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

[winston]

Be careful if you are short HK or China.

The market is very strong today and I think some of the shorts are being squeezed.

There is talk that China is supporting the Shanghai market for the Olympics.

Some property counters, airline etc. have touched their daily limit of 10% in Shanghai..

[winston]

From DBS:-

China stock market is most oversold among the regional indices, thus the risk/reward is favorable. The wave pattern gives us a high degree of confidence that the SSEC is approaching an important intermediate low and upside potential outweighs downside risks over the next 3 to 6 months.

Our view for that turning point is 2430 (worst case 2200).

We recommend investors buy into ETFs that tracks the China stock markets when the SSEC falls to 2600 or below.

Two ETFs that track the China equity markets are:
1. iShares Asia Trust – iShares FTSE/Xinhua A50 China Tracker (2823 HK)
2. World Index Shares ETFs – CSI 300 China Tracker (2827 HK)

Winston's Comment: Vested in both

[winston]

Olympic Rally coming ? Enjoy it while it last . Not a nice day to be short HK or Chinese stocks.

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China Stocks Advance Most in Three Weeks;
By Zhang Shidong and Chua Kong Ho

July 7 (Bloomberg) -- China's stocks rose the most in almost three weeks, led by banking shares, after China Merchants Bank Co. and China Citic Bank Corp. said first-half earnings probably more than doubled.

Merchants Bank, the country's most profitable bank, rose by the most in more than two months. Citic Bank, the banking unit of the nation's largest investment company, gained for a fourth day. Beijing North Star Co. jumped on speculation next month's Olympic Games will lure more tourists to the capital city.

``Fundamentals are very strong in China compared to any other Asian nation,'' said Liu Yang, managing director at Atlantis Investment Management Ltd. in Hong Kong, which oversees about $4 billion in assets, in a Bloomberg Television interview. ``Chinese stocks are trading at crisis valuations. Do they deserve to trade at crisis valuations? The answer is no. The market deserves a very good rebound from here.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 140.91, or 5.1 percent, to 2,882.76 at the close. The increase was the most since June 18. All of the measure's 10 industry groups gained today, with just one of its 300 constituents falling.

[LenaHuat]

What has Marc Faber said abt China stocks :

July 7 (Bloomberg) -- Investors betting on a rebound in China's tumbling stocks are setting themselves up for more losses, according to Marc Faber, who told investors to bail out of U.S. stocks before 1987's so-called Black Monday crash and correctly predicted last August the U.S. would enter a bear market.

Faber's forecast contrasts with local stock analysts, who are as bullish as ever even after a 51 percent plunge in the CSI 300 Index since its October record. ``Buy'' calls still make up two-thirds of all recommendations for Chinese stocks, virtually unchanged from the market's peak, according to Bloomberg data.

``I just wouldn't buy,'' Faber said in an interview from Bangkok July 4. ``When a bubble bursts, you only hit bottom when people totally give up and vow they'll never buy stocks again. People are still more worried they'll miss the next rally.''

[winston]

SOUTH CHINA MORNING POST

-- Misplaced fears over Beijing's tightening monetary policy and concerns over the slowing economy have caused an "irrational sell-off" of mainland banking stocks, according to a report by JP Morgan.

[winston]

China's Stock Index Closes Above 3,000 for 1st Time in a Month
By Zhang Shidong

July 9 (Bloomberg) -- China stocks rose, taking the benchmark above the 3,000-point level for the first time in almost a month, amid speculation earnings growth is robust enough to withstand government measures to curb inflation.

Poly Real Estate Group Co., the country's No. 2 developer by market value, and Cosco Shipping Co., a unit of China's biggest shipping company, advanced after forecasting higher profits.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 113.28, or 3.9 percent, to 3,015.13, the highest close since June 12. Only 10 of the gauge's 300 constituents fell. The gauge has tumbled 44 percent in a slump this year that erased as much as $2.2 trillion in market value.

``First-half corporate earnings have exceeded expectations,'' said Fan Dizhao, a Shanghai-based analyst at Guotai Asset Management Co., which oversees the equivalent of $7 billion. ``Sentiment has been improving as valuations have dropped to a very low level after the rout.''

The CSI 300's decline this year has made it the second-worst performing major stock index tracked by Bloomberg. Stocks have fallen as the central bank required lenders to set aside a record amount of money in reserve to curb inflation running at the highest in more than a decade. The People's Bank of China raised interest rates six times in 2007.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 3.8 percent to 2,920.55. The Shenzhen Composite Index added 3.2 percent to 885.01.

[winston]

Hong Kong shares close higher, led by banks, airlines on earnings outlook
Xinhua Newsfeed

HONG KONG (Thomson Financial) - Hong Kong shares closed higher on Wednesday, led by banks and airlines, on hopes that China will ease its monetary policy in the second half of the year and that the drop in oil prices will boost earnings.

There was speculation that China will help prop up its property sector by easing credits flowing into the industry.

The benchmark Shanghai Composite Index ended Wednesday's trade up 3.8 percent, extending Tuesday's 0.8 percent gain and Monday's 4.6 percent rise.

