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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 378.35+2.7%4:00 PM EST
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To: energyplay who wrote (65951)9/9/2010 6:55:30 PM
From: TobagoJack  Read Replies (1) of 217648
 
just in in-tray, per greed n fear

· The markets have started to focus on Europe’s problems again. GREED & fear continues to believe that the European banks’ exposure to PIIGS debt remains the most potentially incendiary systemic issue for financial markets to contend with for the rest of 2010 though next year systemic risk focus will likely switch back to America.

· Renewed risk aversion in Euroland would serve the useful purpose of giving Billyboy Ben the political cover he is looking for to accelerate quantitative easing precisely because he can blame the problem on Euroland. In any such a renewed equity correction investors should also continue to expect both the yen and dollar to rally further against the euro.

· A notable feature of Asia this year has been the remarkable outperformance of the “Asean-4” emerging markets; namely Indonesia, Malaysia, Philippines and Thailand. This is reflected in the rising trading volume in these four markets relative to the rest of Asia ex-Japan. This should be expected to continue for now given the powerful self feeding dynamic where previously illiquid markets or stocks become more investable.

· GREED & fear will add another percentage point to Thailand in the relative-return portfolio this week where all the recent data is indicating an accelerating domestic demand cycle. The money will be invested by shaving the overweight in China.

· The “Asean-4” markets have lots of good domestic demand-orientated stocks. And they do not have governments actively trying to suppress residential property markets. In this sense the asset inflation story in all these markets has at least tactically greater momentum than other markets in Asia.

· The improvement in cross-strait relations, sealed by the signing of ECFA in late June, has triggered a genuine improvement in Taiwan’s long-moribund domestic economy.

· Still, the Taiwan banking sector’s net interest margins remain as miserably low as ever. The insurance sector is also not exciting given that investment returns are still hard to achieve relative to the hurdle rate required to meet obligations to policyholders.

· CLSA’s Capital Links story is happening but not yet at a pace quick enough to excite the market. For now the two most direct manifestations of Capital Links are direct flights and tourist arrivals. But the most powerful trend has been the ongoing appreciation in residential property values in Taipei City and Taipei County.

· Taiwan has lately joined the Asian crusade to control asset inflation. More tightening measures are likely, sooner or later. But they will probably be deferred until after upcoming city mayoral electors due to be held on 27 November.

· Near term sentiment on the Taiwan domestic story will be driven by politics with mayoral elections due in November. Still GREED & fear’s fundamental view is that the only thing that really matters for continuing positive momentum on Capital Links is the next presidential election in March 2012. And the most likely outcome remains that Taiwan President Ma Ying-jeou will be re-elected.

· GREED & fear assumes that the domestic plays featured in CLSA’s Capital Links portfolio will continue to outperform. The best approach for investors is to buy the constituents of this portfolio since there is no one stock which fully captures the story.

· The spectacular success of Apple’s iPad product has raised fundamental questions for the notebook industry where Taiwan producers are such dominant players. The manifestation of this has been stagnant notebook sales as people wait for the opportunity to buy the hot iPad or similar “tablet” clone devices.

· GREED & fear will introduce Taiwan touch sensor maker Sintek into the long-only Asia ex-Japan portfolio this week to replace Yuanta Financial. Thai property developer Preuksa will also be added into the portfolio to replace China Overseas Land.

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