Bloomberg News

Macquarie Says Buy China Stocks on Breakout: Technical Analysis

February 27, 2012

Feb. 27 (Bloomberg) -- It’s “time to buy” China’s stocks after the CSI 300 Index broke through the 2,600 level last week and entered a bullish trend, according to Macquarie Group Ltd.’s head of China strategy.

The CSI 300, representing the 300 biggest Chinese companies listed in Shanghai and Shenzhen, exceeded the 100-day moving average last week for the first time since May 2011 and closed above 2,600 on Feb. 23, the first time since Nov. 29. The index may next test resistance at the 200-day moving average of around 2,750 to 2,800, Jiong Shao, who is based in Hong Kong, said in an e-mailed response to questions on Feb. 24.

Chinese stocks rallied for a sixth week last week, the longest winning streak since November 2010, on speculation local governments are relaxing restrictions on the property market and China will further cut lenders’ reserve-requirement ratios to spur lending. The CSI 300 gained 4.4 percent last week, while the Shanghai Composite Index advanced 3.5 percent.

“It is time to buy, given the decisive break out,” the Macquarie strategist said. “The factors that will drive markets higher include continued liquidity loosening, revival of infrastructure construction, and lastly property policy easing near the end of the second quarter or in the third quarter.”

Technical analysts look at price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines.

--Allen Wan in Shanghai. Editors: Darren Boey, Chan Tien Hin

-0- Feb/27/2012 00:48 GMT

-0- Feb/27/2012 00:58 GMT

To contact the reporter on this story: Allen Wan in Shanghai at awan3@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net -0- Feb/26/2012 12:59 GMT


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