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From the Floor: Buy the dip in China? — #SaxoStrats

#SaxoStrats
   • Chinese stocks show continued value/momentum divergence
   • Tech-sector shares still falling in Shenzhen, downward HSI pressure slowing
   • Gold looking for support after breaking trendline from December 2016
   • Copper posts limited bounce after biggest one-day selloff in over two years
   • Jump in gasoline stocks could see lower refinery demand for crude

SaxoStrats
By Michael McKenna

Declines in Hong Kong's Hang Seng index are slowing, reports Saxo Bank head of equities strategy Peter Garnry, but the Chinese tech sector continues to sell off, particularly in Shenzhen and on the Shanghai-Shenzhen CSI 300 index.

"We continue to see divergence between value and momentum shares," says Garnry, adding that it could be time for investors to consider buying the dip.

"Looking at the data, nothing has fundamentally changed," Garnry concludes.

In single shares, Saxo's equities head points to a $20 billion charge faced by Citigroup as tax reform means that the firm will have to write down deferred tax assets; the amount is far in excess of that faced by competitors, with JPMorgan's total bill amounting to just $2bn.

HSI.i:
Hang Seng

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Source: Saxo Bank

In commodities, Saxo's Ole Hansen points to gold volatility as prices have broken through support at $1,261/oz and are below both the 200-day moving average and a long-term trendline stretching back to December 2016.

"We saw additional selling this morning," says Saxo bank's head of commodities strategy, "while copper posted a limited bounce following its largest one-day selloff in more than two years".

In oil, Hansen reports that a jump in gasoline stocks could be crude-negative on a consequent slump in refinery demand, noting that we are still seeing "buying fatigue" in the wake of the production cut deal extension signed by Opec and Russia last week.

CSI 300

Is it time to buy the dip in Shenzhen tech stocks? Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank
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