Chinese Stocks Continue Recent Rally On National Team Data

Chinese stocks have mounted a long-awaited rally on government buying and economic optimism. 

CHINA 50 - Weekly Chart

CHINA 50 – Weekly Chart 

The China 50 index of the 50 top Chinese stocks has surged in the last month, finding initial resistance at 12,100. The market will look toward the following resistance levels: 12,400 and 13,300.

The stock market’s sharp recovery comes after a January low. Investors had been rushing to exit the market because of China’s worsening economic conditions, leading to an estimated $7 trillion leaving the market over the last three years. 

According to EPFR data, Chinese equity funds drew $3.5 billion in the first week of March, while China’s National Team also bought as it sought to create a price floor. 

China’s government has set an economic growth target of 5%, which has led to optimism. 

There were also signs that the deflationary threat was easing. China’s consumer price index rebounded by 0.7% in February, its highest level in 11 months. Holiday consumption levels also boosted the economy. 

JD.Com boosted stocks on Wednesday after announcing a new share buyback program over the next three years. Electric vehicle stocks were higher after data from the China Association of Automobile Manufacturers showed that production and sales of EVs increased year-on-year by 28.2% and 29.4% in the first two months of 2024. 

This week, another Chinese firm in the news was ByteDance, which owns the social media app TikTok. US lawmakers have approved an initial bill to ban the app from app stores until the Chinese firm fully divests it.  

On Tuesday, Republican Thomas Massie said: “The so-called TikTok ban is a trojan horse” that would give the President the power to “ban WEBSITES,” not just apps. 

“If you think this isn’t a Trojan horse and will only apply to TikTok and foreign-adversary social media companies, then contemplate why someone thought it was important to get a very specific exclusion for their internet-based business written into the bill,” he added. 

That raises the risk of Beijing’s retaliatory action, which could significantly threaten the ongoing tech rally in US stocks.

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