Chinese Stocks Dip After the Lunar New Year

Rumours of an Alibaba headquarters move have hit the Asian market, but the retailer has denied the plan.

Stock in Alibaba fell 7% in Hong Kong trading after speculation that the company is moving its headquarters out of the country to Singapore. Alibaba has denied the move, telling Chinese media it is “untrue and a misunderstanding.”

CHI 50 – Daily Chart

CHI 50 – Daily Chart

The Shanghai index of the 50 largest Chinese firms dipped to 14,118 from the 14,400 highs and could see a further pullback to 13,700. The bull trend is still intact for the market, and a correction can set the market up for further highs. 

There was better news for Chinese shares with news that consumers have been hitting stores during the lunar New Year. The question of how to play the economic reopening is becoming a hot topic, with mobility and traffic measures showing solid numbers for the Chinese New Year holiday. Analysts see China reopening as still in its stages, with as much as $1 trillion in excess household savings ready to support consumption and growth. 

Investors have been buying into China’s reopening stock plays with the view that the China market could outperform the US in the near term. Meanwhile, Goldman Sachs upgraded year-end targets on the MSCI China Index for the third time in over two months and also raised its forecast for the CSI 300 to 4,800 from 4.500 in a report on January 27. Investor bets on China are now evolving from “reopening” to a broader “growth recovery” theme. Analysts at the investment bank said there is still an attractive upside. 

“The current market rally is not just a consumer and services recovery trade but a more broad-based growth rebound spanning a wide range of industries,” Goldman strategists said. “We expect A shares to assume leadership once the [Hong Kong-listed] H share recovery trade matures.” 

The bull market is still protected in the CHI 50, and investors should look for buying opportunities with a technical correction over the next week or two.

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