Owner: Wandering around Financial Cities URL:http://louis-fina.blogspot.com Join Date: Fri, 07 Mar 2008 03:49:25 -0600 Rating:0 Site Description: Based in Hong Kong, and will be at London few months later, I strive to write my comments on economies and markets in a more global level. Yes, we lack a global perspective among Hong Kong financial writers. Site statistics:Click here
Decoupling 2008-03-10 03:58:47 Since the US economic slowdown, people around are talking about "decoupling", whether emerging markets can continue their growth in face of economic slowdown in US. The answers are yes or no, different people have their own reasons for the guess.Today, China officials announced the trade figure for February. The trade surplus declined more than expected, and the export growth was slowest in 6 years. This probably gives us some ideas of how US economic slowdown can impact on China. The Economist published an article "The decoupling debate", which argued that the export of emerging markets would not be much affected as the decrease in export to US would be offset by the increase in export to other emerging countries. There is of course some reality in this argument I think, but the late
What's happening in the market? Psychology again 2008-03-09 22:29:06 Last week was a bad week. Many of the markets had their worst weekly slump in years.The condition in the credit market continued to be serious. Carlyle Group, one of the leading private equity firms, had one of the highly leveraged fund, which holds Fannie Mae's and Freddie Mac's securities, suffered from substantial financial distress because of continuous big number of margin calls from various banks. To meet the margin calls, they were forced to liquidate its assets in this gloomy market at low price.Recently, I have been continuously thinking of the market in relation to psychology of market participants. When credit was easy, and market was performing well, the prospect would look good, investors would then be less risk averse. When risk was not properly priced, in good time, not
Psychology in Financial Markets 2008-03-07 00:55:15 Truth be told, I did my undergraduate degree in Psychology, although I will do my graduate studies in Finance.A transition into financial world is an interesting process, and I see how inadequate the financial theories are by a psyc major mind. George Soros developed his own theory of "reflexivity". I have no time to go through it in detail, however, from his theory, I see some reality.I think we probably believe that when we analyze the company stocks using various valuation models (e.g. Dividend Discount Model), we are trying to establish the stocks' intrinsic value. Why present value of future cash flow would be the intrinsic value of the stock is a big question to me as always. Analysts have unlimited power to choose what to input into the formulas, and slight changes in the inputs Read more:Financial
, Markets
Some thoughts on Real Estate (without much insights though...) 2008-03-05 00:05:36 I was not particularly interested in real estate investment. Within alternative investments, venture capital and private equity probably interest me more than real estate.I was interviewing with one top-tier investment bank over the phone two days ago. Interesting, it was an analyst level position in real estate investing, in which they "invest in real estate in a way like private equity group do their investment". Yes they do. They may buy a building which currently is not generating enough income, and they will try to improve the income by "restructuring" the building through new layout of floor plan, introducing some stores into the lobby, and others. These would increase the rental income of the building, then they can sell it at a much higher price.In the course of my preparation Read more:thoughts
, Estate
, though
, Real Estate
HSBC 2007 full year result 2008-03-04 22:08:53 In fact they have announced their results for two days, but I still want to say something.HSBC is among the first financial institutions to warn about the seriousness of subprime issue in US, and it was the first group of financial institutions who made provision for the bad loans related to subprime. HSBC exposed itself to subprime through subsidiary HSBC Finance in US, which was formerly Household International, which it acquired years ago. Unlike many other banks like UBS which exposed itsel to subprime primarily by buying MBS, CDO and other similar kinds of fixed income securities, HSBC is actually the one who lend the money out. In such a case, the bank probably have more power to re-negotiating the terms of debt to prevent default. As for banks like UBS, they are not even possibl
Record High Inflation in China 2008-02-19 07:09:55 The Chinese government have just announced the consumer price index for January. Inflation
in China
has reached a 11-year high of 7.1%, after the worst snowstorm in a century affected food supply. The prices of food category products 18.2%, in particular, the price of pork rose 58.8%! High inflation will certainly pose an important social problem. I just watched the TV news in Hong Kong, the old lady said she has no money to buy food, because the food price rose much!As I have written before, China has been trying hard to prevent overheating of the economy and inflation. China has raised interest rate and bank reserve ratio for many times last year, but it seems that there wasn't much use. Why was that!?When we look at the money supply data, I guess we would be more clear about why. Read more:Record
Hong Kong's government budget 2008-02-16 10:46:17 Last year, our government ran a budget
surplus of tens of billions Hong Kong
dollar.How to use the surplus is always a much debated topic, and more importantly, it is always a very political topic. Politicians always ask for things like tax rebate in order to "return the wealth to the citizens".As I have written on that before, our government has been doing countercyclical fiscal and monetary policies in the past for so many years, which hugely exaggerated the ups and downs of the business cycle. And I think they will do so again.If any of you have read Alan Greenspan's autobiography, the U.S. government ran a big budget surplus in President Clinton time. His personal suggestion to use the surplus was to pay off the debt of U.S. government, the the president packaged this as "save socia
An Apology 2008-02-16 09:42:56 I really have to apologize for writing nothing for more than 2 weeks! I wrote so much because I was at the time waiting for the new job to start. And now, it started. So I don't have so much time to bring so many things here.But I hope to bring you a few commentaries in the coming week!
