Forex Trading

Asia Day Ahead: China’s mixed economic data reflects challenging environment ahead

Asia Open

Asian stocks look set for a mixed open, with Nikkei+0.55%, ASX -0.20% and KOSPI -1.59% at the time of writing. Nikkei’s rally has seemingly called for a near-term breather on overextended technical conditions, although there are no strong bearish catalysts to challenge its prevailing upward trend just yet. Chinese equities remain the underperformer, with the 16,000 level for the Hang Seng Index caving in yesterday, which unlocks a continuation of fresh selling pressures into today’s session.

Market focus will be on a series of economic data out of China and subdued growth conditions in the world’s second largest economy remain the key story once again. China’s full-year gross domestic product (GDP) at 5.2% met the authorities’ target of 5% for 2023, but 4Q read of 1% quarter-on-quarter still reflect a weak growth environment, easing from the 1.3% in 3Q.

Other economic data were more mixed as well, with fixed asset investment and industrial production coming in slightly above consensus, but retail sales disappoint. Overall, the trend of weak economic data suggests that the accommodative policy environment has yet to translate to a sustained turnaround in economic conditions, which may call for more supportive intervention by authorities in the first half of 2024.

Chinese equities struggled to see any pick-up on these numbers. The Hang Seng Index seems on the verge of breaking below the lower trendline of a descending wedge pattern, sticking to its broader downward trend. Its daily moving average convergence/divergence (MACD) continues to struggle to move back into positive territory as well. With the 16,000 level giving way, a retest of its October 2022 bottom at the 14,600 level may potentially be in sight over the coming weeks. On the upside, the 16,000 level will stand as immediate resistance to overcome.

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