The Chinese stock market is pushing to test a critical resistance level that could open up further gains.
CH50 – Weekly Chart
The CH50 index is now trading at 12,309, which aligns with resistance from January and July 2023. If the market can push higher from here, the target levels will be 12,800 and 13,600.
Chinese stocks have been supported after the China Securities Regulatory Commission introduced a series of measures to boost investment. As a result, analysts at Goldman Sachs now believe that certain stocks could rise by up to 40%.
The company identified three main areas where they anticipate policy actions based on recent directives, including strengthening market supervision, efforts to increase the quality of listed companies, implementing more rigorous delisting mechanisms, and improving shareholder returns.
Their analysis said that if A-shares can narrow the gaps with international averages in these areas, they could see a 20% increase in value. In a more optimistic scenario, where A-shares match the standards of global leaders, they “could re-rate as much as 40%,” analysts said.
The Chinese economy has also stabilised, which can help the stock market continue its recent bullish posture.
“In Q1, from a macro perspective, the overall economic operation has continued to show a trend of recovery and improvement,” Li Hui, China’s top economic planner, said. I noted that economic and social development had stabilised in Q1.
According to National Bureau of Statistics data, China’s gross domestic product grew 5.3% yearly to 29.63 trillion yuan ($4.17 trillion) in the first three months of 2024.
Goldman Sachs and Citigroup have recently released reports predicting that the Chinese government’s 5% GDP growth target can be achieved. They have raised their forecasts for the country’s GDP growth accordingly.
A push higher through the strong resistance here could also see a resurgence in foreign investment in Chinese stocks after the economic revival faltered and saw severe outflows.
