Two-way forces in Chinese markets

China equity markets continued doing its own thing with little care about what’s on going globally.

China Flags
Source: Bloomberg

While Fridays are usually a magical day for Chinese equities, today is somewhat different with the buoyancy hard to sustain.

I can only put it down to the event risk ahead of MSCI review next Tuesday 9 June.

Today’s trading continued to see wide swings, with the Shanghai Composite’s 100-day volatility remaining near five-year highs. Nonetheless, China markets managed to close in positive territory.

After the IPO lock-up period this week, about CNY 3.28 trillion (USD 530 billion) of IPO money returned back to the markets, which saw an early strong upmove in Chinese stock markets.

The SHCOMP jumped past psychological 5000 for the first time since 2008. This was helped by demands from retail investors and foreign funds. However, local institutions were reportedly on the topside, resulting in the SHCOMP struggling to hold intraday gains.

On the aside, risks of more tightening measures in margin lending among Chinese brokers appeared to have receded. The level of margin debt continued to rise, increasing by 0.7%, to a record CNY 1.41 trillion (USD 227 billion) on Thursday.

From a longer-term perspective, the bull market in China should be sustained, although the transition to a slower bull run is likely to materialise as the authorities continue efforts to liberalise the A-shares market.

Singapore equities remain dull

The Straits Times Index found it hard to keep its pace above the 3350 level and the technical set up continued to point towards the downside. MACD indicator still showing a widening divergence, and with the Singapore stock market seemingly in moribund conditions, it’s difficult to see a strong rebound.

Only a total of 1.28 billion of units worth SGD 1.18 billion was done today. Noble shares saw some demands today as buyers emerging after a brief break of key support at SGD 0.70. On the other hand, the strong rebound in Singtel lost steam.

Olam was under pressure today as lower crude prices and heightened risks of STI removal weigh. Maybank said in a report that Olam and Jardine Matheson have the highest risks of being ejected from the benchmark index upon the implementation of the new liquidity rule.

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