The Chinese market surges on MSCI hopes, GBP tumbles on Brexit polls

The Chinese and HK markets surged on Tuesday, led by the securities sector, particularly Citic and Haitong.

The Shanghai Composite rallied 3.3%, with higher volume. The most likely reason for this is market speculation on the possible inclusion of the A-shares into the MSCI index, a decision which will be announced this month. Should this happen this year, it would introduce billions of passive inflow into the A-shares market.

Another possible reason is that the HK-Shenzhen link may come out sooner than expected, resulting in speculation. Recently, we have seen large inflows into the HK-listed RQFII ETF – CSOP China A50 (2822 HK), which shows that foreign funds have already started to increase their positions in the A-share market.

Separately, the Chinese PMI figure came out at 50.1 this morning, beating market expectations of 50.0. A reading above 50 indicates economic expansion. This is the third consecutive month of China’s monthly PMI reporting above 50.0 this year, showing a sign of economic stablisation.

Singapore’s STI rallied 1% in the earlier trading hours, however, ended marginally lower during the last trading hour. The Singapore Exchange (SGX) rallied 2.1% on China hopes, as the most liquid A50 futures are listed in the SGX.

FX

GBP/USD tumbled over 1.12% to the 1.4470 area as a recent poll shows more voters leaning towards Brexit. AUD/USD has rebounded to the 0.7230 area from a three-month low. The MACD has formed a positive crossover. USD/JPY has retraced back to the 110.60 area, with the market tending toward more caution ahead of the Prime Minister Abe’s talk later today.

Commodities

The WTI Crude Oil price dropped from its year-to-date high as Canadian oil production resumed after the wildfire. A few technical indicators have shown a strong resistance level near the $50.00 area, as discussed earlier. The strong USD continued to suppress the gold and silver prices. However, the gold price has rebounded for a second day to $1,219 this morning, with its immediate support level at $1,200. Silver also seems to find some support around the $16.00 area. Its next support level could be found near $15.63.

CSOP FTSE China A50 ETF

CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.