hkstockpickr-blog

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Iran+Israel+nuclear spells "trouble"

It is widely believed in the Middle East that Saudi has already given Israel the green light to use its airspace in an attack on its Shiite rival, just as it did 30 years ago when the Israelis destroyed Saddam’s near completed nuclear reactor. With Libya still struggling to restore political stability and full oil production, the risk is that the geopolitical risk premium surpasses levels seen a year ago.

Alongside surging portfolio inflows as this latest round of QE percolates through the financial system, that scenario would again complicate EM policy and generate renewed asset volatility...

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Germany and Greece are likely headed for a very acrimonious divorce within the next 12-18 months...

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Why isn't anyone else calling Japan's demise?

It seems only the brave-hearted will call Japan's situation for what it really is...severe cyclical decline. I have seen only Isaac Sofaer calling this situation - declining population, massive government debt, cronyism politics, isolationist immigration policies, trade deficit, etc.

Population: "Its population has been dwindling and will continue to do so at the rate of 800k pa for the next 50 years. Population in Japan by 2060 may be 88m from 128m today of whom 40m will be retired and only 48m workers."

Trade deficit: "Japan's trade deficit of US$32b, first in 31 years, is a clear signal times are changing. Forecasts for the next 30 years make it hard to be optimistic about Japan's balance of trade."

Weak market / negative sentiment: "The stock market, previously boasting darlings like Sony, Canon, Toyota, is down 80% in the past 22 years. These companies are surpassed by others all over the world. Japanese investors own 95% of their government bonds paying 1% pa. There's plenty of evidence businesses are closing down, there are few property buyers and jobs are impossible to find. Sentiment is extremely negative and there's little hope for any change."

Croynism / lack of transparency / sick politics: "It's not just because of an aging population, but with the outright cronyism, the non-transparent corporations, the free spending government, sickly politics and an overvalued yen."

Isolationism / energy risk / uncompetitive industry: "Japan has no immigration policy, it's reliant on foreign energy, and companies are moving production abroad as they can't compete any more."

Massive Government debt: "The government's deficit, 200-250% debt to GDP, is the highest in the developed world and dependant on the goodwill of local investors to finance it. But as investor's age, then die, and with fewer workers and uncertain pensions, what's goodwill got to do with it? Who will buy the bonds? I suppose foreigners might but they'll want more than the current 1% coupon, more like 3%. By then Japan may be unable to pay interest, let alone capital."   Makes Greece look good: "It's worse than Greece, but because its money borrowed locally instead of from abroad it's classified as a domestic matter. So it's not newsworthy and no one really cares. Yet Japan's population is 12x greater than that of Greece, yet look at the market reaction Greece managed to accomplish. And note how the world ignores this terrifying situation developing in Japan."

Hopeless: "Japan's all but finished. Sell yen, Japanese property, bonds and shares if you're unlucky enough to hold any and lucky enough to find a buyer at a price. Investing in private business is a major minefield, so don't, even if the figures look good."   But: "...products which the Japanese like i.e. McDonald's, L'Occitane (HK.00973) etc will do well while the consumer is king, for now."

[hkstockpickr-blog]

China developers continue to fall while HSI rises

Mainland developers slumped despite a general market rally. Greentown (3900) was down by 8.1% at HK$ 4.1. Hopefluent (733) was down by 7.4% at HK$ 1.76. Shimao (813) was down by 7.2% at HK$ 8.88. Evergrande (3333) was down by 6.9% at HK$ 4.2. Country Garden (2007) was down by 6.7% at HK$ 3.36. Agile (3383) was down by 6.6% at HK$ 9.0. China Res Land (1109) was down by 5.8% at HK$ 13.98. R&F PPT (2777) was down by 5.7% at HK$ 8.32. KWG PPT (1813) was down by 4.9% at HK$ 3.7. China Overseas (688) was down by 4.8% at HK$ 14.58.

[hkstockpickr-blog]

Hong Kong Up: Where next?

Hong Kong's benchmark, the Hang Seng Index was up 103.54 pts or 0.50% to 20,887.40 pts. Turnover was HK$ 61.94B. The Hang Seng China Enterprise Index, which tracks H shares, was up 62.44 pts or 0.55% to 11,467.66pts. SSE Composite Index was down 0.12 pts or 0.01% to 2,351.86 pts. Nikkei 225 was up 52.01 pts or 0.58% to 8,999.18 pts. US$/RMB was down 0.0005 to 6.2973.

[hkstockpickr-blog]

Jim O'Neill warns against over-pessimism on Greek question

Keeping it all in perspective...

