(Sept 2): Whether we like it or not, business operates in a political environment. As much as we would just like to stick to business, the activi-ty of political leaders can make business more difficult. This is sometimes because they are ill-informed.
How do we share updated knowledge of China, particularly when the media may be filled with negative and sometimes hate-filled stories? What is said on the US news channel Fox News, what is tweeted by presidents and the ill-informed, and inflammatory statements from some senior policy advisers make it difficult to present alternative viewpoints. And yet it is these alternative viewpoints that are essential in developing a better understanding of policies such as the Belt and Road Initiative. A better understanding means more appropriate policy responses and an improved business environment.
The most significant obstacle in exploring development opportunities is the lack of knowledge about those opportunities and the lack of knowledge of whom to contact and whom to speak too. How do we share the knowledge that is the necessary foundation of the Belt and Road development opportunities? I offered three suggestions at a BRI roundtable in Dunhuang, Gansu province last week.
The first suggestion is to support work done by organisations such as the Silk Road Chambers of International Commerce and the Singapore Business Federation because they bring together diverse chambers of business to discuss ideas and opportunities. These forums and roundtables help establish the strategic framework for discussion and development. This information is fed back to chamber members, and this improves knowledge and the quality of discussion.
The second suggestion is hosting and participating in regional and industry trade expos. We focus very heavily on the business done at these expos, but even more important than business is the growth in understanding of development opportunities. This is an intangible benefit and difficult to measure but this shared knowledge is shared understanding, and together these improve relations between people and between nation states.
The third suggestion is delegation exchanges. These have a more specific and practical focus than forums and expos. They bring together key decision makers and influencers to explore specific areas of cooperation and development.
We live in a time in which there is considerable disruption of the world order. What can we do? We have given much thought to an answer. We do not sit at these policymaking levels, but we can show through our own action in our Chambers of Commerce that we respect the global order and will proceed with exploring the development opportunities brought by the BRI. The path forward is not defined by theft and bully behaviour. It comes from cooperation, and the task of business chambers is to create the conditions that encourage cooperation and understanding.
Technical outlook for the Shanghai market
The Shanghai Index continues to develop the classic downtrend breakout pattern, although the potential position of each section of the pattern needs adjustment. This is usually a three-stage pattern of behaviour, although sometimes it involves four steps. We consider the three-step pattern development. Traders have taken early positions in anticipation of a long-term trend breakout and move back towards 3,040. This is shown by the way the short-term Guppy Multiple Moving Average has moved into the body of the long-term GMMA. Investors are more cautious and may wait until the pattern is more fully developed. The long-term GMMA continues with a steady separation but has flattened out and is showing some evidence of moving upwards.
This is a GMMA indicator breakout pattern. The potential pattern of development is shown by the thick lines. The first part of the pattern is a fast rally, following a significant downtrend. The minor retreat this week is not classed as a significant downtrend, so traders wait for a retreat from the upper edge of the long-term GMMA. The rally has been strong and moved above resistance near the upper edge of the long-term group of moving averages.
The short-term group of moving averages has compressed and turned upwards. The long-term group of averages is beginning to flatten out and move sideways.
The second part of the pattern is created by a retreat — in this case, from the upper edge of the long-term GMMA. The index retreat may fall below the previous lows before a new rally develops. In the current situation, traders anticipate a retreat and consolidation around support at 2,830.
The second rally carries the index above the upper level of the long-term GMMA. In this case, traders will look for the rally to move above the resistance level near 2,920 because the current rally has already tested resistance near the upper edge of the long-term GMMA. The short-term GMMA also moves above the long-term GMMA. The long-term GMMA shows good compression and is usually beginning to turn up and confirms that investors have entered the market as buyers and are supporting the new uptrend.
The third part of the breakout pattern is when the second rally retreats and uses the 2,920 resistance area as a support-and-rebound level. The index bounces away from this level and moves decisively above the upper edge of the long-term GMMA. By this time, the long-term GMMA has compressed, turned upwards and is showing signs of expansion, which indicates increased buying by investors.
This is the pattern of development that traders and investors will watch for over the next few weeks. The long-term upside target for the trend breakout is resistance near 3,040.
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 more than a decade. 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.
