Much of the foreign media attention is focused on the gross economic figures. The relentlessly gloomy reportage tells us that China’s economic growth has stalled or failed to hit its targets. The reports say the economy is in the grip of deflation and there is little hope for the future. It is a story of gloom that has been told for decades, but in recent times, under the continuous threat of US tariffs, the story gets gloomier.
The Huangshan economy faced a problem in these conditions. Tourism numbers have increased to around 40,000 visitors a day since the Covid-19 pandemic. A hard decision was taken, and the number of visitors to the mountain was limited to 30,000 per day.
Even still, the mountain range is a crowded place with literally standing room only and long lines of people slowly crawling up the steep steps, their chatter drowning out the chirping of the yellow willow warbler birds hopping amongst the famous pine trees.
It is said that a sure sign of a booming economy is when taxi drivers are glued to their screens, following stock prices. My Huangshan visit was official, so I could not confirm whether this was happening.
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However, during every dinner, official or otherwise, I was asked eagerly about the state of the market. As things became more casual, I was asked to comment on individual stocks held by senior leaders, official staff and guests. The delegates represented a wide cross-section of China’s provinces. Small screens of stock charts were displayed on handphones or on larger screens on the triple-fold Huawei phones.
The renewed interest in the market was in sharp contrast to the view taken by Western doomsayers. More notable was the new idea that the market provided an income opportunity. Also noteworthy was the number and diversity of holdings. Although I would be asked to analyse one stock, the portfolio list shown on the phone typically included around 10 stocks on average.
The nature of these dinners meant that this was a self-selecting group of higher and middle-income individuals. Still, their confidence in the market reflected confidence in economic growth.
I had a long conversation while sitting next to the official tour guide. Her parents still farm a small plot in a village. As a child, she encountered Western travellers to Huangshan and resolved to learn English. Her son also aspires to become proficient in English, but not so that he can follow in his mother’s footsteps. His ambitions are larger, aiming for higher education at a university and a career in the development of the hi-tech industry.
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My tour guide’s life was much better than that of her parents and she was confident that her son’s life would be much better than her own. This belief in the future contradicts the Western narrative that China has little to offer the new generation and that hope is faltering.
I note the contradictions, but have no explanation for them. However, they serve as a reminder that China is a complex environment that cannot be summed up in a single headline, a clutch of economic figures or the relentless negativity of Western media reportage.
Technical outlook of the Shanghai market
After the strong upmove above the resistance level near 3,888, the market has pulled back and is developing a retest of 3,888 as a support feature. This has now become a strong support area.
It includes the upper edges of the long-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator. It is also near the value of the long-term uptrend line A.
Strong support features enable traders to enter at lower levels, confident in a rebound and the continuation of the long-term uptrend.
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A rebound from support has two upside targets. The first upside calculation used the upsloping triangle chart pattern — the upward-sloping triangle pattern created by trend line B and the resistance level line A. The base of the triangle is measured and projected upward to yield a target of approximately 4,050.
The second calculation method uses the width of the trading bands. The width of the lower band is calculated and then projected above the upper edge of the band. This gives a target objective of around 4,100.
This is just above the triangle pattern target, so it is reasonable to set an upside target of between 4,050 and 4,100.
Despite the current index pullback, the consistent separation in the long-term group of moving averages in the GMMA indicator confirms support for a rebound move to the upside.
The long-term group of averages in the GMMA are not compressing, confirming that investor support for the trend remains strong. The trend behaviour remains bullish. The index could pull back to the value of the long-term uptrend line A and remain in a bullish uptrend.
A fall below the trendline A is bearish.
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 former national board member of the Australia China Business Council
