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Investors have been cashing out after the recent stream of soft Chinese macroeconomic data.
Concerns were raised yesterday after Premier Li Keqiang indicated that M2 money supply growth had moderated to 12.8% for August.
The sell-off was also driven by expectations that we could see more structural reforms in China rather than more targeted stimulus measures.
Chinese stocks will be in focus again today with another round of data to be released in the morning.
Inflation numbers have come in weaker for August. PPI showed a print of -1.2%, against the consensus forecast of -1.1% and July’s -0.9%. CPI was marginally weaker, coming in at 2% versus the forecasted 2.2% and July’s 2.3%
With the readings suggesting further weakness in China’s economy, we are likely to see further pressure on Chinese stocks and see the Hang Seng test its next support level.
The bears have dragged the Hang Seng Index close to the support area of 24,620, which was last week’s low. Traders can watch for the index to make a clear break of support to consider a short position in the interim.