New FXTM index enters “bull market” today! :: InvestMacro

By ForexTime

• FXTM launches brand new CHINAH stock index
• CHINAH index has now risen over 20% from January low
• CHINAH is most-volatile and “cheapest” stock index within FXTM universe
• CHINAH pays higher dividends than many peers
• Wall Street predicts that CHINAH could climb another 28% over next 12 months

 

FXTM’s just-launched CHINAH index is enjoying a stellar debut so far!

Since first appearing across FXTM trading platforms on March 4th, this stock index has climbed by almost 4%.

In fact, CHINAH is also outperforming many of its global peers so far in March 2024!

Here’s how major stock indices have each fared on a month-to-date basis:

• CHINAH: +4.8%
• UK100: +1.3%
• EU50: +1.2%
• US500: +0.4%
• NAS100: -0.5%
• JP225: -0.9%

Within the FXTM universe, CHINAH’s month-to-date performance is only currently surpassed, but only just slightly, by the TWN index (+4.9% so far in March 2024).

Technical pullback soon?

In light of its recent runup, CHINAH’s 14-day relative strength index (RSI) is now flirting with the 70 number which marks “overbought” conditions.

This suggests that CHINAH’s prices may soon drop, as this stock index attempts to clear some of the froth from its recent ascent.

 

More notable is the fact that today (Tuesday, March 12th) …

the CHINAH index has met the textbook criteria for entering a “bull market”.

 

What is a “bull market”?

According to popular opinion, an asset enters a “bull market” once it has risen by 20% from a recent low.

At the time of writing, with the CHINAH trading above 5950, this stock index is now over 20% higher compared to the intraday low of 4943.24 registered on 22nd January 2024.

 

What is a stock index?

Imagine a stock index being a basket of many different stocks.

The index measures the overall performance of those stocks inside that “basket”.

 

What does the CHINAH stock index track?

FXTMs CHINAH stock index tracks the performance of the Hang Seng China Enterprises Index.

This Hang Seng China Enterprises Index aims to capture the overall performance of 50 companies from Mainland China that are listed on the Hong Kong stock market.

The 3 biggest industries represented on CHINAH are:

• Information Technology
  (35.4% of total index; including Tencent, Alibaba, and Meituan)
• Financials/Banks
  (25.8% of total index; including CCB – China Construction Bank, ICBC – Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China).
• Consumer Discretionary
  (13.6% of total index, including EV makers such as Li Auto and BYD Company).

 

Why is CHINAH soaring today (Tuesday, March 12th)?

Here are two reasons:

• Xiaomi to start selling its electric vehicles later this month

Long known for its affordable smartphones, Xiaomi today announced it will begin selling its electric vehicles (SU7 series) on March 28th across 29 cities.

This news triggered an 11.3% jump in this stock today – its biggest one-day jump since January 2023.

And given the fact that Xiaomi alone accounts for 3.5% of the broader CHINAH index, the jump in Xiaomi’s stocks have also boosted CHINAH in tandem.

NOTE: Xiaomi remains classified as an “Information Technology” stock on this index, despite its multi-billion dollar bet on the EV market, which falls under the “Consumer Discretionary” umbrella.

• JD.com still climbing post 4Q-earnings beat

JD.com’s Hong Kong listed stocks climbed 7.8% today – its biggest one-day climb since December 2022.

Given that JD.com accounts for 2.4% of CHINAH, the former’s gains also helped propel the latter higher.

The shares of this e-commerce giant has been soaring after posting better-than-expected 4Q earnings last week, while its CEO Sandy XU also predicted that Chinese consumers will benefit from government stimulus this year.

There was also news yesterday (Monday, March 11th) that JD.com’s potential bid for Currys, a British electronics retailer, may have been made easier after another suitor (Elliot Investment Management) decided to walk away.

JD.com has one week, until March 18th, to formally announce its intention to either make a bid for Currys, or walk away.

 

 

3 key things to know about the CHINAH index:

1) Most-volatile stock index within the FXTM universe

Of the 18 different stock indices offered by FXTM, this CHINAH index now has the highest 30-day volatility number of 28.17 as of today (Tuesday, March 12th).

For comparison, here are the 30-day volatility readings for some popular stock indices:

• HK50: 24.17
• NAS100: 18.84
• CN50: 18.37
• JP225: 15.03
• US500: 12.94
• EU50: 11.7
• UK100: 11.09
• US300: 9.09

And as seasoned traders know, bigger price swings (volatility) translate into larger opportunities to garner potential profits (or losses).

 

2) CHINAH is the “cheapest” stock index offered by FXTM

To be clear, whether something is considered “cheap” is highly subjective.

A commonly-used metric in deciding whether a financial asset is “cheap” or “expensive” is to use the price-to-earnings ratio, or PE ratio for short.

Simply put, the PE ratio indicates how much an investor would have to pay to access $1 of an asset’s earnings.

Even simpler still, the higher the PE ratio, the more “expensive” an asset is.

(Higher PE ratio = investor has to spend more money to access $1 of an asset’s earnings)

Here’s the PE ratio for the CHINAH index, stacked against some of peers from around the world:

• CHINAH: 8.2
• UK100: 11.6
• EU50: 14.7
• AU200: 19.5
• US500: 24.5
• JP225: 27.8
• NAS100: 33.1

 

3) CHINAH pays relatively higher dividends.

Over the past 12 months, CHINAH index has paid out a dividend yield of 3.86% (based on current prices).

That’s significantly higher than the dividend yields currently offered by other popular stock indices (based on current prices):

• GER40: 3.05%
• EU50: 2.9%
• JP225: 1.64%
• US500: 1.4%
• NAS100: 0.83%

But wait, there’s more!

Over the next 12 months, Wall Street analysts forecast that members of the CHINAH index will pay out EVEN HIGHER dividends.

This is expected to bring the forward 12-month yield above 4%!

What is “dividend yield”?

Dividends are cash rewards that are given by companies (in this case, companies that are included in the CHINAH index) to its shareholders.

Dividend yield is a % number representing how much money you’re getting back from this asset for every dollar you invest.

The higher the yield, the more money you’re getting back compared to what you put in.

 

Where’s CHINAH headed next?

Over the next 12 months, Wall Street analysts predict this CHINAH index could return above the 7600 level.

From current prices, this suggests 28% more in potential upside.

For proper context, a number above 7600 would only restore the CHINAH index to levels not seen since January 2023.

A higher-than-7600 CHINAH index would still pale in comparison to its all-time intraday high above 20,609 on November 1st, 2007, before the Global Financial Crisis.

Still, if the Chinese economy can finally get its post-pandemic recovery sustainably underway, aided by government support, that should help restore CHINAH to its former glories.

 

---

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com