The quote, "China is a sleeping giant, when she wakes she will shake the world," is often attributed to Napoleon Bonaparte, and it appears that this might be as true today as it was originally said in the 18th century. SIA practitioners have been monitoring the sleeping giant since it originally stirred in late September, when the central government began its campaign of fiscal and monetary support for its domestic economy. At that time, the stock market surged in a massive move off the bottom, having consolidated after a selloff that wiped out much of its equity value over the last four years. That weeklong rally fizzled quickly as skeptical global investors hit the sell button and capitalized on the dead cat bounce. But the question remains: Does the rally have legs heading into 2025, and what is next for this sleeping giant? To analyze this further, KraneShares SSE Star Market 50 Index ETF (KSTR) provides a clear example of China’s market potential. Recently, KSTR has made its way to the top of the SIA International Equity Universe ETF Report, an impressive achievement that underscores the strength of the China market now that the dust has settled on the initial rally and subsequent pullback. In the first point-and-figure chart, a comparison of KSTR against the Invesco S&P 500 Index Equal Weight ETF (RSP) is displayed. This comparison highlights the shift in momentum for KSTR, which had long underperformed the S&P 500, but is now beginning to show signs of life. Despite this improvement, the overall trend remains negative, and while the latest column up and pullback have caught attention, there is still caution about fully committing to this recovery. After the large pullback from the initial rally, a double top has once again appeared, which, when taken together with the marked improvement in relative strength, has definitely piqued the interest of the global investment community.
The next point-and-figure chart shows KSTR independently, with its SIA report history overlay tool engaged. This illustrates the improvement in relative strength against other names within the SIA International Equity ETF Universe. After many years of living in the "Unfavored" green zone of the report, the shares have now moved up into the "Favored" zone. Note the latest move up through the long-term resistance line and the pullback from that zone of resistance, highlighted in red. Having consolidated for a few months, shares of KSTR appear to be building once again and have produced their first double top since the initial rally. KSTR shares face resistance at $15.09, but there is little resistance until the recent highs at $19.91-$20.30. Support is now at the $12.88 level, with a notable build on the point-and-figure chart since the latest pullback, highlighted with the small black line. From a technical perspective, KSTR shares are as strong as they have been in over three years of trading history. KSTR seeks to track the performance of the Shanghai Stock Exchange (SSE) Science and Technology Innovation Board 50 Index (STAR 50 Index). The Index comprises the 50 largest companies listed on the SSE Science and Technology Innovation Board (STAR Market) as determined by market capitalization and liquidity.
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