This week, there will be no specific larger changes to the watchlist as such, since it is essentially a wait-an-see week against the backdrop on the Eurozone, and the HSI ipushing against the 18 800 – 19 000 resistance levels. Here is some further analysis of the situation.
1: Gold. Unchanged. Still here and still holding onto Zhaojin Mining. Zijin has been running better, but it also fell harder before, so the risk/reward is better with Zhaojin still. The shiny yellow metal