(Bloomberg) — Chinese stock benchmarks are nearing key technical levels amid a relentless selloff, and a fall below thresholds could portend more losses.
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The downward trend comes as global investors remain pessimistic about China’s prospects as China’s economy shows a fragile recovery and the housing crisis continues to worsen. Despite Beijing’s attempts to stabilize sentiment, outflows from abroad continued. Moody’s Investors Service’s sweeping downgrade of its outlook for China’s sovereign and corporate ratings has added to the headwinds.
Hong Kong’s Hang Seng Index is approaching a long-term trend line dating back to the 1998 Asian financial crisis. The line provided support during the 2008 global financial crisis, and the benchmark was able to quickly recover after crossing the threshold in October last year.
Still, traders fear the index could extend its losses if it falls below support this time due to poor sentiment. With a decline of more than 17% this year, the HSI is the world’s worst-performing major stock index.
The indicator fell as much as 0.6% on Friday, heading for its lowest close in a year.
The so-called “line of fate” of the Shanghai Composite Index, which has held up in times of crisis over the past 18 years, was also put to the test several times this year. Meanwhile, the CSI 300 Index is near its historical trend line after falling to its lowest level since 2019 this week. The onshore equity benchmark fluctuated between gains and losses on Friday.
– With support from Akshay Chinchalkar.
(Updates with Friday’s moves.)
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