• CHINAH, CN50, HK50 falling on fears of heightened US-China trade tensions
     
  • US president-elect Trump reportedly set to appoint China "hawks" to cabinet
     
  • CHINAH, CN50, HK50 testing key moving averages as immediate support
     
  • Relief to arrive from this week's earnings by Tencent, JD.com, NetEase, Geely, and Alibaba?
     
  • Markets still predict double-digit % gains for CHINAH and HK50 over next 12 months, for now

 

Chinese stock indexes are still reeling from the fallout from the just-concluded US presidential elections.

At the time of writing, here's how major Chinese stock indices within FXTM's universe have fared since Asian markets closed on November 5th - US elections day:

 

  • CN50: -2.75%

At the time of writing, the CN50 is now testing its 21-day simple moving average for immediate support.


FXTM's CN50 stock index tracks the FTSE China A50 Index.
 

  • HK50: down 5.6%

At the time of writing, the HK50 is now testing its 50-day simple moving average for immediate support.

FXTM's HK50 stock index tracks the Hang Seng Index.

 

  • CHINAH: down 5.8%

At the time of writing, the CHINAH is headed towards its 50-day simple moving average, potentially for immediate support, which also currently lies around the psychologically-important 7,000 number.

FXTM's CHINAH stock index tracks the Hang Seng China Enterprises Index.
 

Besides Chinese stock indices, even China's currency, the Yuan (CNH) has also fallen almost 2% since November 5th.

 

 

Why are Chinese assets falling?

Chinese markets have been falling on fears of heightened US-China trade tensions under Trump 2.0.

The US president-elect has campaigned on threats of imposing 60% tariffs on Chinese products imported into the United States.

Such tariffs, if rolled out, are expected to put further downward pressure on the Chinese economy that's already struggling to sustain its post-pandemic recovery.

 

 

Timeline: Chinese stock indexes post-US election reaction

Here's a quick recap of key events that have sent the CHINAH, CN50, and HK50 indexes on a topsy-turvy ride over the past week:

  • Tuesday, Nov. 5: US election day
     
  • Wednesday, Nov. 6: Knee-jerk declines for Chinese markets as US election results pointed to a resounding win for Trump.
     
  • Thursday, Nov. 7: Chinese stocks rose on hopes of more economic support from Beijing
     
  • Friday, Nov. 8: Beijing disappointed markets with less-than-expected fiscal stimulus
     
  • Tuesday, Nov. 12: Markets react to overnight reports of president-elect Trump could appoint Marco Rubio and Mike Waltz to his cabinet - both are known to have aggressive stances against China.

 

 

Can Chinese stock indices see some relief soon?

In the days ahead, big Chinese tech companies are due to report their respective quarterly earnings, all before US markets open:

 

  • Wednesday, Nov. 13: Tencent

Tencent’s stocks are expected to move by 4.2% either up or down after this earnings release.

Though Tencent’s video game segment should offset weakness in its fintech and advertising businesses, this stock is unlikely to be immune from the potentially darkening clouds over the Chinese economy.

 

  • Thursday, Nov. 14: JD.com, NetEase, Geely

These 3 stocks have a combined market cap of about US$132 billion. All are members of the CHINAH stock index.

When US markets open on November 14th, after their respective results, these stocks are forecasted to move anywhere between 5% - 9%, either up or down.

From e-commerce, to automotives, and even gaming, their respective results are likely to serve as a barometer of the health of the world’s second largest economy.

 

  • Friday, Nov. 15: Alibaba

Alibaba’s stocks, listed in Hong Kong and the US, are expected to move by 5.3% either up or down after this earnings release.

Though it’s hoped that government measures to boost this past Singles Day sales (on Nov. 11th) could help Alibaba’s fortunes, this e-commerce giant is still expected to post lacklustre Q3 figures amid slowing consumption.

 

 

Potential scenarios for CN50, HK50, and CHINAH:

  • If the upcoming financial results can punch past the gloom, that could help these indexes stay above their respective critical support levels (21-day / 50-day SMAs), at least temporarily.

    Bulls will also be hoping that the November 11th Singles Day sales can give these companies a boost to start off the week, helping the indices rise in tandem.

     
  • However, if these big Chinese tech companies post lacklustre financial results, while also citing growing headwinds for Chinese consumers that erode their respective earnings outlooks, that could spell further declines for Chinese stock indices.
    ​​​​​​​​​​​​​​

 

What's the longer-term outlook for CHINAH and HK50?

As things stand, markets still expected double-digit % gains for these Chinese stock indices over the next 12 months:

  • CHINAH: +22.4% over next 12 months
     
  • HK50: +23% over next 12 months
SOURCE: Bloomberg; data unavailable for FTSE China A50 Index (CN50 index)

However, with key details yet to be determined about what, when, and how Trump 2.0's upcoming policies could impact China ...

The forecasted double-digit, 12-month potential profits for Chinese stock indices may well be drastically reduced, especially if the market's worst fears are realized under the incoming Trump administration.