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

[winston]

China’s Stocks Rise Most in Week, Led by Consumer Shares By Weiyi Lim

China’s stocks rose, sending the benchmark index to its biggest gain in a week, as renewed economic optimism overshadowed concern that new equity sales will divert funds from existing shares.

The Shanghai Composite Index (SHCOMP) added 0.5 percent to 2,033.93 at the close. A preliminary report from HSBC Holdings Plc and Markit Economics yesterday showed an unexpected expansion in manufacturing. An improving economic outlook is bolstering the outlook for stocks in the second half, Zhang Yanbing, an analyst at Zheshang Securities Co., said in Shanghai.

“It looks like we will get some good data next month,” Zhang said. “Along with small stimulus from the government, it won’t be a problem for the index to hit 2,500 by the end of the year. The index is trading in a very tight range now because it’s still impacted by new share sales.”

‘Tug of War’

A measure of consumer-staples shares in the CSI 300 surged 1.7 percent for the steepest gain since April 8. Kweichow Moutai, the biggest maker of baijiu liquor, rose 4.6 percent. Sichuan Swellfun Co., part-owned by Diageo Plc, jumped by the daily limit. BYD led gains for automakers, posting its biggest advance in a month.

The Shanghai index has fallen 3.9 percent this year on concerns falling property prices will slow the economy. The measure has been stuck in range trade of about 200 points in the first half because of a “tug-of-war” between concerns about an economic slowdown and expectations of policy easing, China International Capital Corp. strategists led by Hanfeng Wang wrote in a report today.

Chinese stocks will do better in the second half as policy easing may improve liquidity and stabilize growth expectations, Wang wrote. The brokerage targeted gains of up to 20 percent for 2014, with large-company shares outperforming smallcaps. The ChiNext index of small-cap shares has gained 5 percent this year, compared with an 8 percent loss for the CSI 300.

CICC’s market forecast contrasts with Bocom International Holdings Co. strategist Hao Hong, who expects the Shanghai Composite to continue trading in a range of 1,900 to 2,100 in the second half. Fidelity Worldwide Investment’s Catherine Yeung sees Chinese equities remaining “directionless,” with no particular catalyst to drive shares higher.

The Chinese economy will probably “muddle its way through” for the rest of year, Yeung, investment director for equities at Fidelity Worldwide, said in a phone interview.


Source: Bloomberg

http://www.bloomberg.com/news/2014-06-2 ... cline.html

[winston]

Goldman’s Buy-China Call Has History on Its Side
By Moxy Ying

Chinese stock bulls, battered by the world’s worst first-half losses, now have history on their side.

While this year’s 3.4 percent drop in the Hang Seng China Enterprises Index (HSCEI) thwarted optimistic forecasts by Goldman Sachs Group Inc. and Morgan Stanley, the second half has proven a much better time to buy during the past decade.

http://www.bloomberg.com/news/2014-07-0 ... -side.html

[winston]

Chinese stocks are building a new uptrend… country fund FXI breaks out to a six-month high.

[winston]

Chinese stocks are working on an uptrend… country fund FXI breaks out to a seven-month high.

[winston]

The Big Breakout You're Not Hearing About By Jeff Clark

Chinese stocks are breaking out… But you won't see it mentioned in the mainstream press.

The Shanghai Stock Exchange Composite Index (the "SSEC") – China's version of the Dow Jones Industrial Average – rallied last Thursday… and broke a five-year consolidating-triangle pattern to the upside. This suggests Chinese stocks are about to rally.

And early investors could make double-digit gains over the next few months…

Take a look at this long-term chart of the SSEC…

Please Enable Images to See this

The SSEC has been stuck in a bear market for the past six years. It's down more than 60% from its peak in 2007. But on Thursday, the index broke out of a five-year consolidating-triangle pattern.

This is such a long, drawn-out pattern that you can barely see the breakout on the eight-year chart. But there's no mistaking it on the one-year chart…

Please Enable Images to See this

This is a BIG DEAL. This is when new bull markets begin. And as I told you in May, the last time the SSEC emerged from a pattern like this, it rallied 500% in a year and a half.

I'm not looking for those types of gains this time around. But at the very least, the SSEC should be able to hit some of the overhead resistance lines on the long-term chart.

The first target is at about 2,500. If the SSEC can rally above that first resistance level, the next upside targets are 2,900 and 3,500. Based on current levels, investors could see gains of anywhere between 38% and 67% in the next few months.

