China’s Coming Back

It was around the end of October and the start of November last year that traders started to look at China’s re-opening as an opportunity to get in early. At the time some news channels were focusing on US-China trade tensions, slowing global demand for oil, a struggling property sector and Covid Zero. However, there were opportunities for those who took the longer view as pointed out , here and here. Since then there has been some profit taking on the rally as traders booked in some early profit. However, is this now the dip to buy?

New month, new positions?

On Wednesday this week China’s manufacturing PMI’s came in above the market’s maximum expectations at 52.6 vs 50.5 expected. This was the highest reading since April 2012 and marks a firm recovery. On top of this the Non Manufacturing PMI also improved to 56.3 vs 55 expected.
This is the first tangible sign that China is emerging from its Covid-Zero slumber. The question is, ‘how strong will the bounce back be?’ The Chinese Lunar New Year would have clearly improved sentiment as it was one of the first major holidays China enjoyed as it tentatively headed back to normality.

National People’s Congress

Next week is the National People’s Congress where new targets will be set. China’s Gov’t is expected to roll out further supportive measures next week, so with more PMI’s out early Friday, does it make sense to buy into China’s 50 for the long term now? The major trend lien and the 100 and 200 EMA could be used too define and limit risk