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CFA Level II 2008-01-28 01:21:20 After months of torturing with Level I of CFA and passed it, here comes another few months of torturing with the Level II...
Last week in the markets (21-15/1/2008) 2008-01-27 04:23:50 We have experienced a really dramatic week in various markets last week. We experienced a large sell-off in at the beginning, and big recovery in the second half of the week.Last week began with large sell-off in the Asian markets. We were asking the question, are we entering the bull market? Indeed, due to the concern of US recession, we have had an awful start of this year. Large sell-off continued in European markets. On Monday, the US markets were closed, but stock futures dropped.On Tuesday, we continued to see large sell-off in Asian markets, which was really panic selling. On a surprise move, the Federal Reserve slashed the Federal Funds Rate before the US markets opened that day by 0.75%, largest single move seen in recent years. We saw a mild sell-off on US markets that day.
Société Générale 2008-01-24 20:31:56 Société Générale, one of the major banks in France, report a 4.9 billion euro trading loss, related to a bet in stock futures markets by a rogue trader, Jérôme Kerviel, which the trading strategies went wrong in the latest market turmoils. The loss is the largest in banking history.Société Générale is famous for its equity derivatives products. We see hundreds of call and put options by SG available in the Hong Kong Market. SG, being very famous in risk management, failed to discover the unauthorized trading this time. As a result, they receive the following comment:"At first this seemed like a joke,'' said Nicolas Rutsaert, an analyst covering European banks at Dexia SA in Brussels. Societe Generale "was a leader in derivatives and was considered one of the best risk manager
Asian Market Wrap Up (24/1/2008) 2008-01-24 07:06:04 I apologize for my lateness of today's Asian
market wrap up because I was out and not looking at the market closely today. So I don't really have many points to say, except this one...Hong KongHong Kong market is the only major market in Asia which dropped today, but the market was quite dramatic today. The Hang Seng Index has rose more than eight hundred points in morning trading, but it closed with a 2.29% loss. I have mentioned the "through-train" arrangement in my previous article. Today morning, rumor was around the market, which the "through-train" arrangement will soon become reality, in which the investors in China can invest in Hong Kong stocks directly and freely, but in the afternoon, the Chinese authority clarified that there was no clear timetable. So the stocks dropped i Read more:Market
Economic Outlook: China 2008-01-24 06:22:04 The theme of this article would be my speculations of how US recession affects Chinese economy.Over the past few months, investors in Hong Kong have been discussing whether the slowdown of US economy would hurt China
. The argument is that the Chinese economy is export-driven. The appreciation of the currency Renmenbi and the slowdown of US economy would hurt export, and thus the economy.Some analysis was done by the economist at UBS. On 28th November 2007, Jonthan Anderson, Economist at UBS, released a report of 2008 macroeconomics outlook in China, suggesting that the Chinese economy is actually less export-driven as previously thought, thus US recession would not be hurting China much.I have no idea if this argument is still relevant today as the economy and market conditions seem to Read more:Economic
, Outlook
Asian Market Wrap Up (23/1/2008) 2008-01-23 04:06:06 After the Fed rate cut last night in Asian
time, the Asian market re-gained some of the loss in the past two days.Hong KongThe Hong Kong's benchmark Hang Seng Index rose a respectable 10.72%, which has erased the loss of the large sell-off yesterday. The Hang Seng Index rose, led by HSBC (5:hk), which rose HK$11.8 to 116.2, or 11.3%. The Fed rate cut was helpful to property sector of Hong Kong, thanks to the currency peg of HKD and USD. Major banks in Hong Kong have announced the mortgage rate and saving rate cut. Cheung Kong (1:hk) and Sun Hung Kai (16:hk) rose about 10% in Hong Kong trading. As the saving rate is further lowered, with the inflation forecast at about 4%, we have negative real interest rate now, which would be beneficial to property stocks in Hong Kong due to the anti Read more:Market
