Xtrackers MSCI China UCITS ETF (TID), also priced in Singapore dollars, has yet to break above the neckline of a base formation at $23.33. TID had earlier broken above $21.7, a level which coincided with a resistance, a pattern breakout and the declining 50-day moving average. Now, a break above $23.33 indicates an upside of around $28. Supports should be kept tight, at $23, the level of the neckline. TID tracks the MSCI China Index which includes several mega tech-related stocks and China’s banking giants.
There may be a divergence between the global economy’s slowdown and the performance of stocks. Stocks can build base formations, and strengthen even as economies tank, and this is materialising in ETFs that track selected indices in Hong Kong with Chinese stocks. Markets tend to overreact to lockdowns, pandemics, war and famine.
Beaten-down Chinese tech stocks could be the first to recover as lockdowns ease. Lion-OCBC Securities Hang Seng Tech ETF (HST) , which is priced in Singapore dollars, has built a base with the neckline at around 78 cents. In addition, the HST has just risen above its 100-day moving average at 79 cents. The simultaneous breakout above the neckline and 100-day moving average, coupled with rising quarterly momentum and smoothed RSI, indicates an upside of almost $1. This target is achievable given that HST started trading at around $1.36 when it first listed in December 2020. HST tracks the Hang Seng Tech Index which in turn tracks the 30 largest tech-themed stocks listed in Hong Kong, many of them Chinese.