( SH has gone up 9.2 % already this week )

"Oil prices tumbled and as far as China goes, it was reported that inflation may come down in the next few months. This is a positive development because the central government may now be able to loosen its austerity measures," said Alex Tang, research head at Core Pacific-Yamaichi.

The Hang Seng Index rose 585.00 points or 2.8 percent to settle at 21,805.81. Today's increase is the biggest single-day gain since April 2, when the index rose 3.2 percent.

"We are on a pretty positive note today. Market sentiment has improved a lot lately. There are rumours that China may loosen its macro-economic controls in the near future to help the real estate sector. As you know, a lot of troubles started in the property sector, such as in the United States," said Jackson Wong, investment manager at Tanrich Securities.

China may ease the bank's mortgage ratio -- the limit imposed on loans to the property sector -- to boost lending to property developers, Wong said.

China Overseas, a developer on the mainland, rallied 10 percent to HK$13.62.

China Life, the largest insurer on the mainland, advanced nearly 6 percent to HK$27.50.

Chinese lenders China Construction Bank (CCB) and Bank of Communications (BoComm) rallied on expectations their first-half earnings will rise at least 50 percent from a year ago.

CCB was up almost 5 percent at HK$6.19. BoComm jumped 5.1 percent to HK$9.21.

Hong Kong's top airline Cathay Pacific gained nealry 5 percent to HK$14.52.

[millionairemind]

Post this here cos' HK is a bigger market. Notice how these investment banks always ask you to "stay invested"...

Published July 10, 2008

Asian equities bottoming out, says Credit Suisse
Downside risk is expected to be limited as correction approaches a trough
By LYNETTE KHOO

WHILE Asian equities markets are unlikely to see a sustained rebound in the near term amid macro uncertainties, the downside risk is expected to be limited as the correction is approaching a trough, according to Credit Suisse Private Banking.

Ms Fan: 'In 2009, we will see a more sustained economic recovery as energy prices retreat'
'We believe that the market is now approaching the ultimate bottom,' the division's director and head of Asia-Pacific research, Fan Cheuk Wan, said yesterday in a conference in Hong Kong.

'The bottoming process may last for several months, but we definitely see relatively limited downside from the current levels,' she added.

'In the next few months, we continue to expect volatility.'

Hence, Credit Suisse's Private Banking division adopts a cautious outlook for Asian equities in the second half of this year and recommends investors adopt a more defensive investment strategy to mitigate the downside.

We advise investors to increase their holding in total return managed investment products, hedge funds.

Ms Fan noted that the valuation of non-Japan Asia market has corrected to 11.6 times 2009 price-to-earnings ratio, compared with the previous crisis valuations of 11 times during the Asian financial crisis.

'Asia doesn't deserve to be de-rated to last crisis levels,' Ms Fan said.

The recent sell-down across Asian markets has been unjustified, she added, given the region's strong domestic fundamentals, fiscal strength and resilient earnings.

But the current oil price shock is dragging global risks appetite back into panic territory.

Risk aversion has driven continual redemptions due to risks and continual outflow of funds in Asia can be expected over the next few months, Ms Fan noted.

According to data firm EPFR Global, investors redeemed US$4.8 billion from Asian equity funds in June - the second-largest monthly outflow ever.

She noted that the markets have factored in overbearish assumptions as Credit Suisse does not believe in the continued rise in oil price.

Credit Suisse predicts that oil price will correct to US$105 a barrel by the end of the third quarter as recent fuel price increases eventually erode demand for oil refined products.

'In 2009, we will see a more sustained economic recovery as energy prices retreat,' Ms Fan said.

Although Asia weathered the US sub-prime crisis well, the oil shock will likely have a more direct impact on Asian economies given their dependence on oil imports and commodities.

The Asia ex-Japan region accounts for 22 per cent of the world's oil consumption and its net fuel imports make up 4 per cent of GDP in 2007.

'Overall, Asia is a victim of high energy price,' Ms Fan said.

'We expect the pass-through effect from high oil price to inflation in Asian economies to filter through in the coming months,' she added, pointing to fuel price hikes already happening in countries such as Malaysia, China, India and Taiwan.

Credit Suisse has factored in potential earnings disappointment in the second and third quarter reporting season in Asia on the back of credit and inflationary woes.

Within Asia where it sees strong fundamentals, Credit Suisse is 'overweight' on Taiwan, China and Singapore markets and highlights Japan as a tactical inflation trade, given the re-emergence of positive inflation, which will have a positive impact on the equity market.

'We advise investors to increase their holding in total return managed investment products, including hedge funds, to their core Asian equities portfolio to reduce their risk exposure,' Ms Fan said.

For satellite investments, Credit Suisse recommends select stock pickings in agricultural and plantation plays, energy and mining counters, and high-yield stocks.

[sesdaqfan]

It is a trader's nightmare these few days. Choppy and all my indicators goes awry. Just does not make sense when it girate a few hundred points a day every day. I only experience this once at the beginning of the Asian Financial crisis.

[millionairemind]

Ok, HSI will only be down -240. I may be buying a put at the beginning as I expect it to go down a few hundred points by the end of today.

A few concerns:-
1) China is only down 1%
2) japan is flat despite the big drop in the US

W - Hope you HUAT AR!!!!