Chart of the day - CHNComp (25.08.2022)

Chinese equity indices, especially HSCEI (CHNComp), rallied during a session today. Announcement of a new, big round of stimulus can be named as a reason behind today's outperformance of Chinese equities, that has also boosted overall risk moods. Chinese authorities decided to prop up the domestic economy with an additional 1 trillion CNY of stimulus (around $146 billion)that will be used mostly for infrastructure spending. State banks will be allocated an additional 300 billion CNY for investment in infrastructure projects. However, economists are mixed on the measure. On one hand, it will provide support to an economy that has been wrecked by Covid lockdowns and property market collapse. On the other hand, they hint that it may not be enough to stop deterioration in the Chinese economy.

Regardless of economists' opinions, markets seem to cheer on the announcement. Taking a look at the CHNComp index at H4 interval, we can see that the index launched today's trading with a big bullish gap and continued to rally further. As a result, price broke above the short-term downward trendline and is now testing the 6,800 pts resistance zone, marked with 23.6% retracement of recent slump.

Source: xStation5