The latest two-day bounce in CH50 has a reversal risk with global stocks.
CH50 – Daily Chart
The CH50 index has reversed by a steep four-day decline with a two-day bounce, and yet a buy here may be risky.
US indices showed weakness again on Wednesday after regional banking fears and the threat of debt ceiling wrangling.
Investor sentiment in China remained weak after last week’s data showed uneven economic recovery after reopening from covid restrictions despite strong growth in Q1. Mainland shares lost billions in market cap, leading to frustration for foreign fund managers who saw it as a better option for growth than developed markets.
Long-only investors in Europe now worry that business and consumer confidence may not recover to pre-pandemic levels quickly, with Bank of America stating in a report that client feedback was negative.
They said the struggling Chinese property sector and a US-China tech market decoupling weighed on sentiment.
Bumpy Recovery Drags Sentiment On Chinese Stocks
China’s reopening trade has stumbled recently from hedge fund investors remaining active. Foreign investors sold nearly 5 billion yuan ($722.9 million) of Chinese shares on Tuesday for a third straight day.
“Investors discount good data for low base effect or being unsustainable,” said Bank of America’s chief China equity strategist. “People question the accuracy of the macro data, as bottom-up corporate earnings and guidance remain soft.”
JPMorgan Chase, UBS, and Nomura Analysts have recently raised their forecasts for China’s growth in 2023 after the government said GDP grew 4.5% in the first quarter.
Traders should watch the price action on Thursday, with any close near the 12,839 support level likely to lead to lower levels.
