Asian Markets Continues Strength

Asian markets finished mostly higher, as shares rose on expectations of a U.S. interest-rate cut.

Market Indices
Australia All Ordinaries 6593.60 + 1.33%
Bombay Sensex* 19363.19 + 1.89%
Hong Kong Hang Seng 28643.61 + 0.57%
Japan Nikkei 15680.67 + 1.08%
Shanghai Composite 4871.77 - 2.63%
Singapore STI 3521.27 + 1.24%
South Korea Composite 1906.00 + 1.51%
Taiwan Weighted 8586.40 + 1.65%

*Late Trading

Sub Prime Fatigue Sets In

The US market closed last night up 331 or 2.6% to 13290, a two-day rally of more than 500 points. Wednesday's buying frenzy was sparked by fresh hopes of a Fed rate cut, signs of life in the battered financial sector and plunging oil prices dwon $4 to $90.

The Fed said that the economy looks weak and that housing will not recover until late 2008. One of the Fed governors also said that the Fed must be flexible on interest rates. This is seen as code words that the Fed will cut interest rates aggressively.

All that, and SUB PRIME FATIGUE. It seems that daily one bank or another is setting aside provisions for sub prime based securities. It's gotten to the stage that if you do not announce provisions, the company is immediately suspect. Think about it! If everyone around you are taking US$8 billion provisions, you would be a fool not to take a similar amount even if you don't need it or need a lower number. You can always write it back when the market becomes more sane, and take a big bonus in that year. If you don't take a big enough number now, and come back for more later, your job is on the line.

Asian stocks rallied, tracking an overnight surge on Wall Street amid hopes of another interest-rate cut. Hong Kong and Shanghai both finished more than 4% higher.

Market Indices
Australia All Ordinaries 6507.20 + 1.16%
Bombay Sensex* 19003.26 + 0.34%
Hong Kong Hang Seng 28482.54 + 4.06%
Japan Nikkei 15513.74 + 2.38%
Shanghai Composite 5003.33 + 4.16%
Singapore STI 3478.22 + 3.22%
South Korea Composite 1877.56 + 2.34%
Taiwan Weighted 8447.03 + 2.06%

*Late trading

Yoyo Market

Asian markets finished mostly lower Wednesday, with oil companies and blue chips weighing on Japan's benchmark index, snapping a three-day winning streak. However, HK finished up slightly after to-ing and fro-ing all day. We expected the index to open higher and it did by about 120. Then it dipped into negative territory, and went back and forth. If not for the weakness in HSBC (#5) we would have finished up higher especially with the US up 215 overnight.

Bank of China (#3988) is still weak after Temasek the Singapore Government investing arm sold 5% of its' holdings. It seems to me that now may be a good time to buy BOC.

Other Mainland companies looking for cornerstone investors may now have second thoughts about the investment horizon of Temasek.

Market Indices
Australia All Ordinaries 6432.80 - 0.94%
Bombay Sensex* 18942.84 - 0.97%
Hong Kong Hang Seng 27371.24 + 0.59%
Japan Nikkei 15153.78 - 0.45%
Shanghai Composite 4803.39 - 1.19%
Singapore STI 3369.72 - 0.09%
South Korea Composite 1834.69 - 1.35%
Taiwan Weighted 8276.26 - 1.19%

*Late trading

Black Monday Follows Black Friday

In the US, the Friday after Thanksgiving is known as "Black Friday". The market reacted quite well, and HK followed suit yesterday going up more than 1,000. But last night, amid concerns about the fall out from sub prime, credit woes and recession fears, the Dow industrials tumbled roughly 240 points, more than erasing their bounce on Black Friday. The financial sector was particularly hard-hit, with Citigroup sinking 6% to less than $30 a share and Goldman Sachs off 4%. The yield on the 10-year Treasury note plunged to a two-year low.

Asian markets followed the US lead down, though Tokyo and South Korea recovered from early losses to finish higher.

Market Indices
Australia All Ordinaries 6493.60 - 0.61%
Bombay Sensex* 19143.32 - 0.54%
Hong Kong Hang Seng 27210.21 - 1.51%
Japan Nikkei 15222.85 + 0.58%
Shanghai Composite 4861.11 - 1.97%
Singapore STI 3372.64 - 1.34%
South Korea Composite 1859.79 + 0.24%
Taiwan Weighted 8375.76 - 1.79%

*Late trading

November 26, 2007

Most Asian markets rallied, as investors took heart from rosy U.S. shopping figures. Hong Kong surged 4.1% and Seoul soared 4.7%.