The Fed cut Fed Funds Rate 2008-01-22 08:54:47 The Federal Reserve just announced the rate cut of the Fed Funds
Rate of 0.75% from 4.25% to 3.5%, which is the biggest one-day move in recent time. The Federal reserve cut the rate to deal with the "weakening economic outlook and increasing downside risks to growth".After the emergency rate cut, the indexes future still drops, but rebounded from previous 5% drop. The afternoon trading of European markets seems to have rebounded a bit after the emergency rate cut of the Fed. At London, FTSE 100 posts a 1.48% rise after the slump yesterday. Other markets in Europe also rebounded a bit. However, the overall sentiment remains bearish.Full coverage from Bloomberg
Asian Market Wrap Up (22/1/2008) 2008-01-22 04:17:24 There is not much to say about AsianMarket
to say. The Markets extended the slump yesterday. All major indexes drop more than 5% in the region.Hong KongThe benchmark Hang Seng Index dropped to 21,757.63, down 8.65%. In this two-day slump, the Hang Seng Index has lost 13.65%. Stocks dropped because of the concern of US recession, but it seems that investors in Hong Kong has been panicking and selling off their holdings to cut loss. Yes, I do see value in some stocks. In particular, I believe that the property and banking sectors of Hong Kong companies (Hong Kong companies only, I am not talking about any H-shares, or the London-based HSBC) would be my picks now. Hong Kong Banks like Bank of China (HK) (2388:hk), ICBC (Asia) (349:hk), Wing Lung Bank (96:hk), etc, would be benefited f
New Monetarism 2008-01-22 01:05:53 How hard is subprime hitting US and global economy? I write this article to introduce the view by David Roche, which I watched from Bloomberg TV some weeks ago. Maybe his theory would help us to understand how subprime can hit so hard on US and global economy.Money MultiplierIn the past, commercial banks receive deposits from you and I, paying small interest to us, and lend to others at higher interest rate, earning the spread between lending and saving. Remember our introductory Economics textbook in college, that because the borrower of money would end up deposit the money back into the banking system, the banking system now have more deposit, and thus, they can lend out more. For example, if I am a CEO of a company, planning to acquire some plants and equipment, I would ask bank for
Asian Market Wrap Up (21/1/2008) 2008-01-21 20:41:17 The markets continue to be bearish, mainly on the concern of US subprime crisis and the risk of entering into recession.Hong KongThe Hong Kong market went down, with the benchmark Hang Seng Index closed at 23,818.86, down 1,383 or 5.49%. The Hang Seng Enterprise Index closed at 13,531.45, down 1,029.9 or 7.07%. HSBC (5:hk) continue its drop on the concern of its exposure to subprime mortgage. In today's Hong Kong trading, HSBC was down to HK$ 113.6, down $4.8 or 4.05%. Bank of China (3988:hk), another bank traded in Hong Kong which also has significant exposure to subprime mortgage, dropped to HK$3.37, down $0.23 or 6.39%. Other Chinese banks which has little or no subprime exposure also dropped significant in Hong Kong trading today, despite the good outlook and the speculations of e Read more:Asian
, Market
Economic outlook: Hong Kong 2008-01-20 23:00:00 Hong Kong is a strange case.Our government like bubbles. They want to get the liquidity from the Mainland China to our stock markets, saying that it is to help our country to solve the problem of excessive liquidity. Our government also have no sense that economy needs some sort of control. Our economy is almost too good now, GDP grows strongly, people spend much in festive seasons, and we really see a scene of big prosperity in Hong Kong.Despite this, the government really has no intention that the economy needs some measures to prevent overheating. John Tsang JP, the financial secretary of HK government, is talking about how to "return the wealth to the fellow citizens" in planning his first budget address, which probably would include tax cuts or rebate. If you were a Keynesian, yo Read more:Hong Kong
