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

[-dol-]

Hi Cherry,

Generally, I am agreement with winston.

SSE is quite a closed market with global fund flows playing a limited role. Hence, it might not move in sync with the world. It can have a mind of its own - which it has exhibited on a few occasions - it zig when the rest of the world zag.

Jim Rogers' investment in Chinese stocks should be mainly through the H-shares in HK, although he did mention about some S-chips in his latest book on investing in China.

Buffett does not seem to have make any moves in China recently. The Chinese market is still structurally less developed than the US and I believe he will require a huge margin of safety.

[Cherry]

dol wrote:

SSE is quite a closed market with global fund flows playing a limited role ...

Hi Dol

Thanks for your views. I appreciate it.

[winston]

Dow: Strong but it was expected
SSE: Up 1% at opening but flat now
HK: Down 354 on pre-market

1) Markets are dropping again in Asia
2) Will try to buy a put on any technical rebound especially in the morning
3) May hold on to this put as I expect the US to be weak tonight, unless there is a windfall profit

[winston]

Not vested in Chinese banks.

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STOCK ALERT - China banks fall sharply in Hong Kong on broker downgrades

HONG KONG (XFN-ASIA) - China banks were sharply lower in Hong Kong after Goldman Sachs downgraded the sector to "neutral" from "attractive" and cut target prices on leading lenders, citing expectations of further macro-headwinds next year.

Bank of Communications (BoComm) was down 0.37 hkd or 4.15 pct at 8.55, China Construction Bank was down 0.21 hkd or 3.39 pct at 5.98 and ICBC was down 0.15 hkd or 2.84 pct at 5.13.

Bank of China was down 0.06 hkd or 1.72 pct at 3.42 and China CITIC Bank was down 0.15 hkd or 3.71 pct at 4.15.

Goldman Sachs lowered target prices for H-shares of China banks by 26 pct on average, while cutting A-share target prices by 41 pct on average.

It downgraded BoComm's H-shares to "sell" from "buy", while cutting Bank of China, China Construction Bank and China CITIC Bank to "neutral" from "buy".

China Merchants Bank was kept "neutral".

"We prefer banks with low exposure to real estate developers and manufacturers and with low earnings sensitivity to rising new non-performing loans formation or credit costs," Goldman said.

Goldman prefers ICBC among dual-listed Chinese banks.

[-dol-]

Finally, the downgrades for the Chinese banks are coming in.

I was beginning to wonder what took them so long - to allow time for their biggest and best clients to exit???

[winston]

China will release tomorrow August producer prices and consumer inflation numbers.

'The data itself may not be the focus, but investors will see if there are any comments from the government regarding the stock market or any new policies to support the economy,' said Steve Cheng, associate director at Shenyin Wanguo Securities.

Consumer price index (CPI) growth is expected to show further easing, but continued rise in wholesale prices will exert pressure on Chinese corporate earnings, analysts said.

[winston]

THE STANDARD:

Amid the global economic slowdown, fund managers withdrew US$28.5 billion (HK$222.3 billion) of funds under management during the second quarter, according to a quarterly survey by Hongkong and Shanghai Banking Corporation covering 12 fund houses around the world.

[OE2008]

W,
Thanks for highlighting. Third quarter would have been worse. Even then Sept is not over yet.
The price and volume study would have signal such repatriation activities much earlier.

[LenaHuat]

Watch out, funds could be returning to Asia sooner rather than later :

http://www.iht.com/articles/2008/09/10/business/col11.php

[LenaHuat]

Second positive note abt ex-Japan equities: (Fr Bloomberg)

Asia Pacific Stocks `Very Close' to Trough, Morgan Stanley Says

By Chua Kong Ho

Sept. 11 (Bloomberg) -- Stocks in the Asia Pacific region excluding Japan appear to be ``very close to a trough'' when compared to previous market cycles, according to Morgan Stanley.

The MSCI Asia Pacific excluding Japan Index is trading at 11 times forward price-earnings, just 5 percent above trough levels in prior market downturns, said Morgan Stanley analysts led by Malcolm Wood in a note today. When compared to reported earnings, current valuations are 14 percent below the average trough level of 14.9 times, the note said.

Other signs that point to a market bottom include a slowing decline in U.S. home prices and depressed sentiment in Asia, according to the note.

The MSCI Asia Pacific excluding Japan Index has declined 33 percent this year and is valued at 11.9 times reported earnings, according to data compiled by Bloomberg.