Market Indices
Australia All Ordinaries 6533.20 + 2.20%
Bombay Sensex* 19247.54 + 2.09%
Hong Kong Hang Seng 27626.62 + 4.09%
Japan Nikkei 15135.21 + 1.66%
Shanghai Composite 4958.84 - 1.46%
Singapore STI 3418.58 + 2.79%
South Korea Composite 1855.33 + 4.65%
Taiwan Weighted 8528.33 + 2.23%

*Late trading

The Thru Train Stops

Trading throughout the week was weak as the double whammy of sub prime problems in the US, and the news that the Chinese government is turning off the illegal funds flow dominated the news.

Apparently, the Shenzhen Branch of the PBOC (people's Bank of China, the Central Bank) instructed the Shenzhen Banks to limit the amount of cash that can be withdrawn by customers to try and stem the flow of illegally remitted funds to HK. The Mainland authorities were concerned that Chinese ccitizens were abandoning the Mainland market for HK where the same shares can be bought at a lower price.

The thru train (where chinese citizens will be allowed to invest directly in the HK market) has now been put back with no date. This is apparently caused by concerns that the Mainland investors are not sophisticated enough to play in the open HK market against foreign hedge funds who will offload shares to them at a high price. Hmm, interesting concept that. They can buy the same shares of dual listed companies in HK at a lower price than in China but we are still worried that they are buying them at too high a price in HK?

I guess since HK is an open market, the hedge funds can take their money and run which is not possible on the Mainland since China is a closed market. However that still leaves the investor with shares that are still cheaper than what they have to pay for them on the Mainland.

Uncle 4 Strikes Again!

After the yo-yo gyrations of the past few days. yesterday provided some relief as the HK market gained some precious ground. This time, it's because Uncle Four (aka Mr. Lewe Shau Kww) our local "Warren Buffet" told reporters that he thinks the market will still finish the year around 30,000, and he is putting some HK$10 billion into it.

Market Indices
Australia All Ordinaries 6392.40 - 0.04%
Bombay Sensex* 18852.87 + 1.76%
Hong Kong Hang Seng 26498.13 + 1.90%
Japan Nikkei** 14888.77 + 0.34%
Shanghai Composite 5032.13 + 0.96%
Singapore STI 3315.57 + 0.08%
South Korea Composite 1772.88 - 1.45%
Taiwan Weighted 8342.20 - 1.85%

*Late trading
**Closed for holiday

Crude Oil at US$99 Per Barrel

Asian markets were mostly lower. Hong Kong and Shanghai shares felled on U.S. economic concerns and a broader decline in Chinese markets.

Crude-oil futures broke above $99 a barrel in early trading yesterday, and energy analysts see little to reverse the trends that have sent crude on its record breaking spree.

The weakening U.S. dollar, the currency used to buy and sell oil globally, is helping reinforce the notion that oil prices could remain high. The dollar sank to a new low against the euro yesterday on pessimism about the American economy and speculation the U.S. will cut interest rates again. Combined with strong global energy demand, the market appears willing to bear prices that would have shocked many in months past.

The survey of energy analysts did say, however, that prices would simmer down at the end of 2008, as the world's richest economies begin to slowdown.

Market Indices
Australia All Ordinaries 6395.10 - 0.85%
Bombay Sensex 18526.32 - 0.40%
Hong Kong Hang Seng 26004.92 - 2.30%
Japan Nikkei 14888.77 - 0.34%
Shanghai Composite 4984.16 - 4.41%
Singapore STI 3312.88 - 1.03%
South Korea Composite 1799.02 - 0.44%
Taiwan Weighted 8499.37 + 0.18%

It's the US Economy Now, Is It?

Asian stocks fell sharply at concerns that the U.S. economy, the most important export market for many of the region's companies, would continue to weaken.

Market Indices
Australia All Ordinaries 6450.20 - 0.62%
Bombay Sensex * 18602.62 - 3.52%
Hong Kong Hang Seng 26618.19 - 4.15%
Japan Nikkei 14837.66 - 2.46%
Shanghai Composite 5214.22 - 1.50%
Singapore STI 3347.20 - 2.65%
South Korea Composite 1806.99 - 3.49%
Taiwan Weighted 8484.11 - 2.27%

*Intraday

You Win Some, and Lose Some

Asian stocks and currencies regained some ground in a late-session sentiment shift, with currency moves highlighting an easing of the risk aversion that earlier weighed on markets.

