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

To: carranza2 who wrote (70945)	2/10/2011 6:02:55 PM
From: TobagoJack	Read Replies (1) \| Respond to of 218462

Agree. Fiat money inflation is a global problem this time, and all monies rushing toward end-game. Only one permanent and drastic solution. Very interesting to watch. In the mean time, just in in-tray per greed n fear · Cyclical evidence on the US economy continues to improve. Investors are beginning to give the benefit of the doubt to the view that the American banking system has begun working again. The recent employment data has also been decent enough not to dent the growing cyclical optimism on the US economy. · It is surely only a matter of time, if the cyclical data continues to improve, before money markets start to price in a much earlier tightening in monetary policy. Indeed there is even the increasing potential for a growth scare. If that happens it will be interesting to see if the chronically weak US dollar finally gets some traction. Investors should also not be surprised to see a further correction in gold bullion in such a context of increased cyclical optimism. · GREED & fear still finds it hard to believe that America is really about to enjoy a normalisation of the economy in terms of a healthy releveraging. This is because the fundamental position of the US economy remains deflationary. · GREED & fear will admit that the market action of late, namely a US stock market rally led by the bank stocks, is consistent with a releveraging story as is the back up in Treasury bond yields. In GREED & fear’s view 10-year bond yields would probably have to back up a lot more before they would begin to upset the stock market since rising Treasury bond yields are being interpreted as a signal of deflationary pressures waning. · The improving cyclical optimism on the US is driving two asset allocation decisions globally. The first is from bonds to equities in the developed world. The second within the global equity space is from emerging markets to developed markets. This is now a consensus trade. Still this trade can continue so long as US cyclical data improves and investors are not convinced that Chinese headline inflation has peaked. · With so much money invested in markets like India and Indonesia last year, there is clearly the potential for more selling on a flow of funds basis whatever the fundamentals. Still GREED & fear remains of the view that one of the most interesting opportunities provided by the present inflation scare will be for investors to buy the likes of India and Indonesia at significantly lower levels. · With its commodity gearing, Malaysia remains the one Asean market that is truly defensive in the context of the current inflation scare. The Malaysian story is looking more interesting than at any time since the false euphoria that preceded the Asian Crisis. There are two government driven investment themes for investors to play. · The “Economic Transformation Programme” (ETP) looks like it will serve the useful role of creating an entity outside the existing bureaucracy to push through things that should have been done already, such as the construction of a Mass Rapid Transit system in Kuala Lumpur. · A second tactical domestic story for investors to play is the growing potential for southern Johor to become a Shenzhen-style low cost hinterland to Singapore. Momentum continues to build on the Johor story. But the real confirmation will come when Singapore GLCs start to make real investments in Iskandar, alongside hopefully Singapore SMEs. In GREED & fear’s view such evidence will be forthcoming during the next year. · Still it requires an altogether greater level of faith to assume that Malaysia can break out of what is rightly defined in Kuala Lumpur as the economy’s “middle income trap” in terms of the need to move to a higher form of “value-added” and away from its traditional role as a final assembler of manufactured exports. · For the above to happen Malaysia requires the return of foreign direct investment which has essentially been absent since the Asian Crisis. And for this to happen in turn requires in GREED & fear’s view full-scale dismantling of the NEP and the related removal of the government’s role in “crowding out” the private sector. · GREED & fear will include UEM Land in the long-only Asia ex-Japan portfolio by removing the existing Malaysia play Bursa Malaysia. While remaining still in large part a “concept” stock, the execution risk for UEM Land has been significantly diluted by the recent merger with private sector high-end developer Sunrise. · From a shorter-term point of view, GREED & fear retains the view that Malaysia remains the Asean market most likely to outperform in Asia during the course of the continuing inflation scare. But there remain better structural stories in Asia and GREED & fear would continue to favour India and Indonesia for the long term. · The reason why the Japanese stock market has not outperformed Wall Street so far is the surprising failure of the yen to correct with the ongoing rally in the S&P500. Still as the potential for a growth scare in America builds, and accordingly Fed monetary tightening expectations are pushed forward, so does the potential grow for a sudden weakening of the yen. · If the Japanese equity story has a certain momentum going for it, so far the buying has been led by foreign investors. For evidence that Japan is truly emerging out of deflation, and that this is not just another gaijin-led “trade”, it would be nice to see domestic institutional investors switching out of JGBs into equities. This has not yet happened. · The weighting in Softbank in the Japanese long-only portfolio will be increased by 2ppts with the money shaved from reducing the investment in Fast Retailing and Yahoo Japan by 1ppt each. An additional 1ppt will be added to Malaysia in the Asia Pacific ex-Japan relative-return portfolio with the money taken from Hong Kong. Please consider the 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.