, Economic
Economic outlook: UK 2008-01-20 22:13:32 Commentators in Hong Kong have been talking about US economic slow down in face of the subprime crisis. How about UK? We have not been focusing on UK lately, and only focus on US. However, It does not really mean that UK is really in a much better position than US, although not many people mentioned or realized this.At the turn of this year, I have seen two people talking about how unprepared the UK economy is in face of the current turmoil. First, Anatole Kaletsky wrote at The Economist: The World in 2008, wrote that UK is facing the first major risk of economic slow down due to a several reasons, which, while compared to the situation in US, seem to be even more worrying. First of all, the housing price in UK rose much more than US (205% vs. 103%). Second, household debts were larg Read more:Economic
Are stocks now bargain? 2008-03-12 10:50:55 This is purely my speculation about the financial market I based in, which is Hong Kong.
I would say that it is. The stocks prices have been plunging for much. If we consider that last major...
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Links for 12/3/2008 2008-03-12 10:31:52 UK's Darling set to cut growth, raise borrowing British finance minister Alistair Darling looks set to cut growth forecasts and ramp up borrowing in his first budget on Wednesday as the economy faces...
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Links for 10/3/2008 2008-03-11 09:00:10 Blackstone Profit Falls 89% on Credit Market Meltdown
BoCom Chairman Jiang Says HSBC Applied to Raise Stake
China Trade Surplus Narrows as U.S. Demand Weakens
China trade surplus fall may be...
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Links for 11/3/2008 2008-03-11 08:59:29 'Financial Model' Abuse Linked to Market Meltdowns
China's Inflation Surges to 8.7% as Food Prices Soar
Dollar Gains Most in 3 Months Versus Yen on Fed Lending Steps
Economy weak but not enough for...
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As the Bear approaches its end, will the bear end too? 2008-03-17 11:48:48 From Reuters:
When a Bear Stearns analyst moved to ask a question at a biotechnology investor meeting, Genentech Chief Executive Arthur Levinson quipped, "There's still somebody here from Bear?...
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Links for 17/3/2008 2008-03-17 10:09:06 Bear Stearns tremors - now affecting candle-sticks Expert chartist view on near term prospects for the financial markets on both sides of the Atlantic.
Dollar's nosedive stirs joint intervention...
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The Fed cuts the Fed Funds Rate by 75 bp 2008-03-18 13:28:57 See what Ben Bernanke's doctoral thesis advisor said about the Chairman:
Federal Reserve Chairman Ben S. Bernanke has the skills to guide the U.S. economy through a credit squeeze, now in its eighth...
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Links for 18/3/2008; Today's Focus 2008-03-18 13:26:24 The Federal Reserve is expected to cut the Fed Funds Rate today. Stocks and Asia and Europe rose first time in four days. Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH) reported...
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, Focus
Ben Bernanke vs. Jim Rogers 2008-03-20 06:52:35 Jim Rogers
said Ben Bernanke
is "an idiot". And he continues to be very critical of the Fed's policy making yesterday on Bloomberg, saying the Bernanke and his colleagues know nothing about...
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Bottoming process? 2008-03-20 05:53:46 An influential blogger Mr. Market in Hong Kong, an advocate of Benjamin Graham's Value Investment who has published a book on investment (and going to publish his second book), has written in his...
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