China: Climb in or get out?
Summary
A number of subscribers have been asking whether they should load up? We think not just yet. The sub-prime mess, sadly, is morphing from a midget to a monster, and that is hitting more and more banks. Besides, Fed Funds are being reduced for a simple reason: the US growth outlook is worsening. Finally, not all "things" are so "different" this time.Topics Covered
1. Why stay out for now?
2. How to save money off this idea
Background
1.Why stay out for now?
"Is going back into the HK market very much risk" is one question recently submitted.
My response is that it is risky. Having said this I am going for the Alibaba IPO with the very simple view that the stock will rocket early on, so why not join the party? However, for the rest of CEA's two pilot funds, I have asked my bank to skim profits and reduce holdings to the original mounts that I invested.
The risks are more to the US market, and my concern is that psychological de-coupling is wishful thinking: if Wall Street tanks, the rest of the world will follow. Indeed, this is what happened last week: Wall Street fell on Thursday and sure enough, we "de-coupled" Asians fell on Friday. Auf Wiedersehen, de-coupling aunts and uncles!
I don't want to go on and on about why I feel that Wall Street is at risk: you know my views. Indeed, this Friday's banking concerns vindicated my views, namely that The Economic Time™ keeps worsening in America, and that this is one reason why markets are concerned this will exacerbate the sub-prime mess.
Concerning Hong Kong, we all know that when markets want to go up, all the bad news is irrelevant, and if the markets want to go down, all the good news is irrelevant.
This time, I guess that all bad news is relevant: Wall Street's sub-prime worries, coupled with PM Wen saying that he wants the "through train" (announced 20th August) to Hong Kong to take a rest wil take their toll here and elsewhere in Asia.
The other question submitted was "When do you advise to load up on Hong Kong and China "
My guess, so often stated so I will not regurgitate, is that China represents a huge buying opportunity, as we all know. In simple talk: we in Hong Kong are sitting at the doorstep of her first industrial revolution.
So, once Wall Street has cracked enough, and thus has dragged reluctant Asia down, load up on Asia. We will revert with more structural research on crashes this week.
2. How to Save Money Off This Idea
1. Always talk with your financial adviser first!
2. Stay out until the Wall Street mess settles.
