CHINAH edges further into “bull market”

The CHINAH stock index has climbed by 4.5% so far in March 2024.

Our just-launched stock index has outperformed many global peers on a month-to-date basis:

• EU50: +2.3%
   
• US500: +1.55%
   
• UK100: +1.5%
   
• NAS100: +1%
   
• JP225: -1.2%

More importantly, CHINAH crossed over into a technical “bull market” yesterday (Tuesday, March 12th).

An asset enters a “bull market” when its prices have risen by 20% from a recent low.

Indeed, since hitting that trough of 4943.24 on 22nd January 2024, it went on to trade as high as 5986.8 today (Wednesday, March 13th) – meeting the threshold for a technical “bull market” along the way.

Still, a near-term technical pullback could be on the cards, considering that CHINAH’s 14-day relative strength index (RSI) is flirting with the 70 mark which denotes “overbought” conditions.

NOTE: This CHINAH index tracks the underlying Hang Seng China Enterprises Index, which aims to capture the overall performance of 50 companies from Mainland China that are listed on the Hong Kong stock market.

What’s pushing CHINAH higher?

From a fundamental perspective:

1) Hopes of China economic recovery

Global investors are aware that China has really struggled to get its post-pandemic recovery underway.

Deflation due to sluggish domestic demand, along with a persistent property crisis, are just some of the factors that have beleaguered the world’s second-largest economy.

However, with Beijing signalling increasing appetite to roll out stimulus measures to support its ailing economy, with markets hoping for as much, such expectations have boosted Chinese stocks.

2) Xiaomi shares jumped on news of its EV sales due later in March

Xiaomi, better known for its budget smartphones, accounts for 3.5% of the broader Hang Seng China Enterprises Index (and by extension, the CHINAH index as well).

Earlier this week, markets reacted positively to Xiaomi’s announcement that its latest products - electric vehicles (SU7 series) - are due to be sold across 29 cities beginning March 28th.

Tuesday’s 11.3% jump in Xiaomi’s stocks helped propel CHINAH higher in tandem.

3) JD.com soars after earnings beat, optimism on consumers rebound

This e-commerce giant posted better-than-expected earnings in 4Q 2023, while its CEO, Sandy Xu also sounded optimistic about the recovery in consumer spending, especially if the government rolls out more policy support.

Note that JD.com accounts for 2.4% of the Hang Seng China Enterprises Index/CHINAH.

All of these assets leapt for joy on the positive hopes surrounding Chinese consumers.

Can CHINAH stock index climb even higher?

Yes, potentially.

Wall Street forecasts that CHINAH could climb by a further 28%, to flirt with the 7600 level, 12 months from now.

As long as the Chinese government does step in with more policy support to shore up its economic growth towards its 5% GDP target for 2024, that should bode well for Chinese stock markets, including this CHINAH index.