MANNHEIM: Emerging markets' place in today's world makes a re-run of the 2008 crisis unlikely, said Goldman Sachs's Jim O'Neill at a conference in Mannheim, Germany today as he warned against 'over-pessimism' in investor sentiment surrounding Greece.

'China is creating another Greece every three to four months', said O'Neill, speaking at the Fonds Professionell Kongress, in reference to the relative economy size of the two countries. 'Greece is not the most important thing in the world.'

His comments come as some commentators warn that a Greek default and a break of the 17 member common currency could lead to a credit crunch comparable to the Lehman crash.

Michael  Hasenstab, global bond manager at Franklin Templeton, is amongst those to warn in his outlook for 2012 of a worst-case 'Lehman' scenario if a resolution to the Euro debt crisis sees no progress.

Negotiations between holders of Greek debt and officials saw little progress last week on an agreement that would see Greek investors take voluntary losses.

'We are nowhere near where we were in 2008,' O'Neill told an audience of investors. 'It is not the right framework to use because of the place of the BRICs and growth markets today'.

The next IMF chief, he said will not be chosen through a 'cushy deal' between the US, Germany and France as 'by 2020 China's share of global GDP will match the whole of the euro area.'

Last week, the Chinese government announced figures that showed economic growth had fallen in the fourth quarter to just below 9% compared with the previous quarter which saw over 9% growth.

[hkstockpickr-blog]

HSI closes at year high with increased turnover

Hong Kong's benchmark, the Hang Seng Index was up 615.55 pts or 3.24% to 19,627.75 pts. Turnover was HK$ 67.88B. The Hang Seng China Enterprise Index, which tracks H shares, was up 472.83 pts or 4.51 % to 10,962.42 pts. SSE Composite Index was up 92.19 pts or 4.18% to 2,298.38 pts. Nikkei 225 was up 88.04 pts or 1.05% to 8,466.40 US$/RMB was down 0.0001 to 6.3128.

Spot gold price was up to US$ 1,665.0 per oz and crude oil price was up to US$ 100.68 per barrel. US dollar index was down to 80.92.

Stock Highlights

Mainland Banks led the rally in HSI. CM Bank (3968) was up by 3.32% at HK$ 17.44. Bank of Comm (3328) was up by 3.29% at HK$ 5.97. Citic Bank (998) was up by 3.43% at HK$ 4.82. BOC (3988) was up by 4.11% at HK$ 3.29. ICBC (1398) was up by 3.88% at HK$ 5.35. ABC (1288) was up by 4.72% at HK$ 3.77. Minsheng Bank (1988) was up by 3.86% at HK$ 7.26. CCB (939) was up by 3.49% at HK$ 5.93. CQRC Bank (3618) was up by 0.43% at HK$ 4.66.

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Hong Kong Stock Highlights

Mainland insurers mixed as A-shares retreated. CPIC (2601) was down 5.21% to HK$21.85 and China Life (2628) closed 3.34% lower at HK$19.38. Ping An (2318) was down 2.47% to HK$51.35. PICC Property & Casualty (2328) was flat at HK$9.66 and New China Life (1336) ended with no change at HK$25.1. Petroleum and coal related companies ended lower on growth concerns. CNOOC (883) was down 1.59% to HK$14.84 and PetroChina (857) closed 0.91% lower at HK$10.88. Yanzhou Coal (1171) was down 2.50% to HK$17.16 and China Shenhua (1088) was down 1.46% to HK$33.65.

Company Updates

AVIC International (232) issued positive profit alert. The company expects to see substantial increase in reported net profit for the year ended 31 Dec 2011, mainly due to disposals of a subsidiary and certain financial investments. AVIC International was up 5.93% to HK$0.25.

China CBM (578) announced to dispose its 100% equity interest in a subsidiary at a consideration of HK$71.2M. China CBM was up 1.89% to HK$0.104.

China Daye Non-Ferrous Metals (661) was suspended from trading with effect from 1:30pm pending the release of price-sensitive information. China Daye Non-Ferrous Metals closed at HK$0.420 before the suspension of trading.

[hkstockpickr-blog]

Vincent Lam today

The much better-than-expected US economic performance has been the recent market highlight. Investors of Asia-Pacific equity markets may be misled by the better US stock performance.

Another noteworthy trend is the recent domestic consumer price index beginning to fall, coupled with the weak macroeconomic data, which might provide adequate conditions for a domestic monetary easing. Recently shares of many large banks were growing stronger, perhaps indicating that the deposit reserve in the mainland would have significant downward adjustment.

