Time To Buy China? (based on asiaconf article)
After the recent correction, China stocks are worth accumulating. We
like consumer-related plays, with internet stocks topping the list.
China banks are factoring in a credit crisis. This is important as these
banks have the largest weighting in Chinese stock market indices. For
instance, they comprise 33% of the H-share index. The prices of these
banks imply a non-performing loan ratio (NPL) of 7%, versus the 1%
reported and 3.2% provisioned in the third quarter of last year. The 7%
implied NPL is at the upper end of historical crisis scenarios globally.
What to buy
The focus of any buying of China stocks should be on what I term “new
China”. That is, stocks in sectors which should benefit from the
country’s switch to a more consumption-driven economy.
Internet stocks should be the first port of call. They have many
structural tailwinds. China’s internet penetration rate stands at just
40%, about the level of the US in 2000. Only 25% of households have a
personal computer, indicating ample room for growth. Lastly, the
smartphone installed base, currently at close to 300 million, is
expected to hit 400 million in 2014.
Among the Chinese internet stocks, our current preferences are Sohu,
Baidu and NetEase.
Sohu operates a search engine called Sogou, in which
Tencent recently took a stake. Sogou will be merged with Tencent’s
search engine SoSo. This should lead to a significant turnaround in Sohu
Baidu is China’s Google, operating the country’s largest search engine.
It’s in prime position as advertising transitions more to mobile
NetEase produces online games. These games have a huge following. The
company has also developed its first mobile game and mobile news
dictionary. NetEase is hugely cash generative and around 30% of its
market capitalisation is now net-cash. That leaves room for share
buybacks and/or increased dividends.
The consumer sector is also one to like. While consumer staples are
expensive, retailers aren’t. While the latter faces considerable
short-term headwinds, some are priced for it. I like Giordano, a
pan-Asian discount retailer with significant exposure to China. It has a
great track record and sports a single digit price-to-earnings ratio
and sustainable dividend yield of +7%.
Finally, Chinese insurers operate in an under-penetrated industry which
should benefit as incomes improve. PICC has a stronghold on property and
casualty insurance and is reasonably priced.
2013-03-17 10:00 GMT (or 11:00 MQ MT5 time) | [EUR - CPI]
if actual > forecast = good for currency (for EUR in our case)
Consumer price inflation in the euro zone rose less than initially
estimated in February, underlining concerns over the threat of deflation
in the region, official data showed on Monday.
In a report, Eurostat said consumer price inflation rose by a
seasonally adjusted 0.7% last month, down from a preliminary estimate of
0.8%. Euro zone inflation rose by 0.8% in January.
The rate remains firmly below the European Central Bank's target of near but just below 2%.
Software will replace more people says Gates
Software King of the World Sir William Gates III
said that software will start replacing more people and US secondary
schools may not be able stay ahead of software automation.
Mincing his words, Gates dubbed the process "software substitution" or systems capable of doing jobs now done by people.
Gates, in an interview with the American Enterprise Institute reckons
that 20 years from now labour demand for a lot of skill sets will be
substantially lower, and he does not think people have that in their
The impact of automation on the labour market, whether it's for
drivers, waiters or nurses, is progressing and low income jobs are being
eliminated by globalisation.
Now the quality of automation, software artificial intelligence, is
improving fast enough that you can start to worry about middle class
jobs. The US has lost manufacturing and union wage scales. Those were
middle class jobs. "Automation is doing that, the wage differential is
tilted, the more education you get, and the higher you are going to be
paid and the tilt of that is much higher. It's really that low end
that's been impacted the most," said Gates.
The only way for a person to survive is through improving US education. The US has to do a better job educating its workforce.
EURUSD Technical Analysis March 17 2014 (based on forextv article)
EUR/USD maximum top for this week 1.3983, but the all important 1.3963
must also break higher. I see 1.3963 as a vital peak. Maximum low:
1.3803 but the all important 1.3836 and 1.3811 must also break lower.
Price appears overbought, shorts are recommended.
USDCAD Technical Analysis March 17 2014 (based on investing article)
The U.S. dollar was lower against its Canadian counterpart on Monday, as
disappointing U.S. manufacturing activity data weighed on the
greenback, although a downbeat economic report from Canada limited the
hit 1.1045 during European afternoon trade, the pair's lowest since
March 13; the pair subsequently consolidated at 1.1070, shedding 0.32%.
The pair was likely to find support at 1.0980, the low of March 7 and resistance at 1.1153, the high of March 12.
USDJPY Technical Analysis March 17 2014 (based on fxstreet article)
continues to trade near the top of today range, although it has pulled
back slightly from highs after failing to break above the 101.85 area.The
USD/JPY came under strong pressure last week amid risk aversion and
dropped more than 200 pips before finding support at the 101.20 zone on
Friday. The pair recovered Monday but with the bounce capped by the
101.90 zone, it was confined to a phase of consolidation. At time of
writing, the USD/JPY is trading at the 101.60 zone, recording a 0.3%
gain on the day.
QE Continues To Be Misunderstood (based on Forbes article)
In the Wall Street Journal, David Malpass of Encima Global LLP says this:
2013-03-18 00:30 GMT (or 01:30 MQ MT5 time) | [AUD - Monetary Policy Meeting Minutes]
RBA Minutes: May Keep Rates Steady For 'Some Time'
The members of the Reserve Bank of Australia's monetary policy board
said that the RBA may well keep its benchmark interest rate steady
indefinitely, minutes from the central bank's March 4 meeting revealed
The members said that the benchmark could be maintained for "some time" as long as it was warranted by the economic conditions.
recent meetings, the board had judged that it was prudent to leave the
cash rate unchanged, while noting that the cash rate could remain at its
current level for some time if the economy was to evolve broadly as expected," the minutes said.
board said that the lower exchange rate for the Australian dollar was
helping the economy and likely would continue to do so.
meeting, the RBA maintained its main cash rate at a record low 2.50
percent for a seventh successive month, and indicated a period of
stability in monetary policy, as inflation pressures remained high.
pace of growth of Australia's major trading partners appeared to have
remained around average. Domestically, timely indicators were consistent
with some improvement in economic conditions over recent months, and
there were further signs that the expansionary setting of monetary
policy was having the desired effects. Indicators had been generally
positive for consumption, housing investment, business conditions and exports," the minutes said.