Market Indices
Australia All Ordinaries 6490.20 - 1.68%
Bombay Sensex* 19506.84 - 0.64%
Hong Kong Hang Seng 27771.21 + 1.13%
Japan Nikkei 15211.52 + 1.12%
Shanghai Composite 5293.70 + 0.45%
Singapore STI 3438.27 + 0.78%
South Korea Composite 1872.24 - 1.12%
Taiwan Weighted 8680.86 + 0.00%

*Intraday

Chinese Regulators Order Lending Freeze

The Dow industrials tumbled more than 1.5% to close below 13000 for just the second time since August 16, dragged down by fresh worries about the housing and credit markets.

Asian markets ended mostly lower. Hong Kong stocks declined on concerns related to fund inflows from mainland China.

In an attempt to halt the rampant investment that is threatening to overheat the world's fastest growing major economy, Chinese regulators, over the past few weeks, have ordered commercial banks to freeze lending through the end of this year.

A China Banking Regulatory Commission official in Shanghai confirmed that local and Chinese subsidiaries of foreign banks have been requested to ensure that loans outstanding at year end don't exceed Oct. 31 levels.

Beijing's options are limited. Raising interest rates would lift the level of its currency, the yuan, to levels that exporters might find uncomfortable.

The lending freeze may, among other things, weaken earnings of key companies listed on the stock market and leave less cash in the financial system that might flow into the market.

Market Indices
Australia All Ordinaries 6601.30 + 1.15%
Bombay Sensex * 19633.36 - 0.33%
Hong Kong Hang Seng 27460.17 - 0.56%
Japan Nikkei 15042.56 - 0.74%
Shanghai Composite 5269.81 - 0.87%
Singapore STI 3411.72 - 0.85%
South Korea Composite 1893.47 - 1.70%
Taiwan Weighted 8680.71 - 0.96%

*Intraday

Curbs on Illegal Funds Flow

Asian markets fell, with Hong Kong plummeting 3.95% on worries that China is cracking down on illegal fund outflows into the city's stock market.

Market Indices
Australia All Ordinaries 6526.10 - 1.04%
Bombay Sensex* 19698.36 - 0.44%
Hong Kong Hang Seng 27614.43 - 3.95%
Japan Nikkei 15154.61 - 1.57%
Shanghai Composite 5316.27 - 0.91%
Singapore STI 3440.96 - 1.05%
South Korea Composite 1926.20 - 1.11%
Taiwan Weighted 8764.82 - 1.58%

*Late trading

Wall Street Sneezes and We All catch A Cold

Asian markets ended lower following declines on Wall Street. Expectations of rising interest rates in China weighed on Hong Kong and Shanghai shares.

Market Indices
Australia All Ordinaries 6594.40 - 0.84%
Bombay Sensex* 19784.89 - 0.72%
Hong Kong Hang Seng 28751.21 - 1.42%
Japan Nikkei 15396.30 - 0.67%
Shanghai Composite 5365.26 - 0.88%
Singapore STI 3477.59 - 1.34%
South Korea Composite 1947.74 - 1.26%
Taiwan Weighted 8905.41 - 0.42%

*Late trading

End of Correction? That is the Question!

The US market rose 316 overnight and HK went up 1,362 to close at 29,166 on HK$149 billion turnover. China Mobile up 9% and accounted for 363 points of the rise.

Property counters were all up except for New World Properties which fell against the trend. Mongolian Energy #276 fell 16% from $13.80 to $11.56 after rising as high as $14.42 and then falling to as low as $9.60 before recovering near the close.

Market Indices
Australia All Ordinaries 6650.00 + 1.20%
Bombay Sensex* 19868.18 + 4.37%
Hong Kong Hang Seng 29166.01 + 4.90%
Japan Nikkei 15499.56 + 2.47%
Shanghai Composite 5412.69 + 4.94%
Singapore STI 3531.45 + 1.61%
South Korea Composite 1972.58 + 2.05%
Taiwan Weighted 8942.93 + 2.47%

*Late trading

Yen broke 110 to the Dollar

Hong Kong ended 3.88% lower, Tokyo dropped about 2.5% and Shanghai shed more than 2. The dollar briefly fell below ¥110 before regaining ground. But the damage has been done. The market is waiting for the unwinding of the Yen carry trade.

Market Indices
Australia All Ordinaries 6523.30 - 1.27%
Bombay Sensex* 18669.20 - 1.26%
Hong Kong Hang Seng 27665.73 - 3.88%
Japan Nikkei 15197.09 - 2.48%
Shanghai Composite 5187.73 - 2.40%
Singapore STI 3510.95 - 2.46%
South Korea Composite 1923.42 - 3.37%
Taiwan Weighted 8670.61 - 3.35%

*Late trading

HK Hit with Aftershocks

The HK market took a big hit as the US market dropped 360 last night. After falling over 1,000 points, the market clawed its way back to close down 3%. Not a bad result considering. However, the exchange's processing capacity is more worrying.

