I am looking at Japan- I would think we will be able to maintain this 14400 level the previous low. This new round of crisis finds its route in China rumoured devaluation which I had highlighted couple of weeks back and Japan solidly entrenched in a recession, two quarters of negative growth. I would think that China devaluation and its impact on HSI is fully priced but the 'shock' is still not. I tend to think that considering falling exports China may go for that devaluation's however they have an advantage and that is on capital account the convertibility is limited. Unlike Rupiah or Ringgit where Suharto/Mahatir extravagance can be punished China's currency can remain unscathed. China's decision to increase demand through a major domestic spending programme is also important to watch. It may take the pressures of export surplus away if they are really planning to spend the kind of money they have been indicating. However, I remain perennially concerned when state wants to run demand programme. The programmes inevitably fail on return test that is these are pork barrel projects and as such cannot withstand the acid test of returns from the projects in excess of market returns on funds invested. In light of this I will keep a keen eye on China for future reference also as it has a potential to sow seeds of a sequel two of ASEAN crisis within three years. When it would appear that we are out of it. This spending which may help them to ride the tide now may come back to haunt the area.
The chances of a readjustment are say 30% and no more with kind of foreign exchange reserves they have I would consider this particular move as a opportunity ( but anyway I have been buying webs and have added Singapore, South Korea , HSI yesterday) I will keep on doing this as I think that since web prices are already trading at a discount it is worth holding them. I will not like to ditch and re-enter as I thought before rather go for adding new positions after every seven and half percent drop of the Index I buy 50% higher number of shares, suppose if I had bought 1000 Singapore I will after 71/2 percent drop add 1500 more and on next 71/2 drop add 2250. Index linked webs have little changed since last one month although Indexes have dropped much sharper the webs inherent discount some time help the buyer. I remain a buyer and will be in for long term. I ask one question is ASEA removed from the investment scene the answer is no. Japan the support at 14400 is critical but I will like to go long at those level on Index like buying JPN 160 call two months out.
On SPM I would like to think that another test and rebound from 1082 levels looks good this is third or the fourth rebound and if it remains within this tight range I would like to see it breaking the resistance of 1102.
I would think that one needs to short SPM not before 1082 break, if it closes below 1082, I will like to short it even after the first close towards the end of the session. I can see that selling was restricted on BKX which I think is being punished and adjusted for problems in ASEA, although I thought last week going long BKX , I thought that potential in BKX as more banks consolidate exists, somewhere at one of the key supports if ASA stabilises BKX can be played.
We all know it well that ASEA is not the real economic engine house for US companies exports, if any this new round will slow down the economy to a level which may be anyway welcome. With ASEA in turmoil since last nine months we have had no effect on US economy so far. This drop in my opinion will also not affect the corporate earnings with exception of Banks or may be some big caps like Boeing or others, overall we are up only 8% on the DOW and this test of many critical MA's is important for market continued strength. I would be more worried if market totally disregards the selling in ASEA. In the process I think things are overdone but that is the first sign of market mavens to start building positions with a view of 12 months.
I consider China and Russia as two unknowns if problems hit these nations politically or financially than it will more of strategic concerns which will lead to market selling. Instability due to China and Russia will bring absolutely different kind of selling. One needs to be on the look out for that. I am seeing interestingly that HSI is slightly up whereas China is down 2%, this indicates to me that HSI is now priced for unexpected. I will watch for 1300 level on China a break of that will mean trouble for ASEA once again.
I will like to take a gamble to go long at 1094 break that is the contrary trade, the only risk.
I see now that SOX may break this 225 low is a bad news from market performer like INTC, it was nice to see that last night SOX lost 3 points against Dow's 207. I will also like to buy some stocks here in my portfolio. Like in my opinion a speculative long call position on Com for Oct can be interesting.
However, I will like to remain cautious and a break of 1082 will automatically lead me to hold some additional puts. |
