China Is Aware That There Is A Bubble

As China is facing the prospect of large capital inflows from investors betting on RMB appreciation in 2010, policymakers have made it easier for mainland Chinese to invest abroad. This may be adding to the massive fund inflows other regional markets have experienced in 2009, especially China’s SARs. China’s rapid credit growth and loose monetary policies are also encouraging the trend.

• WSJ: A bubbly property market in Hong Kong and record gambling revenues in Macau are partially a result of capital leaking out of China through “under-the-table transfers.” GaveKal Dragonomics says that the scale of the “shady money” coming from China’s loose credit and stimulus measures “is becoming slightly embarrassing for Beijing.” Capital controls are supposed to regulate the amount of money flowing to the SARs, but offshore bank accounts and other channels allow money to flow relatively freely. (11/23/09)
• Michael Casey, WSJ: “[A] booming China is importing easy money from the Fed at a time when it least needs it, and is then exporting the same to its similarly undeserving neighbors.” (11/18/09)

Measures Taken to Increase Capital Outflows

• On November 11, the State Administration of Foreign Exchange (SAFE) said it would expand a program that allows individuals to exchange up US$5,000 per-day to non-financial institutions. This helped to spark a rally in China’s B-shares, which are mainland shares denominated in foreign currencies. (Bloomberg, 11/13/09)
• In October SAFE announced US$1.5 billion in new quotas under the qualified domestic institutional investors (QDII) program, which allows mainland funds to be invested in overseas assets. These were the first new quotas granted in 17 months.
• In July 2009, SAFE eased rules on the use of foreign exchange by Chinese firms, which will allow companies to borrow in foreign currencies on the mainland, invest with their foreign exchange revenues, and seek new funding sources.
• China's outbound direct investment reached US$55.6 billion in 2008, nearly double the amount in 2007, but much lower than the US$92.4 billion of inbound direct investment. In 2009, the gap looks may narrow. Through Q3 2009, the Ministry of Finance reported US$32.8 billion in non-financial outbound FDI, up slightly from the same period last year. Meanwhile, FDI to China decreased 14% y/y over the same period.
• Mainland Chinese are limited to converting US$50,000 per-year into foreign currency, but investors often pool the quotas of family and friends to get around the limits.

p/s photo: Maggie Wu

Stock Take On Highlighted Counters & Returns

Time to do stock take since I have said the risk-reward ratio has turned sour, plus my 1,280 target for the year has been reached. Hence I will have been more aggressive in reducing positions. Below was the link to the previous stock take:

http://malaysiafinance.blogspot.com/2009/10/stock-take-on-recommendations-returns.html

http://malaysiafinance.blogspot.com/2009/10/1260-to-1285-before-year-is-over.html


IJM Land, in at 1.81, supposed to wait for the 30% before, now 2.62... 44% take half profit, let the rest ride... but have a stop-loss(gain) at 2.50. Now at 2.27, stop-loss gain triggered, out of stock at 2.50.

CIMB, in at 10.30, now at 12.44... 20%, will hold for the 30%.
Breached 13.00, very close to 30%, enough for now. Out.

QL Resources, in at 3.34, now at 3.46... wait for bonus.
Closed at 3.89, 16% gain, not enough, this one is safe enough to hold for its bonus.

Sep 7: Kurnia Asia 0.58, went to 0.76 (+31%), now at 0.70, took half profit, let the rest ride, stop-loss (gain) at 0.64.
Closed at 0.72, riding to 0.76 two weeks back. Up stop-loss gain to 0.69.

Sep 16: TAS Offshore: in 0.78, had a run to 0.89, back to 0.80, still ok.
Dwindled to 0.76, cut loss here, seems not to be panning out as I thought.
Sep 17: Ann Joo, in 2.30, now at 2.70, +17%, will wait for 3.00.
Closed at 2.89, so close to my 3.00, but cannot be too fixated some times, take all profit, can't complain with 25% in 2 months.

Sep 28: Hock Seng Lee, in 1.02, went to 1.20, now at 1.15, can wait till Budget news out then sell.
Excellent results, trying to recover, closed at 1.15. Not going to wait as the anticipated catalysts have appeared and the stock is finding it hard to scale up, too many stale sellers waiting above 1.20. Out.

Sep 29: TAE, in 1.45, hold for TA Global exercise.
Still comfortable with this, thinks that TA Global will fly and so too will TAE.

Oct 7: Evergreen, in 1.01, now 1.07, some ways to go.
Went above 1.50 strongly, 40-50% gain in 2 months, what more you want, out for now even though I think this is good to 1.80 but risk-reward not that good and had to reduce stocks.

Oct 8: CSC Steel, in 1.08, now 1.23 (+13.8%), strong accumulation by institutional funds, will keep.
Took my 30% or thereabouts at 1.38. Out for now.

Oct 9: BRDB, in 1.72, now 1.90, small position, will wait till volume breaks out.
Volume breakout never came, looks like a need to hold for a few more months, owing to big picture not that conducive, out.

Oct 12: Fajarbaru.
In at 1.20, did try to move but sluggish much like HSL, cut.

Oct 14: Weida.
In at 0.76, also sluggish 0.67, cut loss.

Oct 16: Efficient e-Solutions. In at 0.235, went up a bit, but back down 20.5, cut at 0.22.

Though not a "Why I Like" stock, I did mention Magna Prima as a stock to watch, it has gone from low 2.00 to above 3.00 since then, no position.

Oct 20: Success Transformers.
In at 1.18, went to 1.32. Close at 1.21. Took 1/3 profit at 1.30. Will hold for Seremban Engineering IPO.

Oct 26: Notion VTec.
In at 0.505, 5 into one exercise. Now holding at 2.57. This one I will hold for the placement announcement and mid term.

Nov 6: Salcon. In at 0.565, sold 1/3 at 0.605. Holding well, will keep the rest for my 30%.

Nov 13: Inch Kenneth.
In at 0.445. Volatile, sold 1/3 at 0.52. Closed at 0.475. Recent posting, will hold.

Nov 17: Supportive. In at 1.03. Also volatile, sold 1/3 at 1.14. Closed at 1.09. Recent posting, will hold.

The above were views on stocks and sectors that I like, not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.


p/s photo: Maggie Wu