``The art of central banking is too important to be left to bankers.”-William Pesek, Bloomberg Analyst
And for those insisting that China’s global markets have set the pace for Asia’s market, this we have argued against previously on our February 26 to March 2 edition (see The Blame is on China’s “Shanghai Surprise”, But....); we believe that China’s basically closed capital account and very limited markets to both foreign investors as well as to domestic retail investors (in spite of the blow off numbers) will have less impact to global markets than the rest of the playing field with relatively open capital flows structure.
According to Bloomberg’s Scott Lanman and Simon Kennedy (emphasis mine), ``Total stock holdings in China account for just 25 percent of domestic wealth, and in Asia only Indonesia has a smaller market capitalization than China's 60 percent of GDP….China has capped foreign investment at an aggregate $10 billion in the yuan-denominated ``A'' shares, less than the market value of about 700 U.S.-listed companies.”
This week,
If China’s market supposedly LED most of Asia then the recent tremors instigated anew by the government repeated attempts to rein in the parabolic or near vertical run should have caused an equivalent selloff elsewhere, however except for a few seemingly unrelated but insignificant degree of declines in Sri Lanka (-1.32%), Vietnam (-1.12%) and New Zealand (-.2), such China-led premise has ben proven to be a fallacy.
Is it the end of the run for
First and foremost, we do agree that
However, we don’t think bubbles end soon enough, simply because markets can ever remain so irrational against anyone’s expectation, including Mr. Greenspan or Mr. Li Ka Shing.
Another is that government’s repeated attempt to quash the bubble seems to only intensify buying actions. Each decline has been seen as rather a buying opportunity than the end of the streak. Our view is that bubbles usually collapse by their very own weight.
Most importantly,
In addition, the country’s closed capital account and heavily regulated markets have limited the options of the nation’s capability to allocate into other forms of investments. Unless
In the future, contrary to most expectations, it is even possible that the US dollar could gain against the
Finally bubbles don’t usually end with 400% gains from the bottom even at a very short time span. We have previously seen the gains of the Nikkei and of US treasuries as much as we have seen the past the full cycle of the Phisix.
Figure 3: Bloomberg: Saudi’s Tadawul Index
Figure 4: Bloomberg:
While such vertical action can lead to extremely wild swings, given the secular performances of the other asset classes, this tell us that Shenzhen Index could reach somewhere 1,800 to 2,000 for its “a blow off top” which follows the “dramatic correction” which our gurus are looking for (back to 500???).
Of course, the financial markets do not operate on the spectrum of rocket science; hence we work on guess estimates and probabilities.
Over at the Phisix, the momentum has clearly favored the bulls for the moment. The gains which we have previously defined as a “rising tide lifts all boats” have been punctuated as advancers run roughshod on the decliners. We had two days where bulls were all too dominant with 111-6 on Thursday and 90-25 on Friday.
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