(Bloomberg) -- China’s benchmark stock index may challenge a 14-month high on Aug. 4 after finding “buying support” at 2,750 points, CIMB-GK Research said.The Shanghai Composite Index must first overcome two “major resistance trend lines” at 3,130 and 3,400, CIMB analysts Nigel Foo and Kong Seh Siang wrote in a report yesterday. The gauge is down 16 percent from the 14-month high on Aug. 4 of 3,471.44.The Shanghai index fell to as low as 2,761.40 on Aug. 19, briefly tumbling more than 20 percent below the high, the threshold for a so-called bear market. The index has retreated 15 percent this month, the most among the 89 benchmarks tracked globally by Bloomberg, amid concern the government will rein in record lending and as some companies reported losses.
The 2,750 level “should be a medium-term bottom for the index,” the analysts said. “The index has the potential to challenge the August peak but needs to overcome two major resistance trend lines.”A drop below 2,750, the 50 percent retracement of the gains between March and August, may signal a “medium-term downtrend” and the end of a rally that started in October.For other markets in Asia, a so-called minor wave may have started last week after the MSCI Asia-excluding Japan Index found support between 410 and 420, the analysts added. They have a target range of 458 to 486 for the index, they wrote.Support is a level where buy orders may be clustered and resistance is where there may be sell orders.
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