[hkstockpickr-blog]

Hang Seng Index down 192.22 pts or 1.00%

Hong Kong's benchmark, the Hang Seng Index was down 192.22 pts or 1.00% to 19,012.20 pts. Turnover was HK$ 38.80B. The Hang Seng China Enterprise Index, which tracks H shares, was down 147.44 pts or 1.39 % to 10,489.59 pts. SSE Composite Index was down 38.39 pts or 1.71% to 2,206.19 pts. Nikkei 225 was down 121.66 pts or 1.43% to 8,378.36 US$/RMB was up 0.0064 to 6.3129.

Spot gold price was down to US$ 1,642.5 per oz and crude oil price was down to US$ 99.22 per barrel. US dollar index was up to 81.58.

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Too late to profit from best-performing China insurance stock?

The shares of PICC (002328.HK), the biggest property and casualty (P&C) insurer, in China, have outperformed other insurance shares sharply. During the past 52 weeks, PICC shares declined by only 6%, while other insurers (life and P&C) slumped over 30%. The outperformance of PICC could be attributed to the substantial improvement in the underwriting profitability of P&C insurance.

Taking into account the latest rights issue of 1 rights share per 10 original shares (subscription price HK$5.5 per share), P/B would be 2.7x (book per share HK$3.54). P/B valuation is not attractive, and given the likely peaking in profitability.

Quamnet Research downgrades PICC to Reduce. (CN: http://www.quamnet.com/searchanalysis.action )

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‘US recession has already started’??

I can’t see where Nouriel Roubini and his ilk arrive at their ‘US recession has already started’ call, when Q3 GDP growth should come in at over 2% based not just on the official data but granular stuff like intermodal rail volumes hitting a YTD high in mid September.

[hkstockpickr-blog]

Yurun (1068.HK) issues profit warning

Yurun is expected to suffer both a slowdown in sales (reduced consumer confidence) and margin pressure (failure to transfer rising costs) during 3Q11. The company expects that the unfavorable factors may continue to affect the company in 4Q11.

Previously Quamnet research also raised a number of uncertainties related to Yurun, including increasing pork price, recent share disposal by directors, frequent placement record, and government subsidy uncertainty. The outlook appears now even worse than we and the market expected. It remains to be seen whether Yurun could restore consumer confidence next year.

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HK Market Expectations, 27 Sep, 2011

Yesterday, HK market weaker than expected, but US remained firm. Therefore, will see further recovery in HK, but don't chase the initial rise because sentiment still very cautions, and will therefore limit upside. 

Buy on subsequent recovery.  Trade: 17,650, 17,400 stop loss, with further rise to 17,800.

Favorable policy announcement expected from China...

Buy call options on BOC HK, because usually leads the market on the rise.

Ping An Insurance, SHK Props are oversold. Three oil giants also turned strong yesterday.

Wait until futures expiry date Thursday to buy put options.

http://www.quamnet.com/markets.action

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HK Stocks surge

Greek bank merger news, coupled with the favorable U.S. personal spending��report, caused Hong Kong stocks to surge, driving the Hang Seng Index over 20,000 points, with positive sentiment expected to continue today. The Hang Seng Index closed at 20204 points, up 339 points or 1.7%; Hang Seng China Enterprise Index closed at 10747 points, up 235 points or 2.2%, turnover of 89.1 billion yuan board. Asian markets ended mixed as Nikkei average index closed at 8954 points, up 103 points or 1.2%; Taiwan's weighted index closed at 7646 points, up 68 points or 0.9 percent, the Shanghai Composite Index closed at 2567 points, down 10 points or 0.4%.

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Hong Kong Stock Highlights

Major export-related companies edged up on ease of double dip concern in US after the report of solid consumer spending. Li & Fung (494) was up 1.96% to HK$13.56 and China Merchants (144) closed 2.71% to HK$24.65. PetroChina (857) was up 3.71% to HK$9.79 and CNOOC (883) rose 3.09% to HK$15.36 on higher crude oil price. China Unicom (762) was up 4.40% to HK$16.12. China Overseas (688) was up 3.90% to HK$15.98 and China Resources Land (1109) advanced 2.83% to 12.36. CCB (939) was up 1.80% to HK$5.65 while ICBC (1398) was up 0.197% to HK$5.09. Real-time Hong Kong stock quotes on Quamnet.com, click here

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HK HSI Up 1.7%

Hong Kong's benchmark, the Hang Seng Index was up 339.06 pts or 1.71 % to 20,204.17 pts. Turnover was HK$ 89.1 B. The Hang Seng China Enterprise Index, which tracks H shares, was up 235.21 pts or 2.24% to 10,747.08 pts. SSE Composite Index was down 9.82 pts, or 0.38%, to 2,566.60 pts. Nikkei 225 was up 102.55 pts, or 1.16% to 8,953.90 pts. US$/RMB was down 0.0013 to 6.3798. @HSI