The CSI 300 gained 1.43% for the week on higher volume. The market remains in a Confirmed Uptrend with four distribution days. The block-chain stimuli did not last long and market sentiment was still impacted by increased downward pressure on the economy. China’s manufacturing PMI declined to 49.3% in October, the sixth straight month that factory activities shrank. As Q3 earnings season ends, we expect market volatility to subside in the near term. The decreasing distribution day count has also boosted our conviction. We are cautiously optimistic and expect the CSI 300 to continue trading sideways above its 50-DMA, which serves as strong support. We look for the next resistance at previous highs of ~3,980. Investors are advised to stay patient and focus on ideas that have recently broken out with strong fundamentals.
Author: Midhun Parameswaran
Global Focus Frontier
National Bank of Kuwait is the leading banking group in Kuwait in terms of assets, customer deposits, and customer loans and advances. Its strong leadership position across its product offerings will pave the way for its future growth.
China A Shares
The CSI 300 rose 0.7% for the week on lower volume and remains in a Confirmed Uptrend with six distribution days. The market is struggling and risk preference remains low. As Sino-U.S. trade tensions ease and the market gradually reaches a consensus about economic slowdown, Q3 earnings have come into focus. Ideas that reported stronger-than-expected earnings generally outperformed its index or sector, such as Focus List name Jiangsu Hengrui Medicine (JHM.CN, 600276.CH) and Luxshare Precision Industry (SLP.CN, 002475.CH), not on our Focus List. As the market enters the final earnings week, we advise focusing on individual ideas with strong earnings performance and less on index direction. We see the CSI 300’s next immediate support at the 50-DMA with strong resistance at ~3,980. With the important party meeting next week, we will watch for any favorable signals. Investors are advised to stay patient.
US Focus
The U.S. market remains in a Rally Attempt. The S&P 500 is now testing all-time highs after clearing above September high resistance Friday. The Nasdaq also cleared above near-term resistance, but remains ~1% below all-time highs. We will upgrade to Confirmed Uptrend should indices breakout in the coming days. Though action has been resilient over the last few weeks, volume has been low and breakouts among quality ideas remains limited. We would like to see a multitude of breakouts if and when indices make new highs to gain conviction that a new sustainable trend higher is developing. 32% of S&P 500 stocks report earnings next week.
European Focus
On Thursday, the Stoxx 600 was up 0.58%. Compared with last Friday’s close, the index was up 1.4% through Thursday. Today, it is trading constructively along with other major markets in the region.
Global Focus Developed
Australia’s ASX All Ordinaries Index rose 1.22% this week. The index remains in an Uptrend Under Pressure with five distribution days.
Global Focus Emerging
The CSI 300 rose 0.7% for the week on lower volume and remains in a Confirmed Uptrend with six distribution days. The market is struggling and risk preference remains low. As Sino-U.S. trade tensions ease and the market gradually reaches a consensus about economic slowdown, Q3 earnings have come into focus. Ideas that reported stronger-than-expected earnings generally outperformed its index or sector, such as Focus List name Jiangsu Hengrui Medicine (JHM.CN, 600276.CH) and Luxshare Precision Industry (SLP.CN, 002475.CH), not on our Focus List. As the market enters the final earnings week, we advise focusing on individual ideas with strong earnings performance and less on index direction. We see the CSI 300’s next immediate support at the 50-DMA with strong resistance at ~3,980. With the important party meeting next week, we will watch for any favorable signals. Investors are advised to stay patient.
Global Focus Frontier
National Bank of Kuwait is the leading banking group in Kuwait in terms of assets, customer deposits, and customer loans and advances. Its strong leadership position across its product offerings will pave the way for its future growth.
US Focus
The U.S. market has been moved back to a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating gains after gapping above resistance at the 50-DMA. To remain constructive, we would like to see the 50-DMA serve as support as more high-quality ideas emerge from bases. Currently both indices are less than 2% off all -time highs with five distribution days on Nasdaq and three on the S&P 500.
China A Shares
The CSI 300 dropped 0.6% for the week on slightly lower volume. The market remains in a Confirmed Uptrend with one distribution day. The Sino-U.S. trade war escalated this week and, though negotiations have resumed, the uncertainty still impacted market sentiment. We will be watching closely for trade news this weekend since new tariffs take effect September 1. We expect the CSI to continue consolidating around 50- and 100-DMA support; next support is at ~3,720. Short-term resistance lies at the upper gap of ~3,860. New policies to boost consumption, as well as the upcoming Mid-Autumn Festival and 70th National Day celebrations, are positive factors for the market. Investors are advised to stay patient and select quality growth ideas that have good earnings prospects and could benefit from these policies.
