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Agricultural Bank of China (1288 HK) – Breakout Confirmation with Policy Tailwinds

 


Agricultural Bank of China (1288 HK) has completed a well-defined trading range breakout, closing firmly above the prior resistance at HK$5.14, which previously capped price action since April. The breakout is supported by strengthening technical indicators, suggesting the start of a markup phase.

The breakout move is characterized by:

-Strong daily candle with above-average volume
-Momentum pickup on the stochastic oscillator
-Price holding above the 13-day SMA

Supporting Technical Signals
Relative Strength (RS) > 0 vs Hang Seng Index
Stock outperformed the broader Hang Seng Index, indicating increasing investors attention and a preference for Chinese financials.

Fund Flow Index (FFI): FFI has turned positive, reflecting renewed buying pressure and accumulation after weeks of range-bound behavior.

Above All-Time High: This breakout puts the stock above previous highs, with no immediate resistance ahead — opening the path for price discovery.

Supporting Fundamentals: Policy Tailwinds
China’s central bank recently announced a 10-basis-point cut in the key lending rate and a 50-basis-point cut to the reserve requirement ratio (RRR) (Source – CNBC, May 2025).

This monetary easing benefits large state-owned lenders like Agricultural Bank of China by:

- Lowering funding costs
- Expanding net interest margins
- Supporting increased loan growth amid recovery efforts
- These measures align with the breakout and may sustain a multi-week trend.


Trade Plan
Entry  HK$5.15
Stop Loss  HK$4.90 (below trading range low)
Target 1  HK$5.38
Target 2  HK$5.61
Target 3 (Stretch)  HK$5.80–6.00

Risk-Reward Profile
Risk: 0.25, Target 2 Gain: 0.46
Potential reward-to-risk ratio approx 2.5, depending on execution and target.

News Link:
https://www.cnbc.com/2025/05/07/china-to-cut-key-lending-rates-by-10-points-bank-reserve-requirement-ratio-by-50-points-.html

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