Chinese Equities– Volatility ahead!

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Written by Julien Mueller | 02 November 2015
Posted in Special research

Investors’ uncertainty about the Chinese equity market index CSI300 mounts to a 52 weeks high. The sentix Global Investor Survey shows that investors react paralysed to recent Chinese macroeconomic environment.

The latest sentix Neutrality Index for the Chinese equities market, which captures the percentage of investors indifferent to current market conditions in China, reaches the highest reading since 52 weeks (please see Chart, blue line). In the past four to six weeks, the investors’ sentiment towards Chinese equities was significantly more optimistic than recently. Intriguingly, neutrality has more than doubled since mid of August 2015. Chinese stock market’s rapid recovery affected investors twofold: it ended market’s oversold status. Though, apparently have seeded disbelief as well as lack of orientation among investors concerned with the long-term market perspective. The recent “summer-crash” experience has deeply anchored. Moreover, suspiciousness finds futile ground as news about China’s “weakening” economy hit the tickers. High sentix Neutrality index readings are indications of upcoming market volatility, accompanied by repositioning.

 20151102 iif neutrality csi eng

Relevant from a technical analysis perspective is whether the CSI300 successfully crosses the resistance at 3650 points at a first lunge. Conversely, the support at 3400 points must counter a failed attempt.

Background

The sentix Neutrality Indices represent the share of neutral investors in the market. A high percentage of such investors points to irritation and to higher volatility in the near future. A low reading shows that investors have understood “the market”. In the camp of “neutrals” there is always an important part of investors who are not or only marginally invested.Those are important as they are potential future buyers or sellers! For sentix Neutrality Indices, the  interpretation of the short-term and the medium-term are most of the time similar. Consequently, the case is strengthened when both time horizons reach extreme readings. 

The current sentix Global Investor Survey was conducted from October 29 to October 31, 2015. 1,020 individual and institutional investors took part in it.

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