CHN.cash extends this week’s rebound by another 1% despite deflation signaling weakness in the domestic market. The index broke through key resistance around 9,200, rising to its highest level since October 2021, with the overall uptrend being largely supported by increased engagement from institutional investors.
The HSCEI futures contract has gained more than 20% since the April selloff triggered by Trump’s announcement of reciprocal tariffs, trading for months above the 10-week exponential moving average (EMA10, yellow). Source: xStation5
What is shaping CHN.cash today:
- Deepening deflationary pressure: Consumer prices fell 0.4% y/y in August (forecast: -0.2%, previous: 0%), the sharpest drop since February 2025, which marked the start of China’s current deflationary episode (-0.7% back then). The reading can be partly explained by base effects (August 2024 inflation peaked locally at +0.6%), but the record -3.7% decline in durable goods prices still points to weak domestic demand.
- Core CPI resilience: Excluding food, core CPI rose 0.9%, suggesting stimulus programs have supported prices in categories like clothing and household goods. A sharp -4.3% fall in food prices also freed up household budgets, encouraging spending elsewhere.
- Early results from anti-price-war measures: Unlike CPI, the fall in producer prices slowed in August, improving from -3.6% to -2.9%, reflecting Beijing’s push to curb cut-throat competition among domestic producers. Price wars have weighed heavily on corporate earnings (especially in autos and e-commerce), so these policies could soon improve margins and boost demand for Chinese assets.
- Institutional investors driving the bull market: According to Bloomberg, Chinese insurers boosted equity holdings by 640 billion yuan in H1 2025, taking them to 3.1 trillion yuan, the highest since 2022. Along with potential profit recovery, insurers’ rising presence could deepen China’s financial markets and attract stronger foreign investor interest.
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