Chart of the day - HK.cash (12.07.2024)

Despite a strong sell-off among the biggest U.S. companies (the Nasdaq 100 down more than 2%) yesterday and mostly weak stock indexes in the Asia-Pacific region, futures on Chinese benchmark contracts are trading sharply higher today, with HK.cash gaining nearly 2%. This seems all the more important given the fact of the upcoming Chinese Communist Party summit (July 15-18).

• The gains were supported today by better results from the real estate development sector, where the benchmark measuring the performance of Chinese companies in the sector posted gains of almost 6%, with short selling restrictions hitting hedge funds related to Chinese real estate companies stock. It seems that investors may be building up some anticipation for comments from Chinese officials, who will certainly refer to the health of the economy and 'central' tools that could support domestic consumption.
• Meanwhile, Chinese regulators at the CSRC have introduced further restrictions to 'relieve' the valuations of Chinese companies from pressure from short sellers and funds betting on price declines. China's top securities regulator has suspended securities lending since yesterday, July 11, hitting the strategy of speculative hedge funds. The China Securities Regulatory Commission (CSRC) announced the ban as early as Wednesday
• Existing securities refinancing contracts can be extended, but will be settled before September 30, according to the CSRC. For short sellers, they have also raised the required margin deleveraging dos 80% to 100% as of July 22. Also at the policy level, China is trying to encourage more capital to invest in its home market.
• In April, the State Council published guidelines to strengthen regulation, prevent risk and promote high-quality capital market development. Yesterday's move by the CSRC can be seen as a signal that China intends to implement the guidelines as soon as possible. On the other hand, while the regulators' signals may discourage a sharp 'downward game', they are unable to 'stimulate' the Chinese economy as such, with domestic consumption still struggling badly and having not seen a similar surge to Western economies since the coronavirus pandemic.

HK.cash (D1 interval)

Hang Seng Index (HSI) futures are trading up more than 2% today; the stock is already approaching the simple 50-session moving average (SMA50) near 18340. Declines have been halted once again (similar case in April 2024), near the 100-session moving average SMA100 (black line). Another, higher resistance zone i now settled at 18600 points, where we can see 23.6 Fibo retracement of the January 2024 rising wave and previous price reactions.

Source: xStation5