China - Market Direction 01 (May 12 - Jul 15)

[winston]

China: Greater Synergy Within Greater China

Maintain Overweight (OW) on opportunities and positive prospects brought forth by reforms and opening up policies.

Expect a moderate rebound in 2H2015 as impacts from the rate cuts and targeted stimulus measures start to kick in.

Chinese stock markets remain in bullish mood as investors continue to bet on further easing from policymakers. Liquidity will drive markets rather than fundamentals.

The main risk is the disparity between sluggish growth and buoyant financial markets. Other risks remain: the property downturn, factory overcapacity, high levels of local debt, slowing growth in exports, domestic investment and consumption and hence sluggish credit growth.

H-Shares appear to be more attractive than A-Shares in terms of valuation as well as fundamentals.

Source: Phillips

[winston]

Why We're Selling Half of China Today By Dr. Steve Sjuggerud

A huge announcement about Chinese stocks is coming tomorrow night…

On June 9, shortly after 5 p.m. ET, MSCI – the world's leading provider of global stock market indexes – will announce whether or not China will start to be included in its indexes.

Even if MSCI doesn't approve China tomorrow, it will sometime soon. And this will ultimately cause hundreds of billions of dollars to flow into Chinese stocks over the next couple years.

But right now, we're selling half of our position in our top China holding in my True Wealth letter.

Why would we sell half of our top China recommendation in True Wealth when we are confident hundreds of billions of dollars will ultimately flow into Chinese stocks?

Let me explain…

You might guess we're "buying the rumor, and selling the news." That's a classic money-making Wall Street secret.

"Buy the rumor, sell the news" will probably work this time… Chinese stocks have been soaring in advance of tomorrow's announcement. It would be natural for Chinese stocks to take a bit of a breather when the news finally comes out (regardless of what it actually is).

But that's NOT what we're doing…

Our decision to sell half of our position has nothing to do with the big news coming tomorrow. Instead, our decision to sell half was made when we entered this trade in the October 2014 issue of True Wealth. Here is exactly what I wrote at the end of my China story (to be fair to my True Wealth subscribers, I've taken out the name of the fund):

Buy [fund] today, and sell half once you're up 100%. Plan to be in this trade for about two years.

I can't promise a 600%-plus gain like we saw the last time the Chinese government pushed stock prices higher… But [fund] shares offer us the best chance for triple-digit gains in the world today…
We're now up more than 100% in less than nine months. It has been an incredible move. So, it's time to follow our original advice and sell half our position.

You might be wondering what the point of selling half is.

Think about this… If you were fortunate enough to turn $10,000 into $20,000, and you sell half, then you are immediately pocketing $10,000. Doing this does a couple things:

1. You've gotten your entire initial investment back. (You've "marked to pocket" as I say.)

2. You've lowered your risk.

3. You are still letting your winner ride. The upside potential could still be substantial in whatever investment you're holding. But at this point, you're somewhat rolling on "the house's money."
In short, selling half once you're up 100% is really about:

1. Pocketing big gains. (It ain't a great trade until you've pocketed it.)

2. Controlling risk – but still having upside.

3. Taking your emotions out of the trade.
Selling half when you're up 100% is especially valuable for non-professional traders – where emotions can often get the best of them. (Don't get me wrong, professional traders get crushed by trading on emotion too.)

In short, if you're up 100% in any stock, you ought to consider selling half your position. You get 100% of your initial investment out, you reduce your risk, and you're still onboard with upside potential.

I almost always sell half once I'm up 100% in a position. You should consider doing the same.

Source: Daily Wealth

[behappyalways]

The $6.5 Trillion China Rally That’s Making Stock-Market History
http://www.bloomberg.com/news/articles/ ... et-history


China Billionaires Beat Bank Crunch by Pledging Shares
http://www.bloomberg.com/news/articles/ ... ing-shares

[winston]

$400 Billion Will Move Into Chinese Stocks Based on Today's Decision By Dr. Steve Sjuggerud

"$400 billion will move into Chinese stocks."

That's what the world's leading provider of global stock market indexes, MSCI, says will happen over time… based on a decision happening at approximately 5 p.m. ET today.

