I am not a vegetarian, but I do have Buddhist colleagues and when we eat together in Singapore I respect their food choices. We are often presented with a broad menu that includes artfully disguised meats made from soy bean paste. Here is a delightful array of prawns, fish and beef. The vegetables served with these meat look-alike dishes are the standard vegetable fare and instantly recognisable. The other tofu and bean curd dishes are served on fancy plates that do not lift them much above the ordinary.

For those who are not vegetarian — like myself — these menu choices can almost convince us that we are eating meat. For those not fully committed to Buddhist vegetarianism, the display satisfies both their desire for meat and for vegetarian virtue.

This style of presentation of imitation meat fits neatly into a Western cuisine and there is growing demand for these meat substitutes. The vegan food sector is forecast to be worth US$12 billion ($16 billion) by 2023.

Companies have carved a niche in this Western market, and are now eyeing the China market as China’s appetite for plant-based protein soars. Beijing has signalled its intent to support the growth of the domestic plant-based food sector.

Before jumping at this investment opportunity, it is worth taking the time to step back. Let us rewind my opening observation: I am not a vegetarian, but I do have Buddhist colleagues and when we eat together in China I respect their food choices.

We are presented with a menu that makes no attempt to apologise for its vegetarianism. There are no skilfully moulded prawn or fish lookalikes. There is no pretence that what is on offer is anything other than vegetables.

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And what a range of vegetables! I have been forced to pick from more than 20 choices. At their best, they are cooked to perfection, steamed just-so with scrunch and flavour, stir-fried to perfection with flavour fully intact. Mushrooms and fungi cooked to capture the variety of texture and the subtlety of flavour. Crunchy diamonds of swede sit beside marinated turnips. Tofu comes in multiple guises, fried, steamed, stuffed, pressed and spicy with chilli and in a variety of textures.

There are three observations that need to emerge from this brief culinary survey. First, there is a well-established vegetarian market in China and it reflects the various strands of Buddhism. This is most often a religious choice rather than a political or social statement.

Second, the range of vegetable and fungi choices is very large, providing a broad array of taste and texture. Each is cooked and presented in a way that maximises its inherent characteristics.

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Finally, vegetables, tofu and fungi provide a sophisticated menu and cuisine that does not need to use lookalike meat substitutes. Customers do not demand this and do not expect it.

These different approaches to presenting a vegetarian meal do not alter the basics of the meal, but they do reflect very different consumer preferences and tastes. It is in this difference that a business which has success in the West, finds failure when it seeks to directly transfer its model to China.

Eating habits run deeper than the difference between using a knife and fork and using chopsticks. Investors embracing the craze for plant-based meat substitutes need to carefully evaluate the market suitability.

As an aside, those seeking vegetarian meals in China should tell the waitress they want a Buddhist meal as this will produce the desired result rather than confusion about what is a vegetarian meal.

Technical outlook for the Shanghai market The rebound in the Shanghai Index remains in a consolidation pattern around the 3,220 level. This is a welcome relief from the index decline, but despite several weeks of sideways activity, it is not yet evidence of any sustainable uptrend.

There is little good news for the bulls, other than the halt in the index decline. The consolidation pattern has the index drifting sideways and there is no evidence of any upward pressure. The index is oscillating around the 3,220 level and unable to break out above the 3,280 level.

The bears are equally unsatisfied. Weak support has developed near 3,170 and this has defined the downside limits of the oscillation activity. The market remains weak, but there is no strong indication of a resumption of the downtrend.

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The Guppy Multiple Moving Average (GMMA) indicator remains bearish. The long-term group of averages which indicate investor thinking show that investors remain very bearish. This is confirmed by the wide separation in this group of averages.

The short-term group of averages, indicative of the way traders are thinking, also remains in bear mode with no significant or sustainable compression that would indicate a weakening of bearish pressure.

The wide gap between the short- term and long-term group of moving averages remains steady. This is a bearish environment, but it is not a rampaging bear. At best the bear can be said to be resting.

The Shanghai index chart is dominated by the head and shoulder reversal pattern. The left shoulder was formed in June 2021. The head was formed by the highs in September 2021, while the right hand shoulder is formed in December 2021.

The distance between the top of the head and the neckline is measured and this value is projected downwards to set the downside target. This target was achieved with the market fall on March 16. The probability of a retest of the head and shoulder downside target near 3,050 has diminished as consolidation has developed near 3,220.

Traders are alert for a relative strength index divergence pattern because this is a reliable indication of a trend change. Unfortunately, there is no indication this divergence is developing so traders watch for support to develop within the consolidation pattern. Traders will rely on analysis of the consolidation behaviour around 3,220 and use this as a guide to new uptrend behaviour.

Until this develops, this remains a very bearish environment.

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Daryl Guppy is an international financial technical analysis expert and spe- cial consultant to Axicorp. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a national board member of the Australia China Business Council. The writer owns China stock and index ETFs

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