Positional Picks:
buy KERNEX @ 126-132
buy KALINDEE @ 155-165
Saturday, October 9, 2010
Dated 9 October 2010
IS IT TIME FOR BEING CAUTIOUS ??
BofA-ML EM flow trading rule: "sell" signal again
Inflows over past 4 weeks are 2.0% of AUM, well above the 1.5% sell trigger point.
3rd strongest signal on record (Apr'06 & Oct'09 were stronger)
10 out of past 12 sell signals saw absolute declines in EM equity prices of 8% on average over following 5 weeks.
9 of past 12 sell signals saw relative declines in EM equity prices of 400bps on average over following 5 weeks.
The last EM sell signal was triggered on July 28th - peak-to-trough EM fell 7.7% thereafter
Will it work? Is EM in bubble?
Other signs of EM excess positioning include $43.4bn of IPO issuance in Q3, exceeding IPO's in developed markets ($11.8bn) in same quarter by record margin.
Table 2 below compares flow, momentum & valuation metrics in EM equities today with prior big tops in market (5/06, 11/07, 5/08).
EM is not as overbought today (see both % deviation from 200dma & flows into the asset class as % AUM) as it was at other major cyclical inflection points.
Absolute valuation metrics for EM also less expensive today, although in relative terms EM is more expensive on a price-to-book basis.
We remain cyclical bulls of EM.
But for short-term investors, risk of correction in EM and EM-plays clearly high and growing, especially as many reluctant to short
for performance reasons.
Watch oil prices: one potential trigger for EM correction is oil price moving to $90/b.
Best action right now in our view would be to buy protection, which appears to us to be attractively priced for India, Taiwan, Hong Kong & Korea at present.
BofA-ML EM flow trading rule: "sell" signal again
Inflows over past 4 weeks are 2.0% of AUM, well above the 1.5% sell trigger point.
3rd strongest signal on record (Apr'06 & Oct'09 were stronger)
10 out of past 12 sell signals saw absolute declines in EM equity prices of 8% on average over following 5 weeks.
9 of past 12 sell signals saw relative declines in EM equity prices of 400bps on average over following 5 weeks.
The last EM sell signal was triggered on July 28th - peak-to-trough EM fell 7.7% thereafter
Will it work? Is EM in bubble?
Other signs of EM excess positioning include $43.4bn of IPO issuance in Q3, exceeding IPO's in developed markets ($11.8bn) in same quarter by record margin.
Table 2 below compares flow, momentum & valuation metrics in EM equities today with prior big tops in market (5/06, 11/07, 5/08).
EM is not as overbought today (see both % deviation from 200dma & flows into the asset class as % AUM) as it was at other major cyclical inflection points.
Absolute valuation metrics for EM also less expensive today, although in relative terms EM is more expensive on a price-to-book basis.
We remain cyclical bulls of EM.
But for short-term investors, risk of correction in EM and EM-plays clearly high and growing, especially as many reluctant to short
for performance reasons.
Watch oil prices: one potential trigger for EM correction is oil price moving to $90/b.
Best action right now in our view would be to buy protection, which appears to us to be attractively priced for India, Taiwan, Hong Kong & Korea at present.
Sunday, July 11, 2010
Thursday, June 3, 2010
Market Outlook 03-06-2010
Market Positive.. Nifty Range 5000-5100
Nifty will face some resistance around 5100.. so don't buy in huge qty stay light around Nifty 5100
Fundamental Pick : SUBROS cmp 42 upside likely 46-50-54-60
Nifty will face some resistance around 5100.. so don't buy in huge qty stay light around Nifty 5100
Fundamental Pick : SUBROS cmp 42 upside likely 46-50-54-60
Saturday, April 10, 2010
General Discussion -- April 10 2010
CHINESE PROPERTY MKT BUBBLE
April 8 (Bloomberg) -- China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos.
The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV.
China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.”
Property prices in China rose at the fastest pace in almost two years in February even after officials this year re-imposed a tax on homes sold within five years of their purchase to curb speculation and ordered banks to set aside more funds as reserves to cool lending. The boom in China’s real estate has fueled concern that China may face a collapse seen in Dubai that has hurt the ability of some of its companies to repay debt.
Since his January prediction, Chanos, the founder of Kynikos Associates Ltd, has been joined by Gloom, Doom & Boom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s property market.
Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.
China’s Reserves
China’s foreign currency reserves will be “one asset” that can be used to fund a cleanup of the banking system, he said. The country has accumulated a record $2.4 trillion of reserves, and $889 billion of U.S. government debt, partly a consequence of its exchange-rate policy.
Chanos was one of the first investors to foresee the 2001 collapse of Houston-based energy company Enron Corp. The investor said he is short-selling Chinese developers as well as companies supplying building-related materials to the country, without identifying any stocks.
In a short sale, investors bet on declines in securities by borrowing stock to sell on the expectation it can be purchased at a lower price before handing it back.
April 8 (Bloomberg) -- China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos.
The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV.
China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.”
Property prices in China rose at the fastest pace in almost two years in February even after officials this year re-imposed a tax on homes sold within five years of their purchase to curb speculation and ordered banks to set aside more funds as reserves to cool lending. The boom in China’s real estate has fueled concern that China may face a collapse seen in Dubai that has hurt the ability of some of its companies to repay debt.
Since his January prediction, Chanos, the founder of Kynikos Associates Ltd, has been joined by Gloom, Doom & Boom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s property market.
Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.
China’s Reserves
China’s foreign currency reserves will be “one asset” that can be used to fund a cleanup of the banking system, he said. The country has accumulated a record $2.4 trillion of reserves, and $889 billion of U.S. government debt, partly a consequence of its exchange-rate policy.
Chanos was one of the first investors to foresee the 2001 collapse of Houston-based energy company Enron Corp. The investor said he is short-selling Chinese developers as well as companies supplying building-related materials to the country, without identifying any stocks.
In a short sale, investors bet on declines in securities by borrowing stock to sell on the expectation it can be purchased at a lower price before handing it back.
Saturday, March 6, 2010
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