By Samir Al Khoury,
The annual meeting of the National People’s Congress began on Tuesday and will continue for a week. Through this meeting, several goals were identified for the year 2024, the most prominent of which are:
· GDP growth at 5% (which matches 2023 targets)
· The expected fiscal deficit as a percentage of GDP is 3%.
· Consumer price index at 3%
· Unemployment rate at 5.5%
· The value of long-term special government bonds planned to be issued is 1 trillion yuan, equivalent to $139 billion
But despite these targets, which are considered positive and ambitious, in addition to the various stimulus measures that the People’s Bank of China and the Chinese government have begun to take to support the Chinese financial markets, the rises in Chinese stocks are still somewhat shy for several reasons, some of which we mention:
· The consumer price index on an annual basis is still in a deflationary state, as it recorded a contraction of 0.8% in January 2024, which is very far from the inflation target, i.e. 3%.
· Although liquidity is available from Chinese families, lack of confidence in consumption, investment and production within China still exists.
· The real estate sector, which represents approximately 30% of China’s GDP, remains turbulent.
· Geopolitical tensions between China and Taiwan continue.
· Tensions between China and the United States of America regarding trade, technology, and the restrictions imposed by America on China regarding chips.
Therefore, all the targets set by the Chinese authorities are welcome, but the question that investors and economists are asking is: How will these targets be implemented for this year in light of the lack of clarity on the mechanism for implementing financial and monetary policy on the ground?
At the end of this week, the markets are closely awaiting the release of the consumer price index on an annual basis, amid expectations that it will record a growth of 0.2%, which is a higher percentage than the previous reading (-0.8%), which will be directly reflected in the movements of the Chinese financial markets in addition to the commodity markets, specifically oil. Strength for this indicator will give upward momentum to these markets.
As for Chinese stocks, the CSI 300 index has risen by about 15% since the bottom of February 2 this year, which recorded 3,108 points, to the peak recorded yesterday of 3,577 points, with expectations of the index’s upward trend continuing. It seems that technical indicators may support the CSI 300 index in the next stage for several reasons:
First: The index closed yesterday at 3551 points, which is above the 50-day moving average at 3350 points and is close to the 200-day moving average at 3642 points. The next challenge is to break and exceed the 200-day moving average.
Second: The Relative Strength Index (RSI), which currently records 66 points, is above the 50-day level and is approaching the overbought area, which indicates upward momentum for the CSI 300 index.
Third: The MACD indicator is in blue, which exceeds the SIGNAL LINE in orange and is also in the positive region, which gives positive momentum to the CSI 300 indicator.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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