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Where Is The Low For Chinese Equities?

  • In the past 9 months, we have seen that the significant deceleration in Chinese economic activity, the sharp contraction in liquidity and the government crackdown on a range of industries (education, housing, tech, gambling) have been weighing on domestic risky assets, especially equities.
  • Since their peak reached in February 2021, Chinese equities have been constantly reaching lower highs (and lower lows); the Hang Seng Index is now down 25% over that period.
  • As the discovery of the new variant ‘Omicron’ is likely to result in further downward revision in growth expectations, equities still remain vulnerable in the short term despite the sharp consolidation we have seen this year.
  • HSI index found support slightly below the 23,506 level on Tuesday, which corresponds to the 76.4% Fibo retracement of the 21,139.30 – 31,168.30 range.
  • Next support to watch on the downside stands at 22,800 (low of the LT downward trending channel), followed by 22,000.
  • Key support stands at 21,139.30, which was the low reached during the March 2020 panic.

Source: Bloomberg/MNI

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