High outflows from China, Morgan Stanley bearish expectations 📉HK.cash loses 0,5%

According to Reuters sources, Chinese authorities plan to cut the tax on stock trading by as much as 50%, a move that would support the local market and interest in the struggling stock market. The decision could come any day now; the Ministry of Finance, led by the State Council, submitted a draft proposal to the Cabinet in early August. Analysts, however, doubt whether it will really help the indexes. Morgan Stanley lowered its June 2024 expectation for the MSCI China Index by 14%, citing overly high company valuations amid lower earnings expectations for the current year, uncertainty in the real estate market, and the PBoC's lapsed support for the economy.

Source: Bloomberg Finance LP

• Currently, a proposal to reduce the current stamp duty (currently 0.1%) on securities trading is expected to suggest a 20% or 50% cut (the first such move since 2008). Taxes and fees from stock trading in 2023 were equivalent to 1.35% of revenue for China's budget;
• Analysts point to such a short-term boost as concerns about the economy remain alive, and the situation of the real estate market and 'shadow banking' continue to curb risk appetite. Chinese policymakers continue to show reluctance to launch a broad stimulus of the economy;
• For 13 consecutive sessions, foreign investors sold shares of Hong Kong-listed companies, with total sales amounting to about $11 billion. This was the longest outflow of investors from the stock market in the history of the Chinese stock market, mostly shares of Chinese 'blue chips' were sold, reflecting uncertainty around the economy's momentum;
• The strongest sell-off was recorded by Kweichow Moutai (China's largest liquor producer), with nearly $851 million flowing away. The shares of China Merchants Bank and renewable energy companies including LONGi Green Energy Technology were also heavily sold off.

As we see in HK.cash chart, the bulls halted the declines at the important level of 17,500 points where, in the vicinity, we see the 61.8 Fibonacci retracement of the 2022 upward wave. In the scenario of a broader rebound, an important resistance now appears to be the level between 19,500 and 20,000 points where we see the SMA200 (red line) and the 38.2 Fibo retracement. If the economy will invariably show weakness the base scenario is a test of 17,000 points, 71.6 Fibo.

Source: xStation5