Is the worst over for Chinese stocks this year?
For almost the entirety of this year, the trade rhetoric between US and China has weighed on Chinese equities. In June, the main indices entered into a bear market and since then losses continued to pile up for Chinese stocks.
Despite constant chatter about cheap valuations and overdone declines, there was nothing to suggest any potential upside as the trade rhetoric continues to drag on even as Chinese authorities continue to step up measures to boost investor sentiment.
But this week, it appears that investors have finally woken up to the fact that enough is enough. As more and more global indices start to add more Chinese stocks to their benchmark, it’s adding more focus and attractiveness considering how cheap they are now.
Add to the fact that we’re seeing a relatively important technical break in the charts above, it makes for a strong argument that this is the start of a turning point for Chinese equities.
The key risk event ahead is the FOMC meeting and there is still the issue of the US-China trade rhetoric. But given the technical break above and especially if price moves above the highs seen in July, expect investors to start flocking back into Chinese equities in full force as the year winds down.