China

A pick up in China looks likely into year end, both in the stock market and economy.

On the weekly and daily views, the Shanghai Composite looks to be basing for an up-move.

Source both: Cobra / Stockcharts

It is doing so on a p/e valuation of just 7.8, which is historic extreme cheapness.

Meanwhile, the Hang Seng broke out of its long term triangle and has advanced away from the breakout, which further bodes well for Chinese equities.

China PMI has pushed back up recently, which as a leading indicator suggests an upturn in the economy ahead, even if only short lived rather than enduring.

Source: Ed Yardeni

And the Chinese National Bureau Of Statistics leading indicator suggests an uptick in GDP growth is likely.

I maintain that strength in China is important to fulfill a secular commodities finale next year, due to China’s role as the world’s largest aggregate commodity demand source. Now let’s see whether this improvement in China is mere counter trend respite and stabilisation or a move that gathers momentum, but given the Chinese central bank pumped the equivalent of $50bn into the economy on Sep 25 and another $42bn on Oct 9, there is the potential for a period of reasonable strength.