SINGAPORE (April 1): In ancient times, there were calls to turn ploughshares into swords. Its an early example of dual-use technology, where technology could be used for both peaceful and military purposes. The tradition continued during the Battle of Britain when households were encouraged to turn in their aluminium saucepans so that they could be turned into Spitfire aeroplanes.
In modern times, the concept of dual-use technology has again become important. Chinese investment in Italian ports is held up as an example of dual-purpose activity on the grounds that they could be converted into military ports for the Chinese navy. The lease of the port of Darwin in North Australia by a private Chinese company was subject to the same criticism despite the commercial port being more than 8km away from a small capacity naval port facility.
So where do we draw the line? The US has led a push to ban Huawei Technologies from work in many areas. New Zealand and Australia have been enthusiastic supporters of the generic claim that 5G is dual-use technology that can be used for civilian and military purposes. Europe and the UK are less convinced.
This week, the company responsible for Grindr, the gaydating app, is now reportedly looking to sell it after a US government agency informed the company that Chinese ownership constituted a national security threat. Grindr was acquired by Beijing Kunlun Tech Co in 2016 in a deal worth well over US$100 million.
The argument is that Chinese involvement in Grindr means there is a potential for blackmail, so it is a security risk. This fear is related to the collection of personal data. Of course, transfer of ownership to a US company does not eliminate that security risk — think Facebook with its manipulative use of personal data sold to the highest bidder. Instead, it transfers the security risk to different jurisdictions because Grindr is used worldwide.
The internet itself is a dual-use technology. The head of the secretive Australian Signals Directorate recently released details of operations where cyber spies destroyed IS internet communications in the Middle East to enable an attack by coalition forces against a “blinded” adversary. The internet is used as a vehicle for both civilian and military functions, but this is no argument for restricting access on the grounds of security.
We did not ban ploughshares on the grounds that they could be converted into swords, so we need to exercise caution and credulity when the dual-use technology security argument is advanced as a reason for prohibiting the use of a product or service. There are legitimate security concerns, but we must consider the extent to which commercial agendas also play a role in these policy decisions. Dual-use technology can be and has been managed in the past without security concerns being applied to gain a commercial advantage.
It is increasingly clear that security and dual-use concerns are being used as a cover to provide a commercial advantage for American products, services and ambitions.
For business investment, this means that any dual-use technology or service faces the risk of a commercial attack disguised as a security concern. Third-party investors face the same risk — that a commercially sound investment may be destroyed by fabricated security concerns and forced technology transfer. Our investment decisions are at risk when security concerns are used to further commercial objectives.
Technical outlook for the Shanghai market
The primary uptrend in the Shanghai Index has been broken by the index move below the trend line. This is a signal for the end of the current uptrend behaviour, but it is not a signal for the end of the uptrend. The very rapid up move was always destined to end in a consolidation pattern. This pattern has resistance near 3,120 and support near 2,980. Currently, the index is moving within this consolidation sideways trading band.
There were several bullish features in the Shanghai Index chart. Some of these have become less significant over the past week.
The first bullish feature was the strength of trend support offered by the lower edge of the short-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator. The index dropped below this level and the averages have compressed and turned down. This is no longer a bullish feature, but at this stage it is also not a bearish feature. Instead, this pullback is consistent with a test of support from the long-term group of averages.
The second bullish feature is the way the uptrend line had acted as a support level. The move below this line is bearish because it shows the recent uptrend has ended. The fall below the trend line does not show the start of a new downtrend. In any future rally rebound from the upper edge of the long-term GMMA, the trend line will now act as a resistance feature. A break above the trend line and a break above the upper edge of the consolidation area will be bullish.
The third bullish feature is the continued strong separation in the long-term group of GMMA averages.
This degree of separation has not changed and this shows that investors are absorbing the current selloff. This shows investors are continuing to buy as traders take short-term profits. This underlying uptrend support is further confirmed with the consistent separation between the longand short-term groups of moving averages.
Traders watch the development of the current pattern of pause and consolidation in the index behaviour. The 3,040 level has been a strong support and resistance feature, so there is a high probability the index will consolidate and move in a sideways oscillation around this level.
Traders remain alert for the development of end-of-uptrend patterns. For the Shanghai Index, the most reliable pattern is the headand- shoulder pattern. There is no indication this pattern is currently developing, so traders watch for more consolidation and the potential to develop a rebound rally and an uptrend continuation.
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. 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.
