HK & China - Market Direction 01 (May08 - Oct08)

[kennynah]

how come so odd one....27 basis points? 0.27% ?

[winston]

Dow: Down 500
HK PreMarket: Down 1027
SSE: Down : Down 4.73%

1) The trend is my friend
2) The Chinese govt may have to announce some policy support now

[Cherry]

winston wrote:

1) The trend is my friend
2) The Chinese govt may have to announce some policy support now

Hi Winston

The trend is down.
The policy expected to be announced by the Chinese govt is pro-market.

Do you mind to share your action plan for these 2 conflicting statements?

[winston]

Hi Cherry,

The selling momentum is very strong. Maybe there could be also some margin calls. I would not want to be buying a Call and betting against the market. However, I may buy a small position to satisy my gambler's instinct. The drop today is just too tempting.

The Chinese govt just reduced the bank reserve ratio over the weekend. They thought the market would react positively. Instead, the market dropped further. Therefore, they would have to announce their pro-market package very soon. They are mentioned that they are studying the proposal.

Take care,
Winston

[Cherry]

Hi Winston

Thanks a lot. Your analysis is very enriching.

Tonight, Fed may spring a surprise to help calm the market.

I am wondering how to resolve the following forces:

TA: Downtrend
FA: Good value now
Hope A: Fed & Chinese govt's pro-market surprises
Think A: If markets rebound, how far up can they go as there is a lack of credit and liquidity?
If markets drop further, how far down can they go? Strong Hands have the whole world and all the asset classes to play with. What are the early signs to look out for to assess that big funds find that the Singapore equity market has a comparative advantage, and therefore come here in a big way?

Looks like Big Boys are swinging the market up and down for short term gains.

Will appreciate it if you would like to share your thoughts.

[winston]

The Police Caught Me Breaking into a Freight Yard in China By Tom Dyson

The fence rattled. I looked around. A man had just come through the gate behind us. I could tell by his light blue overalls he was a railroad worker...

I crouched as low as possible in the shadows and hoped he couldn't see me. I hid behind a pile of old railroad ties and between some pieces of scrap rail. The man walked toward me... peeking around the railroad equipment. I'd been spotted.

"Hoooooyeeeaaa," he yelled when he found me. I pretended he'd woken me up and looked up with a sleepy face.

"Come with me," he said in Chinese.

Last week, I flew to Urumqi [pronounced u-roo-muchi] to ride a freight train.

Urumqi is a city in western China. It's a couple hundred kilometers from the borders of Kazakhstan, Tajikistan, Kyrgyzstan, Pakistan, and Russia. It's 4,000 kilometers from Shanghai and Beijing.

With all these countries so close, Urumqi is a major trading post. It's also a major stop on the modern Silk Road – the overland route connecting Amsterdam to Hong Kong.

Freight trains carry cargo like steel pipes, cement blocks, new autos, and agricultural products. Riding freight trains is fun, if you don't mind sharing a ride with a shipment of coal or some tankers of petrochemicals. There's no better way to see the countryside. You get the wind in your hair and you don't have to bump elbows with the masses.

It's also a great way to understand the local economy. Freight-train networks are the arteries and capillaries of a country. By studying them, you learn a lot about a region's important commodities.

Coming into Urumqi from the east, I saw lots of tank cars carrying gas, and wagons full of coal. So China is importing energy from central Asia and Russia. I also saw wagons full of scrap metal heading for China's manufacturing centers.

In the opposite direction, I saw tractors, diggers, new cars, and even military hardware (like tanks and armed vehicles). China is penetrating Russia and Central Asia with its manufactured products.

To get on a freight train, you go to the classification yard, find the departure track, and wait for a train with a suitable wagon (tank cars and closed box cars are no good but grain wagons and open-top gondolas work fine). Then, when no one's watching, you hop on and hide until the train pulls out.

The railroad through Urumqi is the busiest freight railroad I've ever seen. In the States, you might see a couple of freight trains and the odd Amtrak each day. In Urumqi, 10 or 12 freight trains rumble through every hour... on top of six or seven passenger trains. The trains run every day, all day and all night.

