Shanghai: SSE Composite Index (.SSEC) markets must test risk of worst US threat yet
Citigroup Inc has termed it the most extreme potential US move against China in the escalating rivalry between the world’s largest two economies: Restricting access to US finance.
Traders in China’s markets have to decide how to price that risk today — just before the start of a week-long holiday — after Bloomberg reported that US President Donald Trump’s administration is discussing ways to limit the use of US money going to Chinese entities.
The MSCI China Index fell 1.6 percent on Friday.
The US Department of the Treasury said there are no plans to block Chinese firms from listing on US exchanges, although it did not address the potential for other moves.
The Treasury and US National Economic Council are wary of the market reaction to any moves to restrict financial ties, and are working to ensure any plan would not spook investors, people familiar with the deliberations said.
US investment in China’s domestic markets is limited — residents had US$203 billion of long-term mainland Chinese financial assets as of June, little more than double that held in South Africa, according to the US Treasury.
Far bigger is the US$1.2 trillion market capitalization of Chinese companies on three key US exchanges as of February, a report by the US-China Economic and Security Review Commission said.
“It obviously adds yet another layer of uncertainty and does not bode well for a positive outcome for coming trade negotiations,” said Amir Anvarzadeh, a market strategist at Asymmetric Advisors Pte Ltd in Singapore. “It will force Chinese firms to relist in Hong Kong and China.”
While China has sought to increase the attractiveness of its stock and bond markets, to Chinese firms seeking capital as well as to global funds looking to diversify, the reliance of companies, including Alibaba Group Holding Ltd (阿里巴巴), on foreign exchanges exposes vulnerability.
Just this month, the country removed a hurdle for foreign investment into its stock and bond markets almost 20 years after it first allowed access.
Shifting all those listings home would pose major strains for the onshore financial system.
China has itself launched a new market to encourage its technology firms to list at home.
The Shanghai Composite Index as of Friday was up 1.6 percent for this month.
Today is the last chance for traders to act on the new risk before a prolonged market closure to mark the 70th anniversary of the Chinese Communist Party taking power. Exchanges are then to be shut until Tuesday next week.
There is no indication that any moves by the US are imminent, and bilateral high-level trade talks with China are still scheduled for next week, but Friday’s reports showcase the danger of a new front in the two countries’ confrontation.
Proposed US legislation that aims to delist foreign companies from US stock exchanges that contravene accounting and oversight rules, if passed, could “have a profound impact” for the more than 200 Chinese companies trading on US exchanges, Citigroup economist Cesar Rojas wrote in a report last month titled The Most Extreme US Potential Retaliation: Blocking China’s access to US (financial) markets.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 2,942.31.
The projected upper bound is: 3,005.79.
The projected lower bound is: 2,859.79.
The projected closing price is: 2,932.79.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
A bullish harami occurred (where the current small white body is contained within an unusually large black body). During a downtrend (which appears to be the case with SSE COMPOSITE) this pattern implies an end to the decline as the bears appear to have exhausted themselves.
During an uptrend the bullish harami pattern is bearish as the bears appear to be gaining strength as the bulls weaken.
An on-neck line occurred. This is a bearish pattern where prices should move lower when the white candlestick’s (i.e., the most recent) low is penetrated.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 5.4607. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 9 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 45.39. 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 8 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 -177.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 10 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.
Rex Takasugi – TD Profile
SSE COMPOSITE closed up 3.080 at 2,932.167. Volume was 28% below average (neutral) and Bollinger Bands were 20% narrower than normal.
Open High Low Close Volume___
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 2,977.94 2,912.80 2,879.32
Volatility: 14 16 23
Volume: 17,805,234,176 17,683,679,232 22,934,638,592
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.
SSE COMPOSITE is currently 1.8% 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 volume flowing into and out of .SSEC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 24 periods.
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