Shanghai Comp : Time to buy !
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11/05/2012 | 09:59am
Opinion : Bullish above 2450
Target price : 2450 Potential: 2.03%
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The Chinese stock market is still at its lowest level since three years and remains one of the few international exchanges to be negative since the beginning of the year. The Chinese economy gives signs of upturn in activity more reassuring since the end of September.
A relief plane on Asian stock markets since the publication of Chinese GDP in line with expectations at 7.4% in the third quarter. It is certainly his seventh straight quarter of deceleration, but investors worried that growth has slowed even more. They now believe that the Chinese economy is beginning to stabilize and that the risk of a hard landing is away. The official growth target of 7.5% for 2012 should now be held, while some analysts expected a further deterioration of the situation. Markets therefore expect a gradual improvement in the situation, coinciding with the renewal of Chinese political leaders expected at the Communist Party Congress, which begins on the 8th november.
Meanwhile, after having stabilized in September, the economy showed signs of recovery in China. The official manufacturing PMI was posted at 50.2, above the 50 mark that separates contraction from expansion. The index fell below 50 for two months in August and September (49.8). But in October, it recovered as a result of an upturn in new orders, export orders and purchases of businesses, raising hopes that the destocking process observed for several months come to an end.
Similarly, the National Bureau of Statistics announced this weekend that the official PMI services rebounded to 55.5 in October, he fell in September to a low of two years at 53.7. This important restart of the service activity can be explained by an increase in activity in the construction and distribution. The strength of China's services sector shows that the Chinese economy is gradually emerging from its slump.
Technically, the dynamics of the index remains bearish in weekly data below 2150 points, threshold coinciding with the 20-weeks moving average. Given the accumulation of economic reassuring news, we believe that crossing 2150 points in weekly data give an attractive entry point for buyers to enjoy a medium term rebound towards 2450 points. We can play this rebound thanks to a tracker on CSI 300 (IE00B5VG7J94).
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Rodolphe Steffan
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