Analysts at BTIG said in a note Tuesday that the current bearish sentiment and improving trend has created an attractive set-up for Chinese equities.
They stated that after a rough start to 2024, the Hang Seng is now beating S&P 500 in the year-to-date, while sentiment is "still extremely negative."
"FXI's daily RSI recently exceeded 74, a level many consider 'overbought.' It's important to put that in context, however, and with price clearing a three-year downtrend, we view this as a 'good overbought' condition," explained the analysts at BTIG.
"The Chinese Internet ETF (KWEB) is also clearing a downtrend and nearing an upside 'volume pocket' above 32, which would suggest it can move towards 50."
In a 2023 note, BTIG discussed how China was "the ultimate contrarian play," and given the current sentiment, they think the recent outperformance in Chinese equities continues.