The Shanghai Composite index has retail sales and industrial production data ahead on Monday.
CHI 50 – Daily Chart
CHI 50 has been trading in a range since October 2024 with support at 12,930 holding again. The upside target is 14,359.
Industrial production data is released at 10am HKT and analysts expect a dip from 6.2% to 5.3%. Retail sales data is released at the same time with economists expecting a gain from 3.7% to 4%.
Robin Xing, leading China economist at Morgan Stanley, recently discussed the outlook for the Chinese economy. He talked about Beijing’s focus on technological innovation and the recent stimulus packages.
Before the September pivot on stimulus, the progress had been slow with deflationary pressures increasing since March. A debt-swap program for local governments and housing relief was followed by stimulus aimed at boosting consumers.
China’s economy was on a stable path but growth and consumption was slow. Donald Trump’s tariffs were not a welcome addition but China has been expecting his arrival.
China’s approach to reforms and stimulus is to “establish the new before abolishing the old”, with a focus on gradual change in policy and expectation guidance. This has been a stance communicated in official documents since 2023.
Xing believes that overseas investors have a new interest in Chinese assets that could be the start of global demand. Such a shift would boost Hong Kong as it acts as a cushion during geopolitical headwinds.
Despite the tariffs, many Chinese firms have operations in other markets that help them mitigate the impact. They are exporting more sophisticated products, such as cars, batteries, capital goods, and humanoid robots. This allows them to mitigate tariffs, given the value-added part of their goods is now higher.
The CHI 50 is currently in a trading range with the support and resistance well defined for any breakout.
