hello haim, i elected to play the japan incident by combination of
(1) adding to aussie hotsie totsie Message 27267492
(2) loading up on clf Message 27265034 and
(3) per re-calibration imperative, closed out some short put/call encumbrances on certain remx and paas long positions Message 27263207 so that the long positions can more fully express their bullish behavior, and
(4) readying to harvest pt @ the 18xx level should it get there as they were acquire at onset of japan incident Message 27240142
in the mean time, just in in-tray, per greed n fear, time for china easing
· Wall Street-correlated stock markets are moving up again, albeit in unconvincing trading volume. It is hard not to form the conclusion that liquidity-driven Western equity markets still want to go up unless some particularly nasty news intervenes. Still GREED & fear remains as wary as ever of the fundamental merits of the domestic equity investment story in either the US or Europe.
· The tightening cycle in China is near an end, though this does not mean that there will be no more interest rate and reserve requirement hikes before there is an official declaration of victory by the PBOC. Experience shows that the always policy obsessed Shanghai market will be very sensitive to the easing signal when it comes.
· Chinese equity valuations are now looking very attractive, most particularly if tightening ends. The risk for investors right now in Chinese equities is less the “out-of-control” inflation story than that the authorities overdo the tightening leading to a hard landing. Still this is not GREED & fear’s base case.
· GREED & fear is content for now to be overweight China in the relative-return portfolio and will add a further one percentage point to that weighting this week by reducing the weighting in Korea. The investment in Rural Electrification Corp of India in the long-only portfolio will be removed with 2ppts added to the existing investment in the China A share tracker fund and 1ppt to IDFC.
· From the perspective of a long-only investor in China, GREED & fear would continue to favour core holdings in the e-commerce stocks, as well as those sectors geared to the social housing construction boom, such as cement stocks, household appliances and construction machinery.
· History shows that the property sector is normally highly correlated with the MSCI China Index. This raises the issue of whether there can be a bull run in China without the property stocks participating. This is a pertinent point given the authorities are unlikely to lift the controls on residential property when they declare victory on inflation.
· Still the mainland authorities seemingly just want to keep property price growth below income growth rather than looking for prices to fall. GREED & fear would advise investors to accumulate property stocks on weakness focusing on those developers with a policy-compliant manufacturing business model.
· India remains the Asian stock market most negatively exposed to a further Middle East-news driven spike in the oil price. This will remain a negative consideration for India in the context of its relative merits in an Asian or emerging market portfolio. Still, a significant de-rating has already occurred in India.
· A marked feature of the Indian market so far this year for GREED & fear is how little foreign selling has occurred given the degree of negative sentiment hitting the market. There are two ways of looking at this phenomenon. The first is that there is still a lot of potential foreign selling pressure. The second is that foreign money will prove to be resilient because of belief in the long term Indian growth story.
· The chief virtue of the FY12 India budget is that it contained no nasty surprises from an investor standpoint. Still the risk is oil and an overshoot in the energy subsidy in the context of the country’s continuing current account deficit and still relatively high fiscal deficit.
· Investors are still assuming that, when push comes to shove, Germany will still move towards accepting the principle of collective responsibility for Euroland sovereign debt. Still GREED & fear’s view remains that further German moves in this direction will only come in response to market pressures.
· The historic defeat of the Christian Democratic Union (CDU) in Sunday’s Baden-Württemberg state election is undoubtedly significant in that it has badly eroded Frau Merkel’s political capital. Her practice in recent years of trimming to the left by adopting more pinko positions has badly backfired.
· Germany still looks likely to respond to seemingly inevitable future market pressures by moving further towards the principle of underwriting collective fiscal responsibility. Macro investors should continue to bet on a long-term rise in German CDS spreads since all roads seem to point to Germans making the biggest contribution to the periphery’s bailout.
· GREED & fear’s view is that investors are insane to own MBS given the growing percentage of negative equity in the housing market, given the political morass that is the US housing market and the not insignificant risk at some stage of mortgage debt relief, and given the legal reality that Fannie and Freddie are still not explicitly guaranteed by the Federal Government.
· The existing investment in Yamada Denki in the Japanese long-only portfolio will be replaced by an investment in Yamaha Motor.
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