Chinese shares have faltered at the 15,000 level, but trading at a four-year volume high could see support.
CHINA 50 – Daily Chart
The 15,727 level proved to be an obstacle for the CHINA 50 index. There is support at the current level and above 15,000.
China’s stock trading volume climbed to the highest level in four months, according to recent data. That could be a sign that the rally still has further to go.
Trading volume rose to 2.8 trillion yuan ($401 billion) this week, the highest since September, and much higher than the daily average of 1.13 trillion yuan seen in the last five years.
Chinese shares have been dragged lower by global market fears. We have seen a large number of assets hitting record highs in recent weeks, and that can pull the whole market higher, but it also brings correction risk. Some of the buying in early January can be attributed to large investment players conducting their January new-year buying.
It is understandable that the volume can dip from there when macroeconomic data is largely known. We also have the risk of further escalation with the U.S. and Iran, which is creating an environment of insecurity.
However, Goldman Sachs is positive on Chinese equities in the year ahead.
“The intersection of low to mid-teen trend earnings per share growth, mid-range but undemanding valuations, and generally low investor positioning points to a favourable risk reward for China equity,” analysts said.
“Exports and AI tech would likely be the key contributors to market profits given higher overseas margins, policy support, and AI-related demand and investments,” the report added.
Recent appreciation in the yuan should also be a support for earnings in the current quarter.
