A China-Saudi Tie-Up? This Unloved Market Could Rocket to New Heights

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  • 28.02.2019
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<p>In recent months, most financial media outlets have been focusing on US president Donald Trump’s trade war with China, the EU and even Mexico. Elsewhere though, historic new trade alliances are developing – helping to fuel the rise of a new global order.</p>
<p><a href=”https://admiralmarkets.com/analytics/traders-blog/china-saudi-economic-alliance”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/096cffe03edb30e66d99a51979508c12.png” alt=”Is a China/Saudi alliance on the table?” rel=”” style=””></a></p>
<p>We explore this new global order, the fundamental reasons why one currently unloved market could surge to unexpected heights and the possible long term, and short term, trading opportunities available right now.</p>
<h2>China &amp; Saudi Arabia’s $28 Billion Deal</h2>
<p>Crown prince of Saudi Arabia, Mohammed bin Salman, is currently on tour in Asia meeting with top-level leaders in Beijing. With both countries experiencing issues in their relationship with the United States, deepening ties and economic cooperation was inevitable. </p>
<p>In fact, trade between China and Saudi Arabia <a href=”https://www.scmp.com/news/china/diplomacy/article/2187374/china-and-saudi-arabia-seal-us28-billion-deals” target=”_blank”>rose</a> by thirty-two percent last year. And, for 2019 so far, Saudi Arabia has signed $28 billion worth of agreements with China. Both countries are on the path to securing more economic reform and more global power and have a unique strategic alliance. </p>
<p>Saudi Arabia’s ‘Vision 2030’ is the ambitious economic reform programme developed by the crown prince. China’s ‘One Belt One Road’ is their plan for global economic network and stimulus for stagnant or untapped economies worldwide.</p>
<p>However, key Western players have <a href=”https://admiralmarkets.com/analytics/traders-blog/saudi-investment-conference”>distanced themselves</a> from the Middle East over the Khashoggi killing. It now seems that China is likely to benefit the most in this new strategic alliance. </p>
<h2>What is China’s One Belt One Road Initiative?</h2>
<p>The new state-backed economic outreach project is often referred to as a twenty-first century silk road, aiming to connect Asia, Europe, the Middle East and Africa with a vast and complex logistical and transportation network. So far, China has <a href=”https://www.cnbc.com/2017/07/18/heres-why-chinas-belt-and-road-initiative-is-risky-think-tanker-says.html” target=”_blank”>pledged</a> over $100 billion to finance the project as well as giving out around $900 billion in credit to host nations. </p>
<p><a href=”https://admiralmarkets.com/analytics/traders-blog/china-saudi-economic-alliance”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/078f9b9b4bc9f921ec8cf16f8e37b336.png” alt=”One Belt One Road map” rel=”” style=””></a></p><p><em>Source: </em><a href=”https://www.cnbc.com/2017/07/18/heres-why-chinas-belt-and-road-initiative-is-risky-think-tanker-says.html” target=”_blank”>CNBC</a></p>
<p>The belt and road include seventy-one countries which account for over half of the world’s population and a quarter of global GDP. Construction has already started or is being planned, in more <a href=”https://www.theguardian.com/cities/ng-interactive/2018/jul/30/what-china-belt-road-initiative-silk-road-explainer” target=”_blank”>than</a> sixty countries along these routes. This has already helped Chinese companies secure more than $340 billion in construction projects – thereby, giving the country the stimulus it needs for its ever-growing economy. </p>
<p>With fundamental growth prospects seemingly turning very favourable for China, there is one market that could set to benefit in a big way – China’s A50 Stock Market Index. </p>
<h2>Trading China’s A50 Stock Market Index</h2>
<p>The China A50 index comprises of the top fifty A-share companies listed in China. The term ‘A-shares’ refers to stocks that are listed on two of China’s mainland stock exchanges: the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). </p>
<p>There are over two thousand A-share listed companies from a broad range of sectors including banking, insurance, manufacturing and investment. Any successful stimulus plan – like China’s One Belt One Road – is set to be hugely beneficial for many of these companies. </p>
<p><a href=”https://admiralmarkets.com/analytics/traders-blog/china-saudi-economic-alliance”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/3cda9c1446763930d607f660e0be86a5.png” alt=”China 50 Index monthly chart” rel=”” style=””></a></p><p><em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5 Supreme Edition</em></a><em>, </em><a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/china50″><em>China 50</em></a><em>, Monthly – Data range: from May 1, 2012, to February 25, 2019, accessed on February 25, 2019, at 12:12pm GMT. – Please note: Past performance is not a reliable indicator of future results. </em></p>
<p>In the above monthly chart for the China A50 stock market index, a large number of buyers seem to have recently stepped into the market. Technical analysis traders would note the ascending black line which acted as a support level for buyers to initiate long positions. </p>
<p>What is most interesting is that buyers could stay in control of the market, until the next level of resistance at $14,524.29. This provides interesting opportunities to the upside, for directional trend based traders. </p>
<p><a href=”https://admiralmarkets.com/analytics/traders-blog/china-saudi-economic-alliance”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/7bd6761193d8bfced475d2ec19b21c1d.png” alt=”China 50 Indec weekly chart” rel=”” style=””></a></p><p><em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5 Supreme Edition</em></a><em>, </em><a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/china50″><em>China 50</em></a><em>, Weekly – Data range: from March 8, 2015, to February 25, 2019, accessed on February 25, 2019, at 12:17 pm GMT. – Please note: Past performance is not a reliable indicator of future results. </em></p>
<p>In the above daily chart of the index, the blue line represents a ten period moving average of value. It is clear to see that, historically, when the price is above the moving average it tends to stay there for an extended period of time and vice versa when the price is below the moving average. With the market having recently crossed above the moving average, buyers are now firmly in control. </p>
<p>Traders may use <a href=”https://admiralmarkets.com/education/articles/forex-basics/everything-you-need-to-know-about-candlestick-trading”>price action patterns</a> in an attempt to identify buying patterns to trade from. You can see a cutting-edge online trading strategy in the ‘Forex &amp; CFD Markets in 2019’ article, found <a href=”https://admiralmarkets.com/education/articles/forex-strategy/forex-cfd-markets”>here</a>. </p><h2>Conclusion </h2>
<p>The fundamental picture has seemed to turn bullish for China’s A50 stock market index. With a state-backed stimulus plan to grow the Chinese economy, traders and investors will now be focusing on this market with great interest. Are you?</p><p><a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″><a href=”https://admiralmarkets.com/analytics/traders-blog/china-saudi-economic-alliance”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/f4c3a6747c308cacfb71f1d7e6bc522c.png” style=”” alt=”Download MetaTrader 5 and begin trading today!” rel=””></a></a></p>
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