In previous years, I have spoken at the China-Asean Expo (CAEXPO) in Nanning. It has always been an important trade expo linking businesses in China and Asean, as the name suggests.
CAEXPO has also been a significant strategic trade platform as vice-premier Zhang Gaoli used the plenary session to formally launch and explain what was then the New Silk Road programme which later became the Belt and Road Initiative (BRI).
This year, the expo is also integrated with the Regional Comprehensive Economic Partnership (RCEP). This encourages the sharing of new joint Asean and RCEP opportunities. Singapore has also taken a lead in this engagement with the Singapore Business Federation hosting The Singapore-China Trade and Investment Forum. This was designed to highlight opportunities and areas of cooperation to improve the trade relationship by accelerating business growth together.
CAEXPO is just one of a series of China trade events held successfully despite a media narrative that suggests we are seeing the end of globalisation or that China can be excised from supply chains. The China International Import Expo (CIIE) in Shanghai brings the world’s exporters to China together. It helps to underline the way China is embedded in the prosperity of the participating countries. For most of the exhibitors, China is their largest trading partner. It is a hybrid event this year but there are still thousands of physical exhibition stands and visitors at the expo centre in Hongqiao.
CIIE is organised for countries exporting to China. It followed on the heels of the Canton Fair in Guangzhou which matches buyers with Chinese suppliers. The Canton Fair is for countries importing from China. Participation clearly showed there is no significant decline in the demand for goods from China. The primary constraints were clogged supply chains rather than demand reduction.
These two trade expos debunk the myth that China can be excluded from supply chains and that the end of globalisation is nigh. What these do suggest is that the locus of demand is shifting to expanding economies in what used to be called the Third World but which are now referred to as the Global South. It is a change that will impact business and also change the way the business interacts with China.
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CAEXPO is different from the two other expos because it focuses on issues which are most important to the Asean region. This includes strategic trade discussions as well as the physical activity of trade. This allows China to work closely with Asean neighbours to resolve problems and improve the efficiency of trading. Business leaders attend the expo because they are looking to further strengthen their cooperation and develop business opportunities brought by the RCEP agreement.
Forums and business meetings help to develop regional cooperation by discussing the political and trade framework that facilitates crossborder trade. This enhances trade in the Asean region and between the signatories to the RCEP and the participants of the BRI.
CAEXPO confirms the essential viability of China’s business with the region and the context of RCEP. This is perhaps its most important message for Singapore business.
See also: Eight reasons why I am still in favour of China stocks
Technical outlook of the Shanghai Composite Index
The Shanghai Index has rebounded strongly from the support level near 2,890. It is not quite a double-bottom pattern but it is within 30 points of the April low. This is a very long-term pattern, so we are reluctant to apply the usual double-bottom analysis to understand the potential for behaviour over the next few months. However, the rebound in this type of pattern has bullish characteristics.
There are two features for the analysis. The first is the rebound from the support level near 2,890 — the double-bottom rebound.
The second is the breakout above the short-term downtrend, shown as line A. There was an initial breakout and then the index retreated and slid down the trend line until it encountered support created by the double bottom feature. The subsequent rebound rally has reversed this decline and is part of a typical bullish pattern.
The rebound rally is generally attributed to central government intervention in the market. This is also generally considered to be evidence that the market is not freely traded in the same way as more advanced Western markets. This conclusion is false. In Western markets, deliberate market intervention is undertaken by central banks and the impacts are the same.
The third feature is the longer-term downtrend line B. This has only two pivot points so the line placement will be confirmed if the index reaches the value of line B and then retreats. The current value is around 3,150.
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A retreat from the value of the trend line B confirms the valid placement of the trend line and also provides an important trigger for any future breakout above the line. If this were to develop then it signals a change from the downtrend to a new uptrend. This is a very bullish situation. Until this develops, the current index activity is treated as a rally rather than a trend change.
The Guppy Multiple Moving Average (GMMA) relationships continue to show steady downward selling pressure. They remain well separated and they have maintained a consistent degree of separation between the two groups of moving averages since early September. This is characteristic of a strong sustained downtrend trend. It will take several rally attempts to break this downtrend.
Investors and traders are alert to the development of a 1-2-3 GMMA pattern. This is where the market rallies but falls short of the long-term GMMA. This happened in October. The next rally penetrates the longterm GMMA. This is the current situation. The third rally breaks above the long-term GMMA and is used as confirmation of a trend breakout and the beginning of a new uptrend. These are there will be major rallies developing over days or weeks.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a national board member of the Australia-China Business Council