It has been a long time since traders have had a chance to make money buying Chinese stocks. But we have a good opportunity right now. Last week's breakout from the consolidating-triangle pattern signals a major change in trend. And early investors could make double-digit profits in the next few months.

Now is the time to buy Chinese stocks.

Source: Growth Stock Wire

[winston]

One of the World's Cheapest Markets Is Soaring By Brett Eversole

No one's paying attention… But one of the world's cheapest stock markets has entered a stealth bull market…

Since bottoming in March, this market is up 23%. But no one is talking about it…

Better still, history shows that this could be just the start of a much larger move. Triple-digit gains are the norm from these levels.

Let me explain…

Today's opportunity might not be in the most savory place to invest… But it's one you have to consider right now.

Our big opportunity is in China…

You see, Chinese stocks have been stuck in a bear market over the past few years. The iShares China Large-Cap Fund (FXI) remains 33% below its 2007 high. But over the last few months, Chinese stocks have rallied…

FXI is up 23% since March. And it's in the midst of breaking out of its multiyear downtrend. Take a look…

Longtime readers know we always like to wait on an uptrend before buying. Cheap stocks and stock markets can always get cheaper. So, buying after an uptrend begins dramatically lowers our risk.

This important thing is, even though Chinese stocks are up 23% in just a few months, we still have plenty of upside for one simple reason…

Chinese stocks remain one of the cheapest markets in the world.

The table below shows what I mean. It shows the Hang Seng China Enterprise Index (the "HSCEI") – an index that tracks large Chinese companies that trade in Hong Kong – versus a few of the world's major stock markets.

Any way you look at it, China's largest companies are dirt-cheap compared with the rest of the world…

Region / Index / P/E Ratio / Price-to-book / Dividend Yield
USA S&P 500 17.6 2.7 2.0%
Japan Nikkei 225 20.0 1.6 1.6%
Eurozone Euro Stoxx 50 22.3 1.5 3.7%
HK Hang Seng 10.8 1.4 3.7%
China HS CH Ent 8.1 1.2 4.0%

China trades at a 50%-plus discount to the U.S., Europe, and Japan, based on earnings. It also pays a higher dividend, roughly 4% today. That's double what the U.S. market pays. But that's not the best part…

You see, China is also cheap compared with its own history. It's now cheaper than it was the last two times Chinese stocks soared…

Take June 2005, for instance. Back then, the Hang Seng China Enterprise Index traded for around 10 times earnings. That valuation extreme kicked off a multiyear bull market good for 333% gains.

Similarly, in October 2008, the index traded for around eight times earnings. Chinese stocks soared 132% over the next year.

Sure, shares of FXI are up 23% in just a few months. But from this level of cheapness, Chinese stocks could easily return triple digits from here. It has already happened twice in the last decade.

Of course, we can't know for sure if this is the start of the next bull market. But Chinese stocks are breaking out and they're dirt-cheap… compared with their own history and the rest of the world.

These two pieces make buying today considerably less risky. Chinese stocks – through the iShares China Large-Cap Fund – are worth considering right now.


Source: Daily Wealth

[winston]

[b]DeMark Says Sell China Stocks Now After World’s Best Gain[/b] By Weiyi Lim

The Shanghai Composite Index (SHCOMP) will probably end its world-beating rally within days and fall about 10 percent, said Tom DeMark, the developer of market-timing indicators who predicted the gauge’s peak last year.

http://www.bloomberg.com/news/2014-08-0 ... id=markets

[winston]

Chinese stocks are working on an uptrend… country fund FXI is up 24% from its March lows.

[winston]

CHINA: BIG GROWTH, SMALL RETURNS

In the May 14 edition of DailyWealth, Steve debunked one of the most popular stock market myths: That big economic growth always leads to big stock returns.

Today's chart is a follow-up to that essay. It shows the lack of returns in China.

You know the China story. Over the past few decades, it has become the world's fastest-growing large economy. It has become the "workshop of the world" and a voracious consumer of natural resources.

But as you can see from the 14-year chart below, that GDP growth hasn't translated into stock market gains.

The benchmark Chinese stock index has boomed and busted several times... but still sits at 2001 levels.

Source: www.dailywealth.com

[winston]

China's "Dow Jones" is breaking out… the Shanghai Stock Exchange Composite Index is sitting at its highest level since December.