Yesterday, all brokers reported a massive slowdown in the exchange's computer system when entering orders for Alibaba's trading debut. Some orders were left in limbo for up to 10 minutes waiting on the exchange's system to process them.

Unfortunately, during this period, we were unable to amend or cancel the orders. All we had was a message that the order was under processing. When the order was finally processed, the price may have moved beyond the specified range resulting in the order being rejected after sitting in the processing queue. Then it had to be re-entered again.

The entire issue can be avoided by increasing the size of the order queue. This is especially important after the trading spreads were narrowed and shares often trading beyond the 24 spread range. the resulting re-input and processing of orders increased the demand on processing cycles and increased line traffic. Technically, the exchange's order processing system did not slow down. By limiting the order procesing queue, the workload was pushed back into the communications network and the participants' own systems. The result is that market depth is reduced and orders have to be input many times before they can be executed. From the exchange's standpoint, increasing the capacity will mean more trades execution and bigger profits. Let's get this fixed as soon as possible.

Market Indices
Australia All Ordinaries 6568.50 - 2.37%
Bombay Sensex* 19058.93 - 1.20%
Hong Kong Hang Seng 28760.22 - 3.19%
Japan Nikkei 15771.57 - 2.02%
Shanghai Composite 5330.02 - 4.85%
Singapore STI** 3673.01 - 0.27%
South Korea Composite 1979.56 - 3.11%
Taiwan Weighted 8937.58 - 3.90%

*Late trading
**Closed for holiday

Marking Time ....

HK opened strong but succumbed to some profit taking. it still managed to close up for the day. Over the last 2 days, we have recovered half of the 1,500 point loss on Monday. It seems that with the availability of information over the internet, TV etc. the markets adjustments are shorter in duration but bigger in fluctuations. This is to be expected as everyone now have access to the news at virtually the same time.

Market Indices
Australia All Ordinaries 6728.10 + 1.04%
Bombay Sensex* 19274.16 - 0.65%
Hong Kong Hang Seng 29708.93 + 0.92%
Japan Nikkei 16096.68 - 0.98%
Shanghai Composite 5601.78 + 1.18%
Singapore STI 3673.01 - 0.27%
South Korea Composite 2043.19 - 0.54%
Taiwan Weighted 9300.22 + 0.08%

*Late trading

Steady Does It

The HK market kept an even keel and managed to claw back some of the losses from yesterday. Investrors were still jittery and some have obviously decided to take some money off the table now that the "thru train" appears to have been delayed.

A series of bad news came out over the weekend when Wen Jia Bao said that the thru train will need further swtudy to ensure it does not adversely affect the Chinese market. The concern there is that too much money will leave the Shanghai market causing a crash on the Mainland.

The CSRC also reminded funds that they are to invest no more than 30% in any one market. Again, this is clearly aimed at curbing the flow of money to HK because currently, QDII funds are only allowed to invest in 1 overseas market and that is HK. There appears to be a big worry that Chinese investors will be buying into HK just in time for foreign investors to cash out, and be left holding over priced shares. This seems a bit rich because the H-shares traded in HK are a a deep discount to the corresponding A-shares in China. For example, PetroChina trades at a 150% premium to HK. Shares in HK are still cheap compared to China.

The main worry is that foreign investors will take advantage of gullible Chinese investors to off load their shares. Let them off load their shares if they want to. The story is China and they cannot afford not to buy in at the start.

Going back to PetroChina. This is definitely overvalued on the Mainland market. It is twice the market capitalisation of Exxon although it earns half the profits and have half the reserves. It is valued at 54x forecast earnings vs. Exxon 13x. Even the HK shares are over valued at 22x. Even if it manages to double the reserves and profits, it should only then be wirth as much as Exxon because oil is an international commodity.

Another story today is the listing of Alibaba. The IPO price was HK$13.50. The shares traded on the grey market yesterday at around HK$25. It opened at HK$32. Traded briefly below HK$30 and then went as high as HK$39.50 before closing slightly lower. At HK$13.50 it listed at 55x forward earnings. People expect this to the Chinese Google. There are some differences. Google is a consumer to consumer platform while Alibaba is business to business. There are a lot more consumers than there are businesses. If it is so great a deal, why have the strategic investors decided to cash out by selling their shares?

PetroChina: World's Biggest Company By Market Capitalisation

PetroChina's shares tripled in value on trading debut in Shanghai. It surged past Exxon Mobil to become the world's most highly valued company by market capitalization. But is this a true value?

