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

[kennynah]

volatile...another word to mean, directionless...

[winston]

Tycoon Lee Shau Kee, chairman of Henderson Land (0012.HK: Quote, Profile, Research, Stock Buzz), said Hong Kong stocks have been oversold and that now was time to buy, predicting the Hang Seng Index would rebound to about 23,000 points by the end of the year from the current 21,000-point level.

His top picks include China Shenhua (1088.HK: Quote, Profile, Research, Stock Buzz) and Ping An Insurance (2318.HK: Quote, Profile, Research, Stock Buzz).

[-dol-]

Lee Shau Kee has been causing grief to HK investors who listen to him since late last year. If he is still holding on to his Agile, Shenhua and Ping An from last year, he would have given back a significant chunk of his profits.

As an influential man and in a city where many still hang by his every word, he should take greater care to exercise restraint in predicting market direction and targets.

Those who have read the book "Once upon a Golconda" by John Brooks will see many similarities about the market, its participants, govt and central bank reactions of times long past with today. History can be instructive.

[winston]

Plan drafted for 100b yuan tax cut

China is considering a 100 billion yuan (HK$114.39 billion) tax cut as part of a finance reform package, the 21st Century Business Herald reported.

The cut would accompany a shift in the country's value-added tax system from the current production-based levy to a consumption-based system that is the norm in most countries.

The Chinese-language daily said the reform may be implemented at the start of 2009. Citing unnamed sources, it said that the Ministry of Finance recently submitted a draft proposal to the State Council.

Finance officials from across the country will meet in September to discuss the proposal, the newspaper said.

REUTERS

[-dol-]

So a >50% slump is a "normal maket correction"... terminology...teminology...

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

China stock market slide a normal correction -HKMA 03 Sep 2008 15:08

HONG KONG, Sept 3 (Reuters) - The slump in China's stock market is a normal correction and government action to shore up equities is not warranted, Joseph Yam, Hong Kong's central bank chief said in a television interview shown on Wednesday.

Yam, chief executive of the Hong Kong Monetary Authority (HKMA), told Hong Kong broadcaster TVB that China's stock market was being affected by weak global equity markets as well as domestic factors, but its decline was not unreasonable.

Shanghai stocks <.SSEC> have plunged more than 50 percent in the past year, the poorest performing equities market in a major economy, as Chinese shares have been hurt by disappointing earnings results among other factors.

Markets were briefly buoyed late last month when JP Morgan's chief China economist Frank Gong said in a report the Chinese leadership was considering a major economic fiscal and monetary stimulus package, but there has been no official confirmation of the plan. Yam said a rescue package was not necessary.

"The key is if (the stock market) is falling to a level that can lead to structural problems or lead to a meltdown of the entire financial system like in Thailand and other Southeast Asian countries back in 1997. I don't feel that it is the situation in the mainland at the moment," Yam said.

"I do feel it is a normal market correction, so I don't think (the government) needs to do anything."

TVB quoted Yam as saying that even if economic growth in China slows down, its yuan <CNY=CFXS> currency will continue to appreciate, although at a slower pace.

[millionairemind]

dol,

I think central gahment don't have so much money to shore up a 50% slump

Imagine the amount of money that is needed to push the index all the way back to 5000.... I think they have better use for that money to be spent elsewhere.

Once a major bubble burst, don't expect to see it back to its high in another 10 yrs.. Nasdaq is a good example. 8 yrs after it burst, we are still only about 50% of its original value

Cheers,
mm

[-dol-]

MM,

Good analogy... SSE chart looks similar to the Nasdaq's dotcom bust. Different script but same outcome.

[winston]

China earnings growth could slip to negative territory in 2009 - Morgan Stanley

BEIJING (XFN-ASIA) - Morgan Stanley said it is maintaining its cautious view on the Chinese stock market following the first half reporting season, with expectations that corporate earnings growth could slip to low single digit or even negative territory in 2009.

"We think the danger for corporate China to further decelerate into an earnings recession in 2009 is high ... Ex-tax effects, corporate China is already slipping into single digit earnings growth, even with the help of robust banking sector results," Morgan Stanley strategist Jerry Lou said.

"Not only is the sell side behind the earnings revision curve, but also the buy side is pricing in too optimistic near-term growth for corporate China... we think there is plenty of room for downward earnings revisions in the next 12 months," Lou said.

He added that investors should replace "growth with value" in their portfolios.

Morgan Stanley is "underweight" on the banking sector and "overweight" on the oil refining industry, where growth expectation is low. The sector is benefiting from lower oil pricing and potential further energy price deregulation, Lou said.

[-dol-]

"Negative earnings growth" as uttered by MS is a significant change.

The analysts are finally downgrading their earning projections in earnest. Will other houses follow suit with their own downgrades? They might want to re-look their numbers for the Chinese banks.

Earnings downgrades should be the trend now to justify generally lower stock prices going forward.

Asian valuations are not looking that cheap after all.

[LenaHuat]

Agree, the China and HK "H" share markets could go in the likes of the Nikkei (peak at almost 38,000) and Nasdaq (peak at almost 6,000) and are best forgotten by specuvestors. Like so many great cities of the overland and naval Silk Routes, they are best committed to history books.