(Sept 9): For hundreds of years, Dunhuang’s Mogao Caves offered protection for the Diamond Sutra and thousands of other ancient scrolls. In 1907, British explorer Aurel Stein stole 40,000 of those manuscripts from China. This is not the method we want to follow when we discuss development opportunities brought by the Belt and Road Initiative (BRI).
We live in more enlightened times and use very different approaches to preserving history and developing cultural exchanges so we can better share and understand the development opportunities. The BRI encourages these pathways and also opens new connections between diverse areas. Shared knowledge is shared understanding, and together these improve relations between people and between nation states.
How do we share the knowledge, 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 BRI.
How do we share the knowledge that is the necessary foundation of BRI development opportunities? Speaking at the Silk Road Council of International Chambers Belt and Road Roundtable in Dunhuang, I gave five suggestions.
The first is by increased media access. We should actively seek out opportunities to promote and explain both BRI and the development opportunities it brings.
The second is to support work done by the Silk Road Chamber of -International Commerce because it brings 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 the chamber members. This improves knowledge and the quality of discussion.
The third suggestion is hosting and participating in regional and industry trade expos. Even more important than business done at the expo is the growth in understanding of development opportunities. This is an intangible benefit and difficult to measure but this shared knowledge is shared understanding.
We live in a time where 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 the policymaking levels, but can show through our own action in our chambers of commerce that we respect the global order and that we will proceed with exploring the development opportunities brought by the BRI. Real development comes from cooperation and understanding. We cannot be like Aurel Stein. The path forward is not defined by theft and bullying behaviour. The path forward comes from cooperation, and our task as business chambers is to create the conditions that encourage cooperation and understanding.
Technical outlook for the Shanghai market
The Shanghai Index has rapidly developed the classic downtrend breakout pattern. The anticipated pullback from the upper edge of the long-term Guppy Multiple Moving Average (GMMA) was weak. The small pullback was followed by a strong rebound rally that has quickly moved above the resistance level near 2,920. This is very bullish, but traders continue to watch for a pullback test of support followed by a rebound rally and uptrend continuation.
This is a GMMA indicator breakout pattern with three tests of downtrend strength. 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 (1). Traders wait for a retreat from the upper edge of the long-term GMMA (2). These retreats were small.
The second rally carries the index above the upper level 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 beginning to turn up. This confirms that investors have entered the market as buyers and are supporting the new uptrend.
The third part of the breakout pattern (3) 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 will have compressed, turned upwards and will be showing signs of expansion, which indicates increased buying by investors.
Aggressive traders took long positions as the index rebounded from the lower edge of the long-term GMMA. Conservative traders and investors wait now for a new pullback to test support near 2,920. This is point (3) on the chart.
The short-term GMMA has moved above the body of the long-term GMMA. The lower edges of the short-term GMMA is equal to the value of the lower edge of the long-term GMMA. The full trend breakout is confirmed when the lower edge of the short-term GMMA moves above the upper edge of the long-term GMMA.
The upside target for the trend breakout is resistance near 3,040. After some consolidation near this level, a new rally breakout has a target near 3,120. The signal of trend breakout failure is when the index closes below the value of the lower edge of the long-term GMMA.
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.
