fall but, with a high propensity to save, there is no guarantee that Chinese consumption will rise as fast as wages.

March 3, 2012

China & Hong Kong

The Shanghai Composite Index rallied strongly above 2300 after breaking out of its downward trend channel. 13-Week Twiggs Money Flow rising strongly indicates good buying pressure. Expect resistance at 2550. Breakout above this level would offer a weak (primary) reversal signal. Stronger confirmation would come if retracement successfully tests support at 2300.

Shanghai Composite Index

Hong Kong’s Hang Seng Index has already started a primary up-trend, with an initial target of 22,500*. Reversal below 21,000 would signal retracement to test the new support level at 20,000, but 13-Week Twiggs Money Flow again indicates buying pressure and we can expect the primary up-trend to continue.

Hang Seng Index

* Target calculation: 20,000 + ( 20,000 – 17,500 ) = 22,500

March 1, 2012

Heard on the Street: China Shifts Out of Dollars, World Doesn’t End – WSJ.com

In the 12 months to June 2011, dollar purchases accounted for just 15% of additions to China’s reserves.

That confirms hints from Beijing and Europe over the past year that China has ramped up purchases of European debt

via Heard on the Street: China Shifts Out of Dollars, World Doesn’t End – WSJ.com.

February 28, 2012

China outlines plan to loosen capital controls – FT.com

China’s capital controls have served it well. It was little harmed by the Asian financial crisis of 1997-98 and has been largely insulated from the global tumult of the past four years. That resilience in the face of external trouble has emboldened conservatives in Beijing who support the status quo.

But there are also problems in maintaining such rigid capital controls. Chinese savers have few investment outlets for their money and plough it into the property market instead. Perhaps most important from a political standpoint, plans to transform the renminbi into a rival to the dollar have run into difficulty – foreign companies do not want a currency that cannot be invested in its country of origin.

“Internationalisation of the renminbi is now a clear mandate, so resistance for capital account liberalisation has been diminishing,” said Liu Li-gang, an economist with ANZ. “The wind has shifted.”

China’s top leaders have given a series of signals in recent months that they want capital account reforms to get into gear.

via China outlines plan to loosen capital controls – FT.com.

February 27, 2012

China Bystander: The middle-income trap | 中國外人

The arc of China’s development is not that different from the rapid industrialization phase of countries such as South Korea, Japan or even, much earlier, western Europe and the U.S., even if the magnitude of China’s arc is on an unprecedented scale. The country’s well of cheap labor, transferred from farm to factory, is starting to run low. Demographics, too, are working against growth. The value of foreign-developed technologies diminish as they age. Most of all, the economy needs to move up the value chain if it is to clear the barrier at which so many developing economies fall, that point where per capita income reaches at $10,000-12,000 a year. Vault it, and a nation becomes a middle income country on the road to being a rich one. Fail, and the country ends up stuck on a plateau of disappointed expectation.

….It is the politics that is the quagmire. There are clear implications for the Party in adopting market reforms. No country has done so successfully and remained a one party state.

….Reining in the power of the SOEs provides a particular challenge to the reformers. SOEs, like the military, are a source of power, money and influence for the princelings, the descendants of Mao’s original revolutionary leaders, an elite collective dynasty of some 400 families who hold extensive sway over the Party, army and the economy.

via China Bystander | 中國外人.

February 27, 2012

China Bystander: World Bank report | 中國外人

The World Bank report offers [China’s reformers] a strategic description of the way forward rather than policy prescription. Its six strategic directions for China’s future are:

Completing the transition to a market economy;
Accelerating the pace of open innovation;
Going “green” to transform environmental stresses into green growth as a driver for development;
Expanding opportunities and services such as health, education and access to jobs for all people;
Modernizing and strengthening its domestic fiscal system;
Seeking mutually beneficial relations with the world by connecting China’s structural reforms to the changing international economy.

via China Bystander | 中國外人.

February 27, 2012

China’s soft landing

The Hang Seng Index is approaching its target of 22,000. Expect retracement to test the new support level at 20,000. Respect would confirm a strong primary up-trend.

Hang Seng Index

* Target calculation: 20000 + ( 20000 – 18000 ) = 22000

A monthly chart of the Shanghai Composite Index reflects China’s soft landing over the last two years. The gentle down-trend is likely to continue, with the current rally testing the descending trendline around 2850.

Shanghai Composite Index