Chart of the day - CHNComp (17.01.2022)

9:49 AM January 17, 2022

The first session of a new week was a busy one for investors from China. Monthly activity data for December as well as Q4 2021 GDP growth figures were released. On top of that, People's Bank of China decided to lower rates for 7-day reverse repo operations and medium-term lending facility by 10 bps to 2.10% and 2.85%, respectively.

Q4 GDP growth

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  • Quarterly: 1.6% QoQ (exp. 1.1% QoQ)

  • Yearly: 4.0% YoY (exp. 3.6% YoY)

Monthly activity data for December

  • Industrial production: 4.3% YoY (exp. 3.6% YoY)

  • Retail sales: 1.7% YoY (exp. 3.7% YoY)

  • Urban investments: 4.9% YoY (exp. 4.8% YoY)

Hard data can be seen as mixed. On one hand, higher-than-expected GDP growth in the final quarter of the year is certainly a positive. On the other hand, a big miss in December's retail sales data is a source of concern. Weakness of the consumer can be reasoned with new pandemic restrictions imposed in the country in the final month of the year. A point to note is that China is struggling with the energy crisis and unless it is resolved quickly, it will have an impact on the output going forward. Rate cuts delivered by PBOC today show that authorities in the country are aware of problems the economy is facing. This was the first rate cut delivered by PBOC since April 2020 and the market is starting to expect that the central bank will follow with cuts to 1- and 5-year prime rates in order to support the ailing economy.

Majority of Chinese indices moved higher today. However, CHNComp was lagging behind. A look at the chart shows that the index has recently made an attempt of breaking above the upper limit of the downward channel. While price managed to jump above this hurdle, advance was halted at the 8,700 pts resistance. Index pulled back into the downward channel and is looking towards a test of the short-term swing level at 8,340 pts.

Source: xStation5

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