By Margaret Yang
Shanghai Composite rose 1.75% yesterday, leading Asian markets to close positively on Monday. The Hang Seng Index was up 1.23%, Nikkei up 1.74%, and the Straits times rose 0.64%. The CSRC’s (China Securities Regulatory Commission) new Chairman held a conference last Friday and his clarifications and responses helped to ease investors’ concerns over a few major issues, and reinstated market confidence. His key points are summarised below:
- He clarified that ‘The registration system’- the reform plan for the initial public offering system is a must, but is not going to be implemented immediately. It may take 2-5 years or even longer for the market to develop a suitable environment – especially the mature legal system, for the “registration system” to be carried out. His statement helped to remove the biggest “time bomb” for the mid-small cap board. The Shenzhen Composite rose over 4% in its early trading hours.
- The ‘National team’ – including CSI, CICC – will not exit the market by selling off stocks in the near future, he said. This will also boost investors’ confidence.
- The ‘HK-Shenzhen link’ will be connected by this year. Some securities said this link is likely to be tested in Q2 this year before it is officially rolled out. It’s believed to bring positive effects to MSCI’s decision to include China’s A shares into its basket by June this year.
Hong Kong’s credit rating and the BOJ meeting
Hong Kong’s long-term debt and issuer ratings outlook has been downgraded by Moody’s on Saturday, shortly after the same rating agency lowered China’s credit outlook to negative on 2nd Mar 16. Its rationale was that the risks on China’s economic stability and increasing political linkage are putting the city’s financial strength under some degree of pressure.
Today, market watchers are awaiting the BOJ meeting. According to a Bloomberg survey, 35 out of 40 analysts believed the BOJ will keep the annual expansion of monetary base at 80 trillion yen and keep the policy rate unchanged at minus 0.1 %.
On the other hand, both JP Morgan and Nomura are expecting a further rate cut, increased amount of quantitative easing, and probably a delay in the consumption tax hike. USDJPY traded cautiously near 113.9 this morning. Nikkei is traded at 17265, the highest level since 4 February
Key technical levels to watch:
- Immediate support level 112.0
- Testing inner upper Bollinger band at 114.01, the next resistance is 114.7
- RSI near to 50% level with Bollinger band narrowing down, indicating that market is hesitant in finding a direction
Crude Oil West Texas – Cash
WTI Crude Oil went down 3% last night to $36.7. Oil price has enjoyed a 46% rally from the recent bottom of $26 dollars. Some technical indicators are showing overbought signals. We need to monitor carefully whether this is just a short-term correction, or trend-reversing.
- Double bottom pattern has completed
- MACD indicate overbought, and momentum is slowing down
- RSI at 63%, near to overbought level
Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.