This is an extraordinary moment.

You see, although China is the world's second-largest stock market by market value (when you add the Shanghai and Shenzhen stock markets together), most institutional investors have next-to-zero exposure to China.

But that's about to change. And it will cause $400 billion to flow into these markets.

So what is this big decision?

It's about adding Chinese stocks to world stock market indexes…

Right now, China's stock markets are NOT included in most world stock market indexes. But at around 5 p.m. tonight, MSCI will announce when it might include China in its indexes.

This is a big deal…

When MSCI makes changes in an index, big dollars start to move.

You see, $9.5 trillion of investor money is "benchmarked" to MSCI indexes. Large investors like to track indexes. So if a stock is added to a stock market index, big dollars flow into that stock. And if a stock is booted out of an index, the stock is sold heavily.

This time, we're not just talking about moving a single stock into or out of an index… We're talking about moving an entire country into an index. This is a major event.

For example, $1.7 trillion (yes, trillion!) is currently benchmarked to the MSCI Emerging Markets Index by large investors…

If Shanghai- and Shenzhen-listed stocks (called Chinese A-shares) went from zero percent of the index to 10% of it, then $170 billion would ultimately have to flow into China's stock market.

You see, the investment funds that track the MSCI Emerging Markets Index would have to buy Chinese stocks to match what the index holds.

And that 10% figure is entirely possible… MSCI has put out research showing that Chinese A-shares could ultimately make up roughly 10% of the MSCI Emerging Markets Index.

Keep in mind, the MSCI Emerging Markets Index is just one index from one provider… the story quickly gets much bigger than the $170 billion that would flow based on MSCI alone.

For example, MSCI's main competitor, FTSE Russell, recently announced it is adding China to its indexes as well. And fund giant Vanguard announced it's adding local Chinese stocks, too. The tide of money flowing into China is just starting.

MSCI says these developments should move $400 billion into Chinese stocks over time.

Today's announcement is important… But regardless of whether or not China is included today, it is inevitable that China will be included in the next couple years.

"The issue is not whether A-shares will get into [the MSCI indexes]; the question is more about when," Chin Ping Chia, head of research for the Asia-Pacific region at MSCI, said in the Wall Street Journal.

However, it won't be an overnight "switch." MSCI will phase China into its indexes. I expect it to start small… but it will increase over time – causing billions to move into China.

This will create a built-in tailwind for Chinese A-shares for the next few years.

Again, this is a big deal… one of the biggest in my two decades in the markets.

NOBODY is invested… Meanwhile, hundreds of billions of dollars are about to move into these markets.

Chances are we'll never see a moment like this again. I urge you to take advantage of it!

Source: Daily Wealth

[behappyalways]

MSCI Defers China Inclusion as It Opts to Work With Regulator
http://www.bloomberg.com/news/articles/ ... ck-indexes


Stock Investors Have a Harder Time Getting Money for Leveraged Buys
http://english.caixin.com/2015-06-09/100817479.html

[behappyalways]

And with stories of students investing in shares, and a wave of novels about playing the markets now attracting readers, it’s no wonder that one Dragon TV news presenter said this week that, “if you’re not frying shares at the moment you feel embarrassed to talk to people, you don’t know what to talk about.”


Chinese Stock Market Hits 7-Year High Despite Bubble Warnings, Farmers Look To Cash In On Boom
http://www.ibtimes.com/chinese-stock-ma ... om-1953995


Rural farmers chase China's stock rally
http://video.cnbc.com/gallery/?video=3000387192

[新闻夜班车-石家庄]图说天下 陕西“炒股村”：农民凌晨干活白天炒股
http://news.cntv.cn/2015/06/03/VIDE1433 ... 2962.shtml

[winston]

Morgan Stanley Sees $400 Billion China Inflows Over Five Years By Helen Sun

Yuan liberalization and the opening up of China’s capital account are likely to attract $400 billion of overseas funds to the nation’s stocks and bonds over the next five years, Morgan Stanley estimates.

In the most optimistic scenario, inflows could exceed $1.2 trillion if its markets are fully open, analysts led by Serena Tang wrote in a June 11 research note.

