In a bid to shake off the lethargy that has seen Chinese stocks on a decline for three consecutive weeks, authorities have taken notable measures. Yet, the efforts seem to have fallen short. Reports suggest that the Chinese government is contemplating a reduction in stamp duty on stock trading by up to 50%. This is seen as a move to rejuvenate waning investor confidence.
The China Securities and Regulatory Commission also made an endeavor to put concerns at bay. The regulatory body convened a virtual meeting with multiple global financial institutions, emphasizing the resilience and potential of China’s economic landscape. But these overtures seem to have done little in swaying investor sentiment, at least for now.
The Shanghai SSE extended the whole down trend from 3418.95 to close at 3064.07. It’s now in proximity to 100% projection 3418.95 to 3144.24 from 3322.12. Strong rebound from current level, followed by firm break of 3144.24 support turned resistance, will argue that the decline has completed already. The three wave structure would also affirm that it’s merely a corrective move. However, sustained break of 3047.41 could prompt further downside acceleration towards 2885.08 (2022 low), and open up more medium term bearish bias.
Investors will likely be keeping an eagle eye on developments next week. The unfolding situation in China’s stock market stands as a significant risk factor in Asia, especially when juxtaposed with the aftermath of the Jackson Hole symposium in the US.
