The China 50 index surged to new yearly highs on Friday as hopes grow for a peaceful trade settlement.
CHINA 50 – Daily Chart
The price of the China 50 index is similar to the U.S. Nasdaq chart, with a sharp downturn and a rebound to new highs. The 15,289 level is now set as the support level.
Investors have returned to a positive tone following recent U.S.-China trade tensions. U.S. President Donald Trump has said that he has a “pretty long meeting scheduled” in South Korea with China’s President Xi Jinping.
Meanwhile, investment banks have ruled out the potential for further monetary stimulus this year.
“China could still be on track to hit its ‘around 5%’ growth target with the growth achieved in the first three quarters of this year,” Citi analysts said. “With smaller room to cut for the People’s Bank of China, we no longer expect a policy rate cut or reserve requirement ratio (RRR) cut in the fourth quarter. Meanwhile, the focus could be on deployment of fiscal and quasi-fiscal policies”.
Analysts at Standard Chartered have predicted another 10-basis-point rate cut in the fourth quarter, with “risk that the rate cut may not happen this year”.
The United States government is still in a shutdown, and that has boosted chances for an interest rate cut this week from the Federal Reserve. That could boost market sentiment globally and add to the good mood in Shanghai.
Chinese stocks have broken through stubborn resistance and can continue higher this week.
