Chinese Stocks Struggling to Find a Low, Continue to Slide
Chinese Stocks Struggling to Find a Low, Continue to Slide
FXI up 0.32% month-to-date
- The data and news flow out of China remains discouraging at best.
- Shares of major Chinese companies, like BABA and BIDU, have broken multi-month uptrends.
- The Chinese large-cap ETF, FXI, has underperformed SPY by more than 20% in 2023.
China’s property market sector continues to teeter on the brink collapse, as home sales have failed to pick up despite various interventions from the central government.
Country Garden Holdings (CTRYF), a distressed property developer, announced on Tuesday that it had no means to repay a loan and was close to defaulting on its foreign debt payments due to a freefall in sales amid China’s intensifying property crisis. The implosion of the real estate market has already forced Evergrande (3333.HK), another major private property developer, into bankruptcy.
Chinese equities have continued to struggle and lag their American counterparts. Chinese junk bonds are trading near new lows for 2023, while iShares China Large-Cap ETF (FXI), the China large-cap ETF, is now trailing the SPDR S&P 500 ETF Trust (SPY) by more than 20% year-to-date. Two of the most popular Chinese companies, which make up nearly 14% of FXI, remain on the cusp of more significant technical breakdowns.
FXI price technical analysis: daily chart (October 2022 to August 2023)
FXI continues to bounce around near the low carved out in May near 25.51, failing to gain any significant upside momentum. A series of lower highs and lower lows has been carved out over the past three months. Momentum has improved–FXI is holding at its daily 5-, 13-, and 21-EMA envelope–but it’s by no means bullish.
Moving average convergence/divergence (MACD) is pinned just below its signal line, and slow stochastics’ advance to their highest level since early-September has not seen a corresponding move in the price to its September high. It remains the case that a drop below late-May low near 25.51 would bring into focus levels below 24.00, unseen since November 2022.
BABA price technical analysis: daily chart (August 2022 to August 2023)
The tepid price action for shares of retail and tech giant Alibaba Group Holding (BABA) in recent weeks has underperformed other Chinese equities, while maintaining the broader consolidation in place late-February. Nevertheless, the uptrend from the September 2022 and May 2023 lows has been broken. A new range has been carved out below trendline support.
Multi-month swing lows near 82.50 have held up thus far, but below this area, the odds would increase of a retest of the May low at 77.77.
BIDU price technical analysis: daily chart (August 2022 to August 2023)
Tech company Baidu Inc. (BIDU) has struggled to retake the rising trendline from the October 2022 and August 2023 swing lows; the September low of 126.77 is back into focus as a meaningful turning point.
BIDU is now below its daily EMA envelope, which is in bearish sequential order. MACD has started to turn lower below its signal line, while Slow Stochastics have issued a sell signal after failing to advance into overbought territory. Below 126.77, BIDU would lose multi-week support which could foretell a return below 120 before month’s end.
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.