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Anti-China sentiment impacts investment

Daryl Guppy
Daryl Guppy • 6 min read
Anti-China sentiment impacts investment
Covid-19, the “Black Lives Matter” protests and the collapse of the UK economy, are all important issues, but they also mask the acceleration in anti-China sentiment.
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(June 19): Singapore is an integral component of globalisation and global trade. It is a role that goes beyond the obvious success of the city-state’s port and airport facilities to include service and supply provision of global companies active in Asia. But there is a danger of developing a self-congratulatory bubble as global news is dominated by Covid-19, the “Black Lives Matter” protests and the collapse of the UK economy. These are all important issues, but they also mask the acceleration in anti-China sentiment.

To be fair, it is easier to assess these changes if you are living in-country rather than relying on local coverage of global events. Singapore and Asia underestimate the growth and vehemency of the anti-China attacks taking place in Australia and the US. This is no longer largely rhetoric and not just about telecommunications networking giant Huawei. Covid-19 has accelerated a serious hardening of positions with a comprehensive media war fed by coordinated leaks and reports from organisations that are funded by government and arms manufacturers.

One national newspaper in Australia routinely carries 10 to 12 full or half-page articles from their weekend opinion columnists that are quite clearly anti-Chinese. The television stations also air regular feature programs on the China threat or its sinister activities in Australia. They all concentrate on the threat that China poses to Australia and alleged attempts to interfere with all manner of Australian activities.

Some information are clearly leaked while others — like that story claiming to be based on a secret US intelligence report when it actually came from publicly available sources — are simply conflated.

China’s recent action at the conclusion of a 12–month enquiry into the pricing of Australian barley exports and the suspension of some abattoir export licences following a 12–month failure to rectify customs errors are cited as deliberately coercive.

It is rare to find an article supporting the Australia–China relationship. Those that do are increasingly branded as unpatriotic or beneficial to self-interested greedy businessmen. For example, the China Matters think tank — whose board includes the current Ambassador to China — was accused in some media stories of lobbying against Australia’s national interests by preparing discussion papers on China policy issues.

There is also an increasing number of reports from so-called independent think tanks, some funded by the Australian Department of Defence and US arms manufacturers. Rather than being independent, they are registered as an agent of foreign influence. The information is often sensationalist in its claims and designed to meet an underlying and poorly disguised ideological agenda. These reports are eventually featured prominently in the Australian media.

In the minds of the public, these anti-China reports do not distinguish between Chinese nationals and others of Chinese descent, including Singaporeans. This means that Singaporean investment in Australia tends to get lumped with Chinese investments.

This is beginning to concern Singaporean investors, particularly as the Republic’s investment in Australia is much larger than Chinese investment.

There is a saying that goes “don’t throw the baby out with the bath water”. In the current anti-China environment, there is a danger for Singaporean investment activity to be caught up in the rhetoric. In a broader context, investors should not underestimate the growing impact of this anti-China sentiment on current Singapore-China engagement and investment.

Technical outlook for the Shanghai market

The Shanghai index uptrend is more fully defined following the retreat and rebound activity last week. There are three key features to note when considering this trend.

The first and second features are the role of the uptrend lines A and B. The third feature is the increasing trend support shown by the longterm group of averages in the Guppy Multiple Moving Average (GMMA) indicator.

The trend has remained strong with trend line A acting as a resistance feature for the uptrend. This is not an exact resistance barrier and the index will cluster around this resistance feature as it moves towards the long-term historical resistance near 2,980.

Trend line B has confirmed its importance as a support feature for this rising trend. The recent retreat rebounded from this level and added a fourth anchor point for the placement of this trend line. The value of the line is also near to the long term GMMA group of averages.

The renewed separation in the short-term group of averages also supports a bullish analysis. This shows traders are very confident in the uptrend continuation because they are not selling into trend strength. This new expansion shows traders are buying into trend weakness in anticipation of a resumption of the uptrend.

The first upside target for this trend rise is near 2,980. This is a long-term historical resistance level — a breakout above this level is very bullish. Beyond this the next target is long term support and resistance level near 3,045.

However, the most likely outcome is a test of resistance near 2,980 followed by a retreat that has three potential support features. The first support area is the value of the long-term GMMA. Currently, this group of averages is compressed so the support is in the area near 2,890. A fall below this level encounters support near to the value of the uptrend line B, currently also near 2,890. Trend line B has four anchor points and defines the support features of the longer-term uptrend. This, along with the position of the long term GMMA, helps confirm the uptrend and also the strength of the line as a support feature.

The divergence in the two trend lines suggests the index could move more than 80 points to the lower trend line B and still remain in a long-term uptrend.

Investors will also watch the behaviour of the long-term group of averages. This group is now moving upwards and beginning to separate. If a wide separation in the long term GMMA develops then it will confirm strong investor support for the uptrend.

Daryl Guppy is an international financial technical analysis expert and special consultant to Axicorp. He has provided weekly Shanghai Index analysis for mainland Chinese media for more than a decade. He is a national board member of the Australia China Business Council.

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