If we applied the share price of PetroChina Co. on the Shanghai Stock Exchange to the whole of the company, China's major oil and gas producer would have a market cap of around $1.08 trillion, making it the world's biggest company. But only a mere 2.2% of its share capital is sold in the Chinese IPO and about 86% of its shares are still held by the state-owned parent.

Since very few shares are publicly traded spread -- scarcity that can drive up prices. If we were to value the company by tradeable shares the total value of PetroChina's publicly traded shares would be about $72.5 billion. In addition, PetroChina's Class A shares in China are trading at around 50 times this year's forecast earnings, compared with 20 times earnings for its Hong Kong-listed stock. Big oil companies average of 10 times forecast earnings internationally.

As I have said before, Exxon has higher reserves than PetroChina. Enough said.

Detour of the Thru Train

The HK market has been running ahead of itself when it was announced in mid August that the Bohai Branch (Tianjin City) of the Bank of China will be allowed to trade HK stocks for Chinese investors. We were anticipating that all of China can invest in HK stocks either thru the BOC or some other bank as we had expected that other banks will be allowed into the scheme. The announcement put paid to that as it was originally set up as an "experiment" in Tianjin only. The Chinese authorities got cold feet after seeing the response. They were afraid that all chinese investors will go to HK and the China stock market will fall. Stocks that are listed inbothe HK and china, trade at a 60% premium in China.

There is also some turf wars as the tianjin experiemnt was announced by the China Banking Regulatory Commission and the China Securities Regulatory Commission got very upset and warned everyone that it could bring the chinese market down. Of course no one wanted to be the one responsible for causing the collapse of the chinese market and so everyone backed off. The end result may be the collapse of the HK market.

Market Indices
Australia All Ordinaries 6620.10 - 1.58%
Bombay Sensex* 19590.78 - 1.93%
Hong Kong Hang Seng 28942.32 - 5.01%
Japan Nikkei 16268.92 - 1.50%
Shanghai Composite 5634.45 - 2.48%
Singapore STI 3670.18 - 1.21%
South Korea Composite 2015.76 - 0.18%
Taiwan Weighted 9308.60 + 0.38%

*Late trading

Citigroup Worries the Street

The Dow industrials closed down 362.14, or 2.6%, at 13567.87, slammed by fresh credit worries a day after the Fed rate cut. The financial sector led the selloff, with Citigroup down nearly 7% and J.P. Morgan and AIG each off 6%. Exxon Mobil's shares slid 3% after its below-forecast earnings. The Nasdaq ended the day 2.25% lower, and the S&P fell 2.6%, its worst day since early August. Oil fell more than $1 a barrel.

In spite of HK banks cutting interest rate, the HK market followed the US by dropping 1,024 points to 30,468 just managing to hold on above 30,000. Turnover was not particularly high at HK$154 billion.

Asian markets fell sharply, as investors digested fresh evidence of a weakening U.S. economy and the prospect that they can't count on further support from the Federal Reserve.

Market Indices
Australia All Ordinaries 6726.70 - 1.85%
Bombay Sensex* 19960.68 + 1.20%
Hong Kong Hang Seng 30468.34 - 3.25%
Japan Nikkei 16517.48 - 2.09%
Shanghai Composite 5777.80 - 2.31%
Singapore STI 3715.32 - 2.32%
South Korea Composite 2019.34 - 2.12%
Taiwan Weighted 9273.09 - 3.39%

*Intraday trade

The Waiting Game

The HK market opened fairly strong but eventually fell back. The hope of a 50 basis point cut was over optimistic. At the end of the trading day the HSI rose 140 to 31,492.

Will the HKAB follow through on rate the cut? It seems almost certain that they will. Yesterday, the HKMA injected HK$7.8 billion to mop up excess US$ as too much liquidity was flowing in to HK. With the US$ weakening, and the RMB expected to increase at the rate of at least 2% p.a. we are seeing a replay of using the HK stock market as a proxy for the currency (remember the hedge funds attack on the HK$ in 1998?) except this time it is the reverse. Since foreign investors cannot buy RMB or A-shares on the Mainland, they are opting to buy H-shares (Chinese companies listed in HK)as a proxy for the RMB since their assets and income streams are in RMB.



Market Indicies
Australia All Ordinaries 6853.60 + 1.10%
Bombay Sensex* 19724.35 - 0.57%
Hong Kong Hang Seng 31492.88 + 0.45%
Japan Nikkei 16870.40 + 0.79%
Shanghai Composite 5914.28 - 0.68%
Singapore STI 3803.56 - 0.06%
South Korea Composite 2063.14 - 0.08%
Taiwan Weighted 9598.23 - 1.17%

*Late trading