A loosening of restrictions could also lead to almost $6 billion of annual outflows as domestic investors diversify their holdings, while funds moving in and out of the country may increase yuan volatility, they said.

China is easing capital controls as it pushes for the International Monetary Fund to include the yuan in its basket of reserve currencies at a five-yearly review in October. Freer access to the nation’s financial markets will lead to the nation’s assets being included in global benchmarks tracked by fund managers.

New York-based equity index compiler MSCI Inc. this week deferred a decision on including yuan-denominated stocks in an emerging-market gauge, citing investor concerns such as accessibility and capital mobility.

The potential initial weighting of Chinese shares in MSCI’s index would be about 1 percent, which would bring $3 billion-$5 billion of inflows, according to Morgan Stanley. That into bonds will be about $3 billion at the first stage.

The People’s Bank of China last week opened an interbank repurchase market to approved foreign lenders and said it will start a cross-border payment system for the yuan by the end of the year.

Although China’s reforms will bolster the yuan’s case, inclusion in the IMF’s reserve’s basket will be “difficult” to achieve this year unless the agency is more flexible with its criteria, according to Morgan Stanley.

Source: Bloomberg

[winston]

The world’s worst investment bubble will burst soon

In China, all the signs are there, but not many investors see them

Margin debt is skyrocketing, up more than fivefold in a year to around 2 trillion yuan (about $320 billion), an “unprecedented” 8.9% of the market capitalization of the Shanghai and Shenzhen exchanges.

http://www.marketwatch.com/story/the-wo ... 2015-06-11

[winston]

June 10, 2015

How to identify Chinese stocks with strong potential

The mainland market is usually criticized as being policy driven.

Many investors are hesitant whether to jump onto the bandwagon given that the market has already gone up substantially.

In fact, a policy-driven market is not unique to China.

The Dow Jones Industrials index plunged to 41 in July 1932 from 381 points in September 1929.

Franklin Roosevelt unveiled his “New Deal” after becoming US president.

The US economy started to pick up after the massive stimulus package.

It’s the same with the quantitative easing program launched by the Federal Reserve in the United States in the wake of the 2008 financial crisis.

Chinese stocks have gone through years of a bear market and distressed valuations, as the market is skeptical about the country’s debt-driven economic growth model.

A large number of stocks have suffered valuation reratings month after month, and mainland banking stocks still have a price-earnings ratio of 7-8 times.

However, if the country’s new policies will lead to a more sustainable growth path, the market valuation is set to rebound.

The Hong Kong market still has a P/E of 11 times.

How should investors respond to that?

The key question is whether policies are able to address the real issues, as low-efficiency projects can only provide limited support for the broad economy.

And if the measures are clear and will last, company earnings will benefit from that.

Over the last two weeks, there has been a lot of news about Chinese power generating firms.

They are expected to obtain power distribution licenses as Beijing accelerates the reform of the power sector.

Also, the market is anticipating asset injection and consolidation of Hong Kong-listed units of mainland power groups.

It’s very difficult to speculate on market rumors, and the only way to benefit from a potential move is to hold the stock for the long term.

If the Chinese government is keen to tackle air pollution, it has to move in favor of power companies.

Meanwhile, nobody knows whether the Chinese central bank will cut the reserve requirement ratio for banks this weekend in light of potential deflation.

However, it’s quite possible that we will see several RRR reductions in the next year.

It remains unclear whether Shenzhen-Hong Kong Stock Connect will kick off before the third quarter.

But it’s certain there will be more measures to integrate the mainland and Hong Kong financial markets in the months ahead.

No matter whether A shares are included in the MSCI Emerging Markets Index or not, China is poised to account for a bigger weighting in the global economy, and global investors are set to recognize the significance of A shares.

Financial intermediary stocks are set to benefit from that trend.

These developments are set to last for years, and investors should wait for a good opportunity to accumulate relevant stocks and hold them for the long term.


Source: Hong Kong Economic Journal

[behappyalways]

170萬本金加四倍孖展　血本無歸
中車變「靈車」股民跳樓亡
http://hk.apple.nextmedia.com/internati ... 4/19183651