I spent two nights at the freight yard in Urumqi and couldn't get on a train. There were too many workers and security guards around. Plus, the entire yard was circled by private businesses with their own guard dogs and fences. Jumping on a moving train was the only way to do it... But that's dangerous.

So I went to the small town of Hami instead. Hami is a village a few hundred miles east of Urumqi on the mainline. It has a small freight yard.

At 3 a.m., I crawled under the fence and hid behind the railroad ties. I watched the trains coming and going for an hour. There were still too many workers and security guards. To get on one of these trains, I would have to catch it "on the fly."

That's when I heard the fence rattle from behind. The worker took me to the main security compound and woke up the commanding police officer. Two more soldiers came out with him. They looked at me as if I'd just landed from another planet. And they laughed. They couldn't believe a Westerner had been sleeping in their freight yard. "Hotel, hotel," I said and gestured with my hands I wanted to sleep.

(They had no idea I was trying to catch a freight. It simply never occurred to them. Even the poorest Chinese don't ride freight trains here.)

So the commanding officer walked me out of the freight yard and asked one of his staff to take me to the closest hotel and help me book a room.

Maybe I'll have better luck in India.

[winston]

BROKER CALL - Hong Kong banks' 2008-10 earnings forecasts cut - DBS Vickers

HONG KONG (XFN-ASIA) - DBS Vickers Securities said it has cut its earnings forecasts for Hong Kong banks by 18 pct, 10 pct and 11 pct, respectively, for the years 2008, 2009 and 2010.

It said it based its downgrades on assumption that local banks will incur more mark-to-market losses from their investments in various debt instruments, set aside higher provisions for loans, generate lower net interest margins (NIM) and achieve slower loan growth.

The Singaporean house noted that local banks have limited exposures to failed Lehman Brothers and AIG, which was rescued by the US Federal Reserve.

BOC Hong Kong said it had a 69.21 mln usd exposure in Lehman. No other local banks have disclosed any exposure to Lehman or AIG so far.

DBS said that despite their limited exposure to Lehman and AIG, local banks face rising pressures from high-risk debt instruments, including collateralised debt obligations (CDOs), and lower-risk asset-backed securities (ABS) and other forms of debts issued by financial institutions and other corporations.

It noted that bonds issued by Citigroup, Merrill Lynch and Bank of America have fallen by 2-29 pct over the past week.

"Debt securities issued by banks and financial institutions account for a high 28-84 pct of Hong Kong banks' total debt securities, while those issued by corporates represent a high 6-37 pct," it said.

It said BOC Hong Kong, Bank of East Asia and Wing Hang may see higher earnings volatility as they have more debt securities classified as "trading" and "financial assets at fair value through profit and loss."

DBS said it expects average loan growth in the local banking sector to decelerate significantly to 14 pct this year from 28 pct last year as the deepening global financial turmoil has caused extreme volatility in financial markets.

It said it has also scaled down its NIM assumptions by 4 basis points for this year and by 8 basis points for next year.

It said local banks may see upward pressures on their funding costs as a result of the global credit crunch and weak stock markets.

At morning close, Hang Seng Bank was down 12.10 hkd or 8.08 pct at 12.10, BOC Hong Kong was down 1.48 hkd or 10.18 pct at 13.06, Bank of East Asia was down 1.95 hkd or 6.61 pct at 27.55 and Wing Hang Bank down 9.40 hkd or 13.84 pct at 58.50.

Among mainland banks, ICBC fell 0.47 hkd or 11.72 pct to 3.54, Bank of China shed 0.28 hkd or 9.66 pct at 2.62 and China Merchants Bank lost 2.20 hkd or 12.13 pct at 15.94.

[LenaHuat]

HSI is getting very close to the halfway mark from its peak

[winston]

HSI was down about 1300 just before lunch. It then recover to down 300 something. It is now down 500.

This market is very volatile. Pity those who panic and sold this morning..

[millionairemind]

HSI was down about 1300 just before lunch. It then recover to down 300 something. It is now down 500.

This market is very volatile. Pity those who panic and sold this morning..

W - Looking at the movement (within 1/2 hr) of the HSI futures, which moved up close to 700pts, I think hedge funds must be having a field day with their computer programs..