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Thursday 5 February 2009
Dr. Chan Newsletter
This year is the Year of Ox. I believe everybody’ is wishing a bull market would come along. Regrettably however, when you look back to the 3 previous Oxen years, the market started bullishly but ended up bearishly.
Gong xi Fa Cai! Wishing all of you a happy and Prosperous New Year.
This year is the Year of Ox. I believe everybody’ is wishing a bull market would come along. Regrettably however, when you look back to the 3 previous Oxen years, the market started bullishly but ended up bearishly.
1997 was the Year of Ox. For the first half of that year, the market was indeed very bullish, but during the later part of the year, the market went down due to Asian financial crisis. The Year of Ox in 1973 was even more terrifying; the bull market ran unprecedentedly high, but ended up as the most terrifying bear market that had many people sent to mental asylum. The Year of Ox in 1985 also had an early bull run only to end up bearish followed by 1986’s severe economic recession, and the market had to stop trading at some point in time.
Fortunately, this Year of Ox started in the midst of financial tsunami from which market had already crashed severely. The worst in October last year is over, and is now recuperating.
However, the global economy is far from recovering, and is not likely to recover within one year. Although stock market usually tends to trend ahead of economic outlook, not too many people would have the confidence to buy stocks after so long a recession period. Therefore, a significant rise in the stock market is unlikely this year; and is still subject to fluctuations now and then.
Obama has been inaugurated to become the 44th US President. US Congress has passed the US$820 billion market rescue plan; the Senate will also support it Of the total bill, US$275 billion will be for tax reductions and tax rebates, US$350 billion for infrastructures, and the balance for recycle energy investments, students’ loans, social welfares and medical expenditures.
President Bush had used up half of his US$700 billion rescue plan, Obama can make use of the other half. Thus Obama has a total of US$1,170 billion to boost the economy. Tax reductions and tax rebates may not lead to creation of employment opportunities, an imminent issue to the US. For fear of unemployment, people will save monies, and the impact to stimulate economy through tax reductions and tax rebates will not be significant. The US$350 billion infrastructure expenditure will take time, and current year spending on infrastructural projects reportedly amounts to only US$29 billion, which will have little impact on the current situation. I expect US economy would only recover in 2010.
US economy is limping, but China economy still looks fine. The Chinese Gevernment is pushing domestic demands to counter export slow down, directly subsidising and raising the buying prices of dairy products so that farmers can have more spendable income.
Listed companies start to publish their 2008 results as from February. I suggest all of you wait for the announcement of corporate resuits before deciding whether to enter the market and buy.
In selecting the stocks, consider two conditions:
1. Market price is below the net tangible assets, i.e. tangible asset worth after deducting intangible assets. This is like buying assets at a discount; share prices will sooner or later reflect the true value of assets.
2. Share holding of major shareholders must not exceed 40%. This is to gamble on consortiums eyeing a particular stock thus a likely takeover tussle that helps pushing up the share price.
1 comment:
Dear Friends,
Gong xi Fa Cai! Wishing all of you a happy and Prosperous New Year.
This year is the Year of Ox. I believe everybody’ is wishing a bull market would come along. Regrettably however, when you look back to the 3 previous Oxen years, the market started bullishly but ended up bearishly.
1997 was the Year of Ox. For the first half of that year, the market was indeed very bullish, but during the later part of the year, the market went down due to Asian financial crisis. The Year of Ox in 1973 was even more terrifying; the bull market ran unprecedentedly high, but ended up as the most terrifying bear market that had many people sent to mental asylum. The Year of Ox in 1985 also had an early bull run only to end up bearish followed by 1986’s severe economic recession, and the market had to stop trading at some point in time.
Fortunately, this Year of Ox started in the midst of financial tsunami from which market had already crashed severely. The worst in October last year is over, and is now recuperating.
However, the global economy is far from recovering, and is not likely to recover within one year. Although stock market usually tends to trend ahead of economic outlook, not too many people would have the confidence to buy stocks after so long a recession period. Therefore, a significant rise in the stock market is unlikely this year; and is still subject to fluctuations now and then.
Obama has been inaugurated to become the 44th US President. US Congress has passed the US$820 billion market rescue plan; the Senate will also support it Of the total bill, US$275 billion will be for tax reductions and tax rebates, US$350 billion for infrastructures, and the balance for recycle energy investments, students’ loans, social welfares and medical expenditures.
President Bush had used up half of his US$700 billion rescue plan, Obama can make use of the other half. Thus Obama has a total of US$1,170 billion to boost the economy. Tax reductions and tax rebates may not lead to creation of employment opportunities, an imminent issue to the US. For fear of unemployment, people will save monies, and the impact to stimulate economy through tax reductions and tax rebates will not be significant. The US$350 billion infrastructure expenditure will take time, and current year spending on infrastructural projects reportedly amounts to only US$29 billion, which will have little impact on the current situation. I expect US economy would only recover in 2010.
US economy is limping, but China economy still looks fine. The Chinese Gevernment is pushing domestic demands to counter export slow down, directly subsidising and raising the buying prices of dairy products so that farmers can have more spendable income.
Listed companies start to publish their 2008 results as from February. I suggest all of you wait for the announcement of corporate resuits before deciding whether to enter the market and buy.
In selecting the stocks, consider two conditions:
1. Market price is below the net tangible assets, i.e. tangible asset worth after deducting intangible assets. This is like buying assets at a discount; share prices will sooner or later reflect the true value of assets.
2. Share holding of major shareholders must not exceed 40%. This is to gamble on consortiums eyeing a particular stock thus a likely takeover tussle that helps pushing up the share price.
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