Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (55103)	9/17/2009 9:15:17 PM
From: TobagoJack	Read Replies (1) \| Respond to of 217662

:0) i truly believe we have not gotten started yet even as i am imagining i would unload much paper gold at 1100 note: must consider taiwan etf as a bubble play in the mean time, just in in-tray · It is becoming ever clearer that the US dollar will keep weakening so long as equities keep rising. The decline in the US dollar index this week provides further evidence that the dollar is the new carry trade. This raises the risk that the dollar overshoots on the downside, which might ultimately trigger concerns that the Fed has to tighten to defend the currency which in turn would hurt equities which in turn would cause the dollar to rally violently. · If the Asian equity universe looks ripe for an asset bubble as a result of an extended period of easy money in the West, Taiwan is the Asian economy which will most likely have an asset bubble even if GREED & fear is wrong and interest rates normalise in the West sooner than expected. · The climax of cross-strait relations will be some kind of deal or “peace treaty” formally ending the 60 years of hostility between China and Taiwan. This deal will likely be based on China’s tactic recognition of the status quo in terms of Taiwan no longer being forced by Beijing to accept some explicit version of China sovereignty. Such a deal may occur by 2012, if not before. · Local investors are most focused on the drawing up of ECFA which will likely in part be an agreement aimed at reducing tariffs and other trade barriers between the mainland and Taiwan. It will also set up the framework for the integration of the Taiwan and mainland economies over the next 10 years covering both the services and manufacturing sectors. · GREED & fear hears that China sees ECFA as the equivalent of the Sino-British agreement on Hong Kong in 1984, a deal which was concluded in the context of a so-called “One China” framework. This is potentially highly controversial in Taiwan. But a compromise semantic formula can be agreed upon by both sides if the political will is there. GREED & fear’s guess is that China will ultimately cut Taiwan President Ma sufficient slack for that to happen. · The dynamic behind the Capital Links story is clear from the quick recovery in the local residential property market this year after the setback in confidence caused by the Western credit crisis. The market has been driven at the high end by Taiwan businessmen living in China. There is also natural upgrading demand and a lack of supply. · Rich Taiwanese have decided to utilise cheap financing to acquire land banks presumably on the view that Capital Links creates a positive dynamic for asset price appreciation. Such land banking further increases the supply constraint for developers and for the overall market making it even more likely that Taiwan goes into an asset bubble. There is also growing demand for commercial property from the local insurance industry desperate for higher yielding assets. · GREED & fear is more convinced than ever that the Capital Links story in Taiwan is likely to climax in a classic Japanese-like asset bubble where stocks are re-rated for their land bank holdings. But such a market move based on land banks is likely to represent the final “spike” in the story. For now the good news is more likely to be reflected in the share prices of property developers and financial stocks. · The Capital Links story is also about Taiwan getting its confidence back or indeed its raison d’être back. This is the consequence of the long drawn out neo-deflationary malaise suffered by Taiwan’s domestic economy, a trend driven by the connected negatives of hollowing out and fundamental political uncertainty reflecting Taiwan’s anomalous political status in the context of a rising China. · Domestic fund mangers in Taiwan now view the “Capital Links” story as “obvious”. But their problem is the rotational market timing issue of when to overweight domestic plays. In GREED & fear’s view there will inevitably be more positive catalysts to push these stocks as well as inevitable moments of disappointment. Investors should accumulate prominent Capital Links plays on weakness. · It is a positive that the return of retail investors to the Taiwan stock market this year has not been signalled by a significant increase in long margin debt. This indicates that most of the buying has been in cash. This is put down to the plentiful supply of low yielding liquidity in the system as well as to money being repatriated from offshore. · For now, GREED & fear will maintain a structural overweight in Taiwan in the relative-return portfolio based on the continuing belief in the Capital Links story. As for the tech sector’s exposure to a continuing deleveraging Western consumer, it is in GREED & fear’s view not as a negative factor as it used to be. For tech products are not sold with leverage while the end demand for tech toys is much more geographically diversified than it used to be. CLSA CLEAN & GREEN: Please consider our environment before printing this email. The content of this communication is subject to CLSA Legal and Regulatory Notices These can be viewed at clsa.com or sent to you upon request.