Asian Market Outlook: Return to Positive Territory Here to Stay?

by: Enzio von Pfeil March 27, 2008 | about stocks: EWH / EWJ / EWM / EWS / EWT / EWY / FXI / IFN / PGJ / TTF    
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Enzio von Pfeil

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Excerpts from Dr. Enzio von Pfeil's recent appearance on CNBC Asia:

1. Asian markets return to positive territory. Is the worst over for financial markets, are we at the bottom and out of the woods?

  • No. Even if The Economic Time is good in markets like Malaysia, Singapore, Korea, India, Hong Kong and China, we are psychologically chained to each other through the Internet. As America is nowhere near out of the woods, our markets will continue suffering.
  • You also have country-specific developments that will rattle markets:
    • China: Tibet, "tightening" talk
    • Southeast Asia: lots of political rumblings in Thailand and Malaysia: they will affect Singapore
    • stagflation will start getting talked about in America

2. Macroeconomic outlook - implications for financial markets for the next three months?

  • the only certainty is volatility.
  • rates will stay low, but the dollar-pegged currencies will experience increased imported inflation
  • exports head south
  • weaker markets imply weaker consumer sentiment, 2/3 of any economy

3. Potential stumbling blocks and investor sentiment as we move into Q2

  • Southeast Asia: politics
  • China: Tibet, "tightening", the new labor law
  • Subprime mess does not just go away because the Fed is bailing out banks; We reckon with USD1 trillion in losses arising mainly from the sub-prime, but also from the looming credit card mess

4. Inflation fears and rising Asian currencies - how will that weigh on regional markets?

  • imported inflation is a big theme, particularly where currencies are pegged to the dollar
  • stronger currencies won't dent Asian exports growth as much as is commonly perceived
  • so my take is that The Economic Time out here worsens for the likes of Japan, Taiwan and Thailand

5. Investor trends and themes in Q2: Out-performing Asian markets/sectors/stocks

  • Amazingly, the best performer since the US peak on 9th October 2007 has been Indonesia, followed by Malaysia and India. So you could say that commodities-driven markets have outperformed industrial markets like China and Hong Kong, Korea, Taiwan
  • China's H-shares have underperformed Japan!!!!
  • Best markets/ our Economic Clock says "buy": Malaysia, Singapore, Korea, India, Hong Kong and China
  • Worst markets/our Clock says "sell": Thailand, USA, EU, Japan and Taiwan

6. Any other topics you want discussed?

  • Tibet, or "Nancy Pelosi's War" (analogous to the fabulous Charlie Wilson's War)
  • This will be used by certain Americans to destabilize China particularly ahead of the Olympics
  • The local party boss obviously has made himself unpopular by denouncing the revered Dalai Lama, who has the stature of the King of Thailand
  • Analogous to Charlie Wilson's War, China is worried that the Tibetan pot may boil over - as is India

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This article has 3 comments:

  •  
    Mar 28 11:20 AM
    I believe I remember one of your previous letters stated that you felt that china would be a buy during the 2nd or 3rd quarter. Do you feel the same way now?

    Another question. Is the worst over and are close to a bottom? Is it time to nibble?
    Reply | Link to Comment
  •  
    Apr 02 02:06 PM
    I share most of Enzio views: he shorted the S&P and went long the yen last october, this was a profitable play, now he is shorting stocks markets of Japan, US, EU, Taiwan and Thailand and long in Malaysia, Singapore, Korea, India, Hong Kong and China. My only point is that strongly export oriented Singapore, Korea and Hong Kong will be hit by the US, EU, Japan slowdown...




    Reply | Link to Comment
  •  
    Apr 13 04:21 AM
    By talking china down is not going to solve your debt problem; you might wish there will be a civil war over tibet in china so you could rid of your debt to China? evil wishing will only destroys yourself first.
    Reply | Link to Comment
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