China PMI Bounce Impacts Hang Seng & CSI 300 Price Setups!

Amidst China’s manufacturing activity improvement, the outlook for Hong Kong and China equities, including the Hang Seng and CSI 300 indices

China Hang Seng CSI 300 INDEX- OUTLOOK:

• China’s manufacturing activity improved in August.
• The CSI 300 index and the Hang Seng Index have yet to witness material strength.
• Explore the outlook and key levels to watch.

China’s Manufacturing Improves, Yet Equities Await Stronger Signal:

Hong Kong and China equities remain unresponsive to the recent uptick in China’s manufacturing activity. Although China’s NBS manufacturing PMI edged up to 49.7 in August, compared to the expected 49.4 and July’s 49.3, and NBS non-manufacturing PMI slowed to 51.0 from the anticipated 51.1 and July’s 51.5, equities are yet to see substantial strength. Despite this, the improvement signals that recent stimulus measures are starting to impact the economy.

Examining Recent Data and Policy Response:

China’s macro data, although better than expected, still leaves room for growth, according to the Economic Surprise Index (ESI). The recent minor rebound in China’s ESI is promising but remains close to the lows seen in mid-2020, leading analysts to revise down growth estimates for the current year. Chinese policymakers have introduced various stimulus measures to boost the post-COVID recovery and struggling property sector. However, these targeted measures are yet to drive a noteworthy rebound in undervalued Hong Kong/China equities, possibly necessitating more comprehensive approaches.

Hang Seng’s Modest Rebound:

The Hang Seng Index is showing signs of a feeble rebound from its May low of around 18000, supported by the convergence of strong levels. However, the index must overcome the initial hurdle of 18500-19000 to diminish immediate bearish risks. An even stronger signal of a sustained rally would be piercing through the mid-June high of 20155. Until then, the balance of risks remains tilted downward.

CSI 300’s Continuing Sideways Bias:

The CSI 300 index has encountered resistance at the August high of 4065 and the February high of 4268, situated below the 200-week moving average. Clearing the barrier of 4300-4400 is imperative for a change in the broader bias. Conversely, horizontal trendline support since 2019 at approximately 3500 remains crucial. A breach of this level could potentially pave the way for revisiting the 2019 low of 2935.

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