Third Wave for Chinese Stocks?

The Rule for First Wave in Elliot Wave Theory

Here are the two key points:

• The first wave often develops after a significant market low, marking a reversal in trend direction.
• It is typically triggered by a shift in market sentiment, such as new economic data, policy changes, or geopolitical events.

As long as the 2024 low is not breached, there is potential for a third wave to form. The first wave aligns well with the principles of Elliott Wave Theory.

Source: TradingView

Are Chinese Stocks Entering Their Second Wave?

According to Elliott Wave Theory, the second wave must not retrace 100% of the first wave. If it does, the first wave is invalidated, indicating that the larger trend has not changed. An example we analyzed on 20 September 2022 was Yangzijiang Shipbuilding. With fundamental considerations and the formation of its first wave, we identified its growth potential.

Source: TradingView

The entry point can be during the first or second wave, provided the stock is trading at a fair value and exhibits growth potential. This aligns with the objective of capturing the third wave in Elliott Wave Theory. Currently, the stock is riding its third wave (see the chart below).

Top 20 Singapore Stocks with Over 50% Revenue from Greater China 

Note YZJ Shipbldg, CapLand Ascendas REIT, Frasers Cpt Tr, Venture and ThaiBev booked the most net institutional outflow over the 6 weeks. TR refers to total Return, ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Inflow, NRF refers to Net Retail Flow. All data as of 9 Oct 2024. Source: SGX & Refinitiv

If you believe that the third wave for the Chinese market is taking shape, investing in Singapore-listed stocks with significant revenue derived from Chinese markets could be a viable alternative. As noted, many of these stocks, as listed above, are currently in their retracement or second wave phase. Could a potential third wave be on the horizon?

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