CN50 flirts with critical resistance :: InvestMacro

• Prices bullish on D1 charts

• Watch out for Big China bank earnings

• Key level of interest at 12250

• Major breakout on horizon?

If you are seeking fresh market opportunities, then look no further!

FXTM’s CN50 index, which tracks the benchmark FTSE China A50, is flirting around key weekly resistance ahead of an event-heavy week…

That’s right, various Chinese companies listed in the CN50 are due to report their latest quarterly earnings throughout the week. This will be complemented with China’s latest industrial profits which could provide insight into the health of the world’s second largest economy.

Before we discuss what to keep an eye on this week, here are some fun facts about the CN50:

• The index recently hit a fresh 2024 high.

• It’s up over 5% year-to-date.

• Rebounded roughly 15% from the mid-January low

CN50 bulls have drawn strength from government stimulus hopes with prices now knocking on critical resistance. Taking a quick look at the technical picture, prices are respecting a bullish channel on the daily charts.

With all the above said, here are 3 forces that could move the CN50 this week:

    1) China industrial profits

The main data release from China will be the industrial profits published on Wednesday.

Profits at large Chinese industrial companies are forecast to rise 9.0% in the first two months of 2024, after falling 2.3% in December 2023.

• A figure that exceeds the 9% forecast could boost sentiment towards the Chinese economy, supporting the CN50 index as a result.

• Should China’s industrial profits print below expectations, the CN50 could weaken amid growing concerns over the world’s second-largest economy.

 

    2) Big China bank earnings

Quarterly earnings from four of the biggest Chinese banks – Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and Agricultural Bank of China among many others will be in focus. 

Note: Chinese banks have been under much stress due to consumers missing loan payments, especially in the real estate sector.

The latest quarterly earnings may provide some insight into where the property crises may be heading.

Given how banks make up just over 20% of the CN50’s weighting, the market response to the earnings could influence the index.

Note: Speaking of property crises, watch out for earnings from Country Garden and China Vanke published on Thursday. Although they are not part of the CN50 Index, they are heavyweights in the property industry with their results influencing sentiment towards the Chinese economy.

• A positive set of earnings from Chinese big banks and the largest property companies could boost confidence in China’s economy, supporting the CN50 index.

• Should overall earnings from banks and biggest property developers disappoint, CN50 bears may jump back into the scene.

 

    3) Technical forces 

The CN50 remains in an uptrend on the daily charts with prices trading above the 50, 100, and 200-day SMA. A breakout could be on the horizon with support found at 12000 and resistance at 12250.

• A solid breakout and daily close above 12250 may encourage a move towards 12450.

• Should prices secure a daily close back under 12000, this may inspire bears to target 11700.