Return to the China Re-Opening Rally?
Return to the China Re-Opening Rally?
It was around the end of October and the start of November last year that traders started to look at China’s re-opening as an opportunity to get in early. At the time some news channels were focusing on US-China trade tensions, slowing global demand for oil, a struggling property sector, and Covid-Zero. However, there were opportunities for those who took the longer view as pointed out here:
Since then there has been some profit taking on the rally as traders booked in some early profit. However, is this now the dip to buy?
New month, new positions?
On Wednesday this week, China’s manufacturing PMIs came in above the market’s maximum expectations at 52.6 vs 50.5 expected. This was the highest reading since April 2012 and marks a firm recovery. On top of this, the Non-Manufacturing PMI also improved to 56.3 vs 55 expected.
This is the first tangible sign that China is emerging from its Covid-Zero slumber. The question is, ‘how strong will the bounce back be?’ The Chinese Lunar New Year would have clearly improved sentiment as it was one of the first major holidays China enjoyed as it tentatively headed back to normality.
National People’s Congress
Next week is the National People’s Congress where new targets will be set. China’s Government is expected to roll out further supportive measures next week, so with more PMIs out early Friday, does it make sense to buy into China 50 for the long term now? The major trend line and the 100 and 200 EMA could be used to define and limit risk.
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