China A50 was flat on Friday, heading for a fourth straight weekly gain. The index rose to its highest since mid-September earlier this week after falling into a bracket of the worst performing stock markets last year.
The rebound of Chinese equities from multiyear lows is stoking optimism that the market has bottomed out, with some analysts saying that a fear of missing out is building among traders.
Led by the real estate sector, the Hang Seng Index has rallied more than 13% since the end of March as cheap valuations, improving macro data and Beijing’s fiscal stimulus stance attract inflows.
The momentum behind one of the world’s biggest stock rallies in China will likely abate and investors should pursue single-stock and thematic opportunities instead, according to Morgan Stanley.
China's exports and imports returned to growth in April after contracting in the previous month, signalling an encouraging improvement in demand. A depreciating yuan may have helped.
Several investment banks expect the tightly managed currency to drop to 7.3 per dollar in the coming months. But China's burgeoning trade surplus could spark a bigger backlash to overcapacity from the West.
The A50 index is well supported by 50 SMA and the immediate resistance lies at 12,800. Without a decisive upside breakout, it may swerve and move back below the 12,500 level.
EBC Group Corporate News Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Group Corporate News EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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