Broker: CGS International
Date of Report: June 5, 2025

China Shenhua Energy and NIO Inc: Technical Analysis and Market Insights for 2025

Market Overview: Fed Rate Cut Speculation and Sector Dispersion

The global financial landscape is currently shaped by expectations of monetary easing in the United States. Treasury yields have extended their rally, prompted by softer-than-expected U.S. economic indicators. Key data revealed a contraction in the US service sector in May, with the Institute for Supply Management’s index falling to 49.9, signaling contraction as hiring decelerated to its slowest pace in two years. The S&P 500 managed a slight gain, led by healthcare and communication companies, while large cap tech stocks were mixed.
Swap traders are now pricing in two Federal Reserve rate cuts before the end of 2025, with the first anticipated in October. The dollar has weakened amid these expectations. Despite trade uncertainty weighing on sectors like healthcare, technology, and construction, certain industries—particularly retail and financial services—are identifying pockets of growth, suggesting a wide dispersion in sector outlooks. Investors are advised to allocate capital wisely in this environment.

China Shenhua Energy Co Ltd (HKG: 1088): Bullish Technical Signals Point to Upside

Last Price: HK$33.35
Analyst: CHUA Wei Ren, CMT
China Shenhua Energy Co Ltd, a leading integrated coal producer and energy company, is displaying notable bullish technical patterns, providing investors with a compelling opportunity for exposure to China’s energy sector.
Company Overview:
China Shenhua Energy mines and distributes a diverse range of coal products, including brown coal, bituminous coal, hard coal, and coking coal. The company also operates in electricity generation, railway transportation, and related businesses.

Key Technical Analysis and Trading Strategy

• Entry Prices: HK\$33.35, HK\$31.40, HK\$29.00
• Support Levels: HK\$32.78 (Support 1), HK\$28.88 (Support 2)
• Stop Loss: HK\$28.25
• Resistance Levels: HK\$38.04 (Resistance 1), HK\$41.88 (Resistance 2)
• Target Prices: HK\$36.30 (Target 1), HK\$44.00 (Target 2), HK\$55.00 (Target 3), HK\$67.00 (Target 4)

Technical Highlights

• China Shenhua has confirmed a bottoming-out reversal, rebounding strongly after a significant correction in April, with the price netting over a 10% gain from the second buy-limit price of HK\$30.00.
• The stock has narrowly broken out from a descending triangle, with previous resistance at HK\$32.78 now acting as support.
• Ichimoku Cloud Analysis: All indicators are sloping upwards, indicating a clear bullish trend.
• MACD: The MACD histogram is positive, and a bullish crossover has occurred at the bottom, with the MACD and signal lines trending towards the zero line.
• Stochastic Oscillator: The indicator has been on the rise, supporting the case for continued upward momentum.
• Rate of Change (ROC): The 23-period ROC has moved above zero, signaling renewed buying pressure.
• Directional Movement Index: The DMI is showing robust bullish strength.
• Volume: Trading activity is expanding healthily, further corroborating the bullish outlook.

NIO Inc (HKG: NIO): Competitive Pressures Undermine Profitability

Investment Rating: Hold (Reiterated)
Target Price (DCF-based): HK$30.62
NIO Inc., the prominent electric vehicle manufacturer, faces intensifying competition in the EV space, which is exerting pressure on its profitability despite a promising product pipeline.

Key Financial Highlights

• 1Q25 Non-GAAP Net Loss: Rmb6.3 billion, up from Rmb4.9 billion in 1Q24, driven by higher operating expenses.
• Brand Portfolio: Strong sales pipeline from the NIO, ONVO, and Firefly brands has the potential to boost top-line growth.

Investment Outlook and Risks

While NIO’s diversified brand strategy and new product launches are expected to support sales, intensifying competition in the electric vehicle market is likely to temper shipment growth in the quarters ahead. As a result, the recommendation for NIO remains at Hold, with a lowered target price reflecting the near-term margin pressures.

Comprehensive Risk Disclosures and Distribution Policies

CGS International underscores the importance of understanding the risks and limitations inherent in financial reports and recommendations. The report is prepared for informational purposes, based on data considered accurate at the time of publication. It is not a solicitation to buy or sell any securities, and investors are urged to consider their unique investment objectives and consult with professional advisors.

Recommendation Framework Overview

• Add: Expected total return exceeds 10% over the next 12 months.
• Hold: Expected total return between 0% and 10% over the next 12 months.
• Reduce: Expected total return below 0% over the next 12 months.

The total expected return includes both the price target differential and forward net dividend yields, with a typical investment horizon of 12 months.

Sector and Country Ratings

• Overweight: Indicates a positive recommendation for the sector/country relative to the benchmark.
• Neutral: Indicates a neutral recommendation relative to the benchmark.
• Underweight: Indicates a negative recommendation relative to the benchmark.

Rating Distribution Snapshot

Based on 551 companies as of the quarter ended March 31, 2025.

Conclusion: Navigating Opportunities in a Divergent Market

As macroeconomic uncertainty and sector divergence continue to define the global investment landscape, CGS International’s latest technical analysis highlights attractive upside potential in China Shenhua Energy amid a bullish technical setup, while cautioning on NIO due to profitability headwinds from intensifying competition. Investors are encouraged to adopt a selective approach, balancing exposure to promising opportunities with prudent risk management.