Shanghai: SSE Composite Index (.SSEC) A new epic — Chinese economy in 2020s

Shanghai: SSE Composite Index (.SSEC) A new epic — Chinese economy in 2020s

Shanghai: SSE Composite Index (.SSEC) A new epic — Chinese economy in 2020s

With the arrival of a new decade, one predictable thing about China in the 2020s is that it is shifting into a higher-quality economy that is more open and abounds with new opportunities for global businesses.

Despite a cloud of challenges, China’s economy wrapped up 2019 with 6.1-percent GDP growth as a top performer among comparable economies. Acting as a “locomotive,” it is expected to contribute to around 30 percent of global growth.

Emerging from the 2010s larger and in better shape, the world’s second-largest economy is increasingly shaped by the growing power of consumers and the services and emerging sectors, all believed to stimulate China’s huge potential in market, reform and innovation.

These trends can offer glimpses into the positive changes the world can expect from China in the new decade:

CONSUMERS FIRST

Domestic consumers now account for over 60 percent of China’s economic growth. Despite a moderation of headline GDP growth, retail sales, a major gauge of consumption, grew 8 percent in 2019.

Looking ahead, analysts expect the country’s consumption to be shaped by a booming middle-income group, fast urbanization and technology advances, among other trends.

With the world’s largest middle-income population, China has great potential to increase the contribution of consumption, especially that of services consumption, to its GDP growth, said Liu Qiao, dean of the Guanghua School of Management at Peking University, predicting that services consumption would make up about 60 percent or more in China’s total consumption by 2035.

Although large cities still contributed to a larger amount of consumption, that of lower-tier cities and rural regions continued to grow fast. A report from Morgan Stanley predicted that consumption in China’s smaller cities could triple by 2030 from 2018.

“The future Chinese consumers will be richer and more tech-savvy,” said Asian market analyst Angela Moh in the report, “Considering that by 2030, more than half of the population in China will either have grown up with a smartphone or be sufficiently tech-literate to benefit from the sprawling e-commerce, which is likely to remain a key driver of China’s consumption.”

RISING INNOVATOR

In the 2020 Bloomberg innovation index, China ranked 15th on the list of the world’s most innovative countries, rising from 16th in 2019 and 19th in 2018. The better performance came amid China’s efforts to enhance intellectual property protection, increase productivity and foster new growth drivers through innovation.

A World Bank report named “China 2030: Building a Modern, Harmonious, and Creative Society” lists the country’s advantages in its journey toward an innovative economy — a steep upward trend of its spending on research and development, large manufacturing sector with wide-ranging capabilities and rising supply of science and engineering skills of improving quality.

Breakthroughs in technology will usher in the next wave of economic development and new investment opportunities, and China is to climb up the value chain, said Mark Haefele, chief investment officer at UBS Global Wealth Management.

China will ramp up its competitiveness in high value-added manufacturing categories such as information technology, emerging industries and household appliances, said UBS researcher Hou Yankun.

GREENER FOOTPRINT

To tackle environmental challenges, the Chinese government has declared a war on pollution and introduced a series of green initiatives, including cutting overall emissions, reducing coal-fired plants and enhancing enforcement of environmental rules.

China is taking the lead with concrete actions. The proportion of China’s clean energy sources in total energy consumption mix continued to rise to 24 percent of the total in 2019, up from 23 percent in 2018. Its carbon dioxide emissions per GDP dropped by 45.8 percent in 2018 from the 2005 level, a stride toward the goal of meeting the emission peak around 2030.

The country’s green commitments can grow into enormous opportunities for global investors. Global financial giant Standard Chartered Bank (SCB) expects that China’s efforts to meet the 2030 sustainable goals would bring about investment opportunities worth 3 trillion U.S. dollars, taking up about 30 percent of the total global investment value.

Realizing the full coverage of clean water and sanitary facilities in China, for example, will unlock investment potential worth 26.1 billion U.S. dollars for the private sector, SCB noted.

GREATER OPENING-UP

China will continue to shorten the negative list to ease foreign investment off-limits rules and beef up opening-up efforts in pilot free trade zones in 2020, said the National Development and Reform Commission.

With the implementation of the landmark foreign investment law, removal of restrictions on the manufacturing and financial sectors for foreign firms and tariff cuts, China has quickened its opening-up pace.

Electric carmaker giant Tesla witnessed China’s speed as its Shanghai gigafactory delivered the first 15 Model 3 cars to customers less than one year after it began operation, which showed that China, with continued efforts in reform and opening-up, still tops the list of investment destinations for foreign firms.

China is committed to opening up at a higher level and honoring its promises to further open up its market, improve its opening-up structure, optimize the business environment, deepen multilateral and bilateral cooperation and advance Belt and Road cooperation.

As its door keeps opening wider and its economy expands steadily, China is bound to make greater contributions to the global economy.

“China will play a bigger role in fuelling global demand and supply,” said Shao Yu, chief economist at Orient Securities.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 3,003.17.

The projected upper bound is: 3,138.87.

The projected lower bound is: 3,016.00.

The projected closing price is: 3,077.43.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 15.5336. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 58.57. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 3 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -14. This is not a topping or bottoming area. The last signal was a sell 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 1.414 at 3,075.496. Volume was 7% above average (neutral) and Bollinger Bands were 22% wider than normal.

Open     High      Low     Close     Volume___
3,081.4643,091.9523,067.2523,075.49619,030,429,696
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 3,090.43 2,975.11 2,967.68
Volatility: 12 13 19
Volume: 23,774,971,904 18,589,714,432 20,344,670,208

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

SSE COMPOSITE is currently 3.6% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into .SSEC (mildly bullish). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 25 periods.

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