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

[winston]

Everyone's Forgotten About China… Huge Gains Start from Here By Steve Sjuggerud and Brett Eversole

"China has been very much out of favor with international investors," Peter Churchouse writes in the latest issue of the Asia Hard Assets Report.

Peter, you may recall, is one of the true pioneers of emerging-markets investing. "China stock indexes have been major underperformers…"

Ah… now this is what I like to see! Why? Huge gains start from "very much out of favor."

You might not know the history here… But Chinese stocks are prone to massive booms and busts. They can quickly swing from "very much in favor" to "very much out of favor." And investors who time the moves right can make a lot of money…

During the last big swing, Chinese stocks soared nearly six-fold in just two years (roughly 2006-2007). The Shanghai Composite Index, which tracks the largest and most important Chinese companies, climbed from about 1,000 to 6,000.

The index then crashed below 2,000 in less than a year. Today, it's still below that level. Take a look…

After a 70% sustained decline, Chinese stocks are once again "very much out of favor" with investors. China is out of the news.

The thing is, Chinese stocks today are much cheaper than they were at their bottoms in 2005 and 2007…

The Shanghai Composite Index now trades for the cheapest price-to-earnings (P/E) and price-to-book (P/B) ratios we've ever seen. Today, you can buy this index of blue-chip Chinese companies for just 7.4 times forward earnings and 1.1 times forward book value. That's crazy-cheap…

This index traded for over 40 times earnings in 2007. And over the last 15 years, its average P/E ratio has been over 30… nearly three times more expensive than where it trades today.

Take a look:

Remember… Chinese stocks are prone to booms and busts. Based on history, the Shanghai Composite Index can easily return hundreds of percent once it gets going.

Chinese stocks could take off at any moment. And the gains can be huge, as we're starting from the cheapest point in history (based on the P/E and the P/B ratios).

But we aren't buying China today…

The thing is, the trend in the Shanghai Composite Index is down. It is hitting new lows almost daily. China is clearly still in "bust" mode.

Our opportunity in China will be great – someday. But we don't want to try to catch a falling knife. We must wait for the uptrend to begin. When it returns, hundreds of percent gains are possible. Remember… last time around, this index soared six-fold in less than two years.

Today, Chinese stocks are record-cheap. And China is finally out of the news. Our opportunity to buy should be here soon.

For now, keep the Market Vectors China Fund (PEK) on your watch list. It's our one-click way to trade the Shanghai Composite Index. As I write, it's making an all-time low. I'll let you know when it's time to jump in.

Source: www.dailywealth.com

[winston]

Can You Really Trust Chinese Stocks? By Martin Hutchinson

http://moneymorning.com/2012/12/14/can- ... se-stocks/

[winston]

TOL:-

Only a month ago, would you have expected the Chinese market to be 2311 today ?

[winston]

You Could Make Fivefold Gains in Chinese Stocks, Starting Now By Dr. Steve Sjuggerud

When the Chinese government wants its stock market to go up, it goes up… a lot.

It's happened several times in history…

It happened from 1996 to 1997… and again in 2005. (Heck, Chinese stocks soared fivefold in just two years starting in 2005, the last time the Chinese government wanted the stock market to go up.)

Today, the Chinese government wants the stock market to go up again.

Even better, Chinese stocks are incredibly cheap, and the uptrend has begun. In short, we have the perfect conditions for a triple-digit profit, courtesy of the Chinese government. Let me explain…

I first visited China in 1996. When I realized what was happening with the Chinese government, I recommended the largest blue-chip Chinese stock I could find to my readers…

You see, to push stocks higher, the government tried floating a variety of rumors. The government rumor that sparked the biggest rise was that China was going to allow local Chinese investors to buy shares of foreigner-only stocks.

Chinese stocks soared. My readers pocketed close to a triple-digit gain in a very short period of time.

But eventually, China's government worried that its rumors pushed stocks up too much. So it floated the opposite rumor… The company we'd pocketed nearly a double on eventually lost over 80% of its value.

This has happened multiple times. The most recent time was in 2005, just before Chinese stocks soared fivefold. And it's happening again, today…

Last month, China's top securities regulator announced it would increase by 10-fold the amount of money qualified foreign institutional investors are allowed to invest in Chinese stocks.

