Asia Day Ahead: why China’s policy moves matter for the ASX 200 today

Chinese equities brought back on the radar

Asian markets began the new week with a late-afternoon surge in Chinese equities yesterday. Bullish momentum is one to watch in today’s session, given the limited window for market participants to react to yesterday’s Politburo meeting. Overnight, the Nasdaq Golden Dragon China Index closed up more than 8.5%, marking its highest level since October 2024.

At the meeting, Chinese authorities provided another round of verbal reassurances, keeping market hopes high for aggressive policy stimulus next year. Policymakers pledged “more proactive” fiscal measures and “moderately” looser monetary policy to boost domestic consumption. This shift in monetary stance—the first since 2011—may suggest upcoming policy efforts could intensify, potentially through further rate cuts and targeted fiscal injections.

China’s Central Economic Work Conference (CEWC) on watch for dovish rhetoric

Recent mixed economic data, including the purchasing managers' index (PMI) and consumer inflation figures, may have prompted Chinese authorities to act in order to restore economic confidence. With the upcoming Central Economic Work Conference (CEWC), policymakers are expected to maintain a dovish stance, emphasising growth stabilisation and preparing for external uncertainties.

Decisive action may only occur in Q1 2025, when authorities gain greater clarity on upcoming US trade restrictions and can formulate an appropriate response to mitigate potential economic impacts. However, there remains room for disappointment if policy specifics fail to meet market expectations. This could echo the stimulus-driven market reactions seen in April 2024 and September 2024, potentially driving a renewed rally in Chinese equities.

Economic calendar to leave Reserve Bank of Australia (RBA) meeting in focus

Today’s focus will also be on the Reserve Bank of Australia (RBA) meeting. Markets widely expect the central bank to hold its official cash rate steady at 4.35% for the eighth consecutive meeting. As this decision is fully priced in, attention will shift to whether weak Q3 gross domestic product (GDP) figures prompt policymakers to lay the groundwork for a potential rate cut early next year.

The balance between persistent inflation and mounting growth risks remains delicate. Any signals about how the RBA may prioritise these factors will be crucial in shaping market expectations for the rate-cut timeline in 2025.

Technical analysis

The China A50 seems to form a near-term double bottom, with the index retesting its potential neckline at the 14,345 level. Any break above the 14,345 level may offer the validation for buyers, with price projection of the pattern potentially leaving its October 2024 high at the 15,834 level on watch next.

The China A50 index appears to be forming a near-term double bottom, with the index retesting its potential neckline at the 14,345 level. A breakout above this level may validate the pattern for buyers, with a price projection potentially targeting its October 2024 high at the 15,834 level.

Currently, the daily relative strength index (RSI) has moved back above its mid-line following a prolonged consolidation period, while the daily moving average convergence/divergence (MACD) is eyeing a return above the zero mark. Positive momentum is one to watch for follow-through. Failure to breach the 14,345 level could lead to a retracement towards the 13,700 level, where near-term horizontal support is expected to hold.

China A50 index daily cart