Thursday, May 7, 2009

All news are good news

Being based in HK, what are currently happening in US is nothing new to us. Our property market collapsed after 1997 and it took almost 10 years to recover, we have SARS in 2003 that hurted our economy to an unprecedented extent. Both of these are not minor issues and experience tells us that it will take long time to recover.

However, when I look at the recent market reaction globally, people are ignoring all these facts.

Is the housing market really reached a bottom in US? Even if it is how quickly can it recover? In HK it was 10 years and not 1 or 2 years which Bernanke or Obama trying to pitch. Well, both of them are having probably the most difficult job in the world, if I were them I probably will do the same thing, the only solution to the subprime aftermath is to re-inflate the bubble.

I believe the Swine Flu impact may not be as serious as SARS, however, still I will not underestimate the risk. But most people's reaction in US is just life-as-usual.

I cannot really understand what's happening over the last few weeks when all news become good news. The only thing I learnt is that I shall never work against the market trend, I short the S&P 4 weeks ago and it proved to be a big mistake.

Having said that, how long can this all-news-are-good-news trend last? I still have reservation.

Q1 earning season is over, market interpretation to most of them is simply not-worst-than-the-worst means it's good and we see stock price jumped. Do we still look at PEG in valuation? what's the new 'G' in the ratio? Market simply ignore it.

CAF (the China A Share ETF that I followed very closely in the past) has reached an all time high 40% premium, while the historical high was about 20% since its launch in 2006. What does that tell us?




On the other hand the A-50 ETF (HKSE: 2823) premium is still trading at close to zero, given there are choices I will rather bet on A-50 if we believe the Chinese market is on a sustainable uptrend.

For more background on CAF and A-50, you can read a very old story I wrote 2 years ago, the link is here, though the story is old but the background doesn't change

1 Comment:

Raymond said...

You are back...
Thanks for sharing your idea.