We have seen this play out before… China gets behind its stock market, and the market soars. It's already happening, as I write. And because Chinese stocks are so cheap, I believe we have an easy shot at triple-digit gains…

As I explained in December, the Shanghai Composite Index now trades for the cheapest price-to-earnings (P/E) and price-to-book (P/B) ratios we've ever seen. In fact, Chinese stocks are even cheaper today than they were in 2005, right before the market soared fivefold in two years. Take a look…

This index of blue-chip Chinese companies traded for over 40 times earnings in 2007. And over the last 15 years, its average P/E ratio has been over 30. Today, this index trades for less than 10 times earnings…

Our starting point is basically the cheapest point in the history of the Shanghai Composite Index (based on the P/E and P/B ratios).

Chinese stocks have bottomed, and we now have our uptrend in place. Even better, the Chinese government is doing everything it can to push the stock market higher.

If the 2005-2007 bull market is any indication, our upside potential is hundreds of percent.

I can't give away the exact details of my True Wealth recommendation for local China shares. But you can consider the Market Vectors China Fund (PEK). It's a one-click way to trade the Shanghai Composite Index. Check it out…


Source: Daily Wealth

[winston]

Guppy on CNBC:-

Another 1000 points to go for the Shanghai Index ...

[winston]

The Shanghai exchange lost just over 5% in four sessions, dropping stone-like after the announcement the PBOC cut off the liquidity and was withdrawing liquidity with reverse repos.

Last time it did that was in 2011, and as noted above, its stock market sold off for nine months.

Much of the world markets went with it.


Source: Investment House

[winston]

Shanghai A shares are trading at 10 times projected earnings. Not expensive. But do you trust annual reports from mainland-based firms?

Another factor to be considered is non- liquid shares worth 2 trillion yuan (HK$2.53 trillion) are to free-float, which can limit the upside.

Tempering doubts, though, was the signing of a deal between China's Securities Regulatory Commission and the US Public Company Accounting Oversight Board.

It could give overseas regulators the right to check audits of mainland corporations - a big step ahead of President Xi Jinping meeting counterpart Barack Obama in California next week.

Perhaps that is a major reason why Shanghai A shares are rising these days.

The flip side, of course, is that when auditing is more transparent you get to know how much profit a company actually makes. A projected price- earnings ratio may rise instead of falling.

China remains too reliant on fixed-asset investment, exporters are not doing well, and domestic consumption cannot lead economic growth yet.

Such factors limit Shanghai A shares. But strength should endure at least for a while, and buying A50 (2823) for trading is not a bad idea.


Source: Dr Check, The Standard HK

[winston]

Beijing set to end eight-month suspension of IPOs in China

Beijing is on its way to lifting an eight-month suspension of new share offerings, in a move that may open the floodgates for a fundraising spree by cash-hungry companies on the mainland.


Source: SCMP

[winston]

CHINA: HIGH GROWTH, LOW RETURNS

Earlier this year, we exposed a big investment myth: You make the best returns buying into "high growth" economies.

Many so-called "experts" promote this myth. But our research shows what knowledgeable investors have known for years: You make the most money buying stocks when economic growth is stagnant or declining.

This is because great conditions get "priced in" to the stock market. By the time things are great, stocks are usually too expensive… and due for a big fall. When things are terrible, stocks become very cheap… and due for a rise. (A country's corporate climate can also kill investor returns.)

To see this idea at work, consider China. For the past decade, it's been the world's fastest-growing large economy. But many of its publicly traded companies have absurd levels of corruption and waste. As you can see from the chart below, this has caused the Shanghai Composite Index – its benchmark stock index – to register zero returns since 2001. Anyone who bought Chinese stocks with the idea that "growth means returns" has learned that lesson…

Source: Daily Wealth

[winston]

Shanghai flag pattern breaks 20-year support, pulling other markets with it! by Chris Kimble

Could a slow down in China not only impact other Emerging markets, could it ripple in the U.S.?

The above 4-pack reflects that the Shanghai index is breaking support of a multi-year flag pattern, with the bottom of the flag pattern, being a support line that has been in place for 20-years.

The 4-pack above reflects that the Hang Seng index is breaking support along with EEM and VWO, two of the six largest ETF's in the U.S.!

Don't overlook the potential ripple effects and impact on markets in the U.S. if these flag breakdowns continue to push lower!

http://blog.kimblechartingsolutions.com ... july31.jpg