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China & Hong Kong – A Lesson from Epictetus

Published on February 6, 2024

John Roque

Epictetus was a Greek Stoic philosopher who died in 135AD. We’re all likely aware of a few of his (thankfully) enduring quotes like, “The greater the difficulty, the more glory in surmounting it.” BJJ practitioners will nod knowingly, I’m sure. But there’s another quote from Epictetus that I think fits neatly with what will follow below for China and Hong Kong; heck, it fits neatly for nearly everybody nearly all the time. The quote is, “You can’t learn what you think you already know.”

Here’s what we already know – Chinese equities, as represented by the CSI 300 Index, have been in a bear market for 36-months and are at levels first seen in April 2007. Hong Kong equities, as represented by the Hang Seng Index, have been in a bear market for 72-months, and might be in a bear market for more than 16 years (measuring from its autumn 2007 high), and is at levels first seen in July 1997! Heck, I’ve been around so long that I remember when HF managers swore that China was the “promised land!” Turns out the only thing it promised was agita.

And here’s a little wrinkle to add to the mix which might not be well-known.

CSI 1000 – a small cap index in China – was down more than 6% o/night Sunday after falling 8% during the session. Through Sunday night, the index was down in 20 of 25 trading days in 2024 and was down, through Friday, five weeks in a row and had fallen 27% so far in 2024. Interestingly, on Sunday night the CSI 300 was up small and did not follow the extreme action in the CSI 1000.

Then last night the CSI 1000 was up 6.74% which reversed the -6% loss of the prior day.
Volume was bigger last night on the reversal day when the CSI 1000 gained 6.74% than it was on Sunday night when the CSI 1000 lost 6.1%.

CSI 300 – gained 3 ¼% last night and volume increased nicely vs. the prior night. Also, there is a positive momentum divergence evident in daily indicators for the CSI 300.

HK / Hang Seng – was up 4% and – so far – has a successful retest in place vis-à-vis its Oct 2022 low.

Admittedly, the above might be just scant evidence of something I want to see – an improving picture for Chinese / HK equities. But I think the above minor inputs suggest we should, at least, be aware that the technical / price action suggests a tradable bottom is coming together in China / HK. Charts follow below.

Please check comments within the charts.

CSI 1000 – Daily w/ 50 & 200-Day MAs, MACD, RSI & Volume

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CSI 300 – Daily w/ 50 & 200-Day MAs, MACD, RSI & Volume

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HK – Hang Seng – Weekly w/ 40-Week MA and MACD

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