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

To: Haim R. Branisteanu who wrote (74308)	5/19/2011 6:52:15 PM
From: TobagoJack	Read Replies (3) \| Respond to of 217749

have not. do you have? in the mean time, just in in-tray, per greed n fear · Despite this week’s admission by Eurogroup President Jean-Claude Juncker that a “re-profiling” of Greek debt may be necessary, GREED & fear’s view remains that the “euro quake” risk is the most likely trigger of renewed risk aversion in coming months. If Germany wants to maintain the more than 50 year old Euroland experiment, it is going to have to pay for it by moving towards fiscal integration as well as monetary integration. · This week’s extraordinary goings on in Manhattan should accelerate the time when the IMF is headed by a representative of the so-called “BRICs”. The reality is that for the foreseeable future IMF bailouts are likely to be taken place primarily in the debt-infested West. For that reason alone it makes sense for the head of the institution to hail from the “emerging” world. · In GREED & fear’s view it is likely that coming months will see a classic neurotic market mood swing towards China where investors stop worrying about inflation and start worrying about the opposite. · GREED & fear remains relatively relaxed in the short term on the China inflation issue, though there is no doubt that structurally core inflation in China is heading higher. The headline inflation rate is likely to peak with June’s number close to 6%, before heading down for the remainder of the year as a consequence of the statistical base effect and significantly slower MoM food price growth. · Investors in China-geared plays are now more vulnerable in coming months to a typically China focused manic depressive market mood swing from worrying about too hot to worrying about too cold. So long as the Chinese government is perceived to remain in tightening mode, this risk will continue to grow. Still the authorities have complete freedom to turn the liquidity tap back on should they want to. · GREED & fear would advise investors to view likely growing market chatter about hard landing risks as an opportunity to build positions in domestic stocks; most particularly those favoured by current government policies of boosting ordinary people’s incomes, building social housing and building out the infrastructure of the interior of the country. GREED & fear favourite policy-sensitive sectors remain cement, consumer durables and construction machinery. · The Shanghai stock market certainly remains a critical area for all investors in emerging markets to watch, if not the key area. This is because the A-share market is likely to be the lead indicator of any change in policy. For now there are no green lights flashing that an end to tightening is imminent. · The sideways trading pattern which has been a feature of the Shanghai market since mid 2009 is relatively healthy. Still the longer the CSI300 index remains in this sideways trading pattern, the more violent the ultimate breakout will be one way or another. GREED & fear continues to assume that the “break out” will be to the upside. · GREED & fear will this week remove the investment in the A share tracker fund and replace it with more stock specific bets. A 4ppt investment will be introduced in Zoomlion, a construction machinery play, while the existing investment in China National Building Material will be increased by 1ppt. · Chinese cement stocks have already outperformed of late reflecting the market’s understanding of the sector’s gearing to social housing as well as the government’s continuing desire to consolidate the sector. In GREED & fear’s view any correction in this area is a buying opportunity because all the evidence is that political pressures to push social housing are intensifying. · As for the private residential property sector, government policies have now led to a real slowdown in both activity and price growth. The question is now whether the government will ease the restrictions on the residential property market around the same time as it declares victory on inflation. GREED & fear’s base case for now is that most of the restrictions will remain in place until the government has met its social housing construction targets. · GREED & fear continues to take the view that three key criteria, or pillars, need to remain in place for the China growth story to continue. The first is that China maintains a closed capital account. The second is that the Chinese banking system remains liquid with healthy deposit growth. The third is psychological in the sense that the Chinese people continue to believe in the economic management of the central government and so respond to the command economy policy signals. · One area recent developments have raised at least the potential for more fundamental change is the capital account. That is the rapid development of an offshore renminbi market, most particularly in Hong Kong. Indeed this has been growing so fast that the prospects must be growing for either the HKMA or the relevant Chinese authority, or both, to announce cooling down measures sooner rather than later. · Foreign bank lending, like domestic lending, is now slowing quite sharply in China. This is yet another reason why GREED & fear is convinced that China’s inflation scare is about to be replaced by a growth scare. Macro investors, who have not already done so, should short the Australian dollar now and/or buy long-term Australian government bonds on a hedged basis. · The dramatic decision over the past week by Singapore’s Minister Mentor Lee Kuan Yew and Senior Minister Goh Chok Tong to resign from the Cabinet is clearly an acknowledgement of the dramatic message sent by the Singapore electorate in this month’s general election. · This does not cause GREED & fear to question the long-term bullish view on the “red dot” story or indeed on the Singapore dollar. Indeed the decision to hand over leadership unambiguously to a new generation is a positive signal. GREED & fear’s long-term target for the Singapore dollar remain 80 cents against the US dollar. GREED & fear would much rather own the Singapore dollar than the renminbi. Please consider the environment before printing this email. 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