The numbers say it all
June 19, 2013 Leave a comment
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Trying to hear what's not being said
June 19, 2013 Leave a comment
April 23, 2013 Leave a comment
Today, China’s Shanghai Stock Exchange Composite Index (SHCOMP) is trading at 2,200 which is the same level seen in 2011, 2008 and 2006,
You can buy the Chinese stock market today for the same price that it was 7 years ago.
Furthermore, it’s trading at one-third of its 6,124 point high seen in October 2007 with a Price/Earnings Ratio of 11 and Dividend Yield of 2.3%.
Economists are suggesting that for China to move it’s into next phase of expansion and prosperity, the economy would need to move from bing dominated by manufacturing into one that is driven by domestic consumption. I think this argument is irrelevant.
Sometimes too much analysis can be counter-productive.
I don’t think pundits were wondering when America was going to morph from its industrial manufacturing roots into a consumer society back in 1910. As The Roaring ’20’s came around, it just happened.
Interestingly, many developed economies now yearn for a return of their manufacturing economy.
Recently, the SHCOMP fell 2% because China only reported GDP growth of 7.7% rather than the consensus expectations of 8%. Analysts then expressed their “disappointment” and promptly wrote reports re-iterating their case for a decline in China’s economics.
Many countries could only wish for the growth that China has.
October 27, 2012 Leave a comment
Did you know that over the past 6 weeks, the spot price of Iron Ore has risen 33% back to $120 per tonne?
Some investors may not believe this as they are still anchored to the bad news they saw last month with headlines such as ‘Iron Ore Prices Plummet”.
Credit to London’s Financial Times who did report the positive news this week.
November 9, 2011 Leave a comment
The spread between the yield of Chinese Govn’t 2yr and 10yr bonds have inverted. The yield that an investor is receiving buying 2 year maturing debt is higher than the yield from a 10 year bond.
Although the data on the attached graph only starts in 2005, an inverted yield curve signals stress in the credit market and leads to weaker equity markets. It is often a good indicator that precedes recession or a change in economic cycles.
It is notable that United States 2’s/10’s spread inverted in 1978, 1988, 2000 & 2006. Recessions followed within 12-18 months.
The trade to look at, is for a falling Australian Dollar. With this comes a rising US Dollar and falling commodity prices.
An inverted Chinese bond yield could spell trouble for the most crowded of “longs” because not many believe BHP, RIO and the Australian Dollar can fall – for China will apparently keep saving them all.
It is highly likely that China will still buy their products, but there is such a thing as cycles and although China has seemed to have avoided one in the past 15 years, the optimism in this post is to be ready to buy some bargains in Australia, China along with some commodities.
In the meantime, selling AUD and buying USD is hardly the worst trade to consider.