Five or six years ago, the West discovered China’s Singles Day (which falls on Nov 11). This was a deliberate marketing exercise designed to drive online sales. It was called Singles Day because the sales date was day one of the 11th month or 111. In a very clever twist, this concept of singles was also used to appeal to unmarried consumers although of course the sales appealed to a much wider audience.
The US has a similar event: The curiously named Black Friday (which normally falls on the fourth Friday in November) — curious because traditionally this is Friday the 13th.
Then, they came up with Cyber Monday sales (or e-commerce sales on the Monday after Thanksgiving in the US). Neither of these sales gained anywhere near the traction or turnover of China’s Singles Day, mainly because the US market did not have the same levels of digital sophistication as China. Remember, this is an economy that still uses magnetic strips on credit cards rather than embedded chips.
China’s Alibaba Group turned Singles Day into an event in 2009 and built it into the world’s biggest online sales event — surpassing even Cyber Monday in the US. It has also spawned domestic imitators, like the just completed 618 Mid-Year Shopping Festival, which happens in June.
Sales numbers remain impressive, easily outstripping both Black Friday and Cyber Monday. More than 30,000 of the items or services on offer turned over sales in excess of RMB1 million ($207,939). Another 2,300 listed services had a turnover in excess of RMB10 million, while 100 top notch products saw sales in excess of RMB100 million.
What is of particular interest is the changing composition of this most recent digital economy sale. Despite the well-publicised lockdowns, there is increased interest in outdoor hobbies. Top selling items including skateboards and equipment for camping. In a surprising category addition, fishing also featured heavily. This category is a major seller in Western markets, but traditionally there has been a low level of interest in this recreational activity in China.
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The personal care category was also a high sales area with a substantial increase in the men’s beauty category. This reflects a change in emphasis and shows a new and expanding market niche. As expected, with lockdown either a recent memory or a current reality, there was the traditional focus on smart home appliances.
International fashion and luxury goods remain in the top categories, but their aggregate turnover has declined. Along with men’s beauty products, a surprising increase was found in the area of high tech pet supplies.
In some ways, this reflected a return to normal work patterns so pets purchased during lockdown now have to be left to their own devices. High tech pet care includes automatic food and water stations and other digital monitoring devices.
See also: Eight reasons why I am still in favour of China stocks
The 618 Mid-Year Shopping Festival sale provides some interesting insights into how the Chinese consumer preferences and spend are changing. In many areas, it may be difficult to compete: Many products in the camping area and accessories are already made in China and Chinese suppliers are ideally situated to service this expanding market segment.
However, there is room for niche products in this area to expand their reach into an audience that was previously not so interested in fishing and camping. The most important feature of the 618 Mid-Year Shopping Festival is to underline that China is a developing and expanding market — and that the post-Covid-19 climate will be different from the pre-Covid-19 period.
Technical outlook for the Shanghai market
The Shanghai Index breakout uptrend has accelerated and achieved the projected target near 3,380, shown as line A. This resistance level may now act as a support feature as the market momentum continues. If this momentum fails, then the index may consolidate around the 3,380 level. If this consolidation fails then there is further support from the uptrend line. The current value is near 3,340. The important observation is that there are multiple features that provide support should the uptrend momentum falter.
Taking the more bullish outlook, a rebound from consolidation near 3,380 has a long-term target near 3560, shown as line B. This was previously the centre point of a long-term trading band. The lower edge of the trading band, shown as line C, also provides a resistance point for further rallies in the Index. This resistance level is near 3,480. The higher target level near 3,560 is the most likely target because this is also a price projection target. The distance of the breakout from 3,220 and the resistance level at line A is measured. This value is projected upwards from line A and sets the target at line B. The Shanghai index has a habit of working consistently within trading bands. This does not preclude a pause and consolidation near the value of line C, but the trade band behaviour suggests the long-term target is the value of line B at 3560.
The strength of the trend is shown by the behaviour of the Guppy Multiple Moving Average (GMMA) indicator. The GMMA consists of two groups of averages. The short-term group provides insights into the way traders are approaching the market. Currently this group shows renewed expansion which suggests the uptrend pressure will continue. The index is clustered along the upper edge of the short-term GMMA. The long-term GMMA also provides insights into the behaviour of investors. The current situation with this group of averages turning up and compressing shows investors are beginning to change their opinion about the potential for a sustained up trend. Support for this new uptrend is shown when the long-term group of averages begins to expand.
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The final measure of trend behaviour is the degree of separation between the long-term and short-term group of averages. Wide and steady separation shows a strong and stable trend. This is developing so the current GMMA relationships lean towards a continuation of the uptrend in the longer-term.
This remains a strong developing and sustainable breakout. But traders are alert for consolidation near current levels prior to a resumption of the uptrend.
Daryl Guppy is an international financial technical analysis expert and special consultant to Axicorp. 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. The writer owns China stock and index ETFs
