China's economic indicators released on Friday revealed persistent deflationary pressures, despite some signs of stabilization in the world's second-largest economy. The National Bureau of Statistics reported that the consumer price index (CPI) for September remained unchanged from a year earlier, missing the anticipated 0.2% gain. This flat CPI follows a modest 0.1% increase in August. On the other hand, the producer price index (PPI) saw a decline of 2.5% year-on-year, slightly more than the expected 2.4% drop but marking the narrowest decline since March. Notably, food prices, a significant component of China's CPI, fell by 3.2% year-on-year in September, with pork prices, a staple in Chinese diets, plummeting by 22%. This data underscores the challenges China faces in its economic recovery, particularly with the ongoing property sector slowdown impacting consumer confidence and household demand.
The stock market's reaction to China's economic data has been notably cautious. Hong Kong's Hang Seng Index and Hang Seng China Enterprises Index (HSCEI) both experienced declines, reflecting investor concerns about the strength and sustainability of China's economic recovery. The deflationary pressures, coupled with the ongoing debt crises in some of China's largest real estate developers, have further dented investor and consumer confidence. While there are emerging signs of stabilization in certain sectors, the broader outlook remains uncertain.
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The Hang Seng China Enterprises Index (HSCEI) recorded declines of 2.30% today. On the chart we see a long-term symmetrical triangle formation. According to theory, such a formation foreshadows a continuation of the earlier movement, especially given the declining volume over the past months. As soon as the price breaks out below, it is worth watching the volume, which should rise again to higher levels for confirmation.
