Chinese equities were outperformers during today's Asia-Pacific session and there was a good reason behind this outperformance. A number of measures was announced over the weekend by Chinese authorities with an aim of supporting domestic equity markets. Those measures include:
- Halving stamp tax on securities trading (from 0.10% to 0.05%)
- Relaxing deposit requirements while trading at margin (from 100 to 80%)
- Imposing limits on stock selling by some institutions
While the first two measures listed are clearly positive for stock markets and have a potential to boost liquidity as well as encourage more investors to trade, the impact of the third measure is not so simple. Of course, putting restrictions on stock selling by major shareholders will reduce downward pressure on prices but it is a short-term measure. After all, putting restrictions on how investors can manage their portfolios is not a move that inspires confidence. It looks like after an initial euphoria, the market seems to have realized it and started to shed gains.
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Create account Try a demo Download mobile app Download mobile appTaking a look at Chinese index CHN.cash chart at H4 interval, we can see that the index launched today's trading with a big bullish price gap (over 3.5%) and traded near the downward trendline at the start of today's trading. However, no breakout above the trendline occurred and gains started to be trimmed after session launch. Price dropped back below the 6,300 pts price zone and reduced daily gain to below 1%. The key question now is whether the sell-off will continue and the stock drops below the 6,150 pts zone.
Source: xStation5
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