Timing is Right

After yesterday's decline of 5.3%, the Shanghai index has dropped over 60% from the peak of October 2008, average P/E is now 15x compared to US of 23x (although HK is cheaper still at 13x).

The Chinese authorities are concentrating on the Olympics right now but as soon as that is over, the focus will move back to the economy. Over the past month, the authorities have already announced a loosening of loans to SME's. In the wake of the snow disaster in the first quarter and the Sichuan earthquake, trhere will be massive infrastructure programmes. Over the next 2 years, these are estimated at over USD200 billion a year.

With inflation starting to come back under control and oil prices moving back down, the authorities now has more room to move. Don't forget, 2009 is the 60th anniversary of the birth of New China. Celebrations in Ocotber 2009 will eclipse the Olympics which after all is for the foreigners and external media to say that we have arrived. The 60th anniversary is for the Chinese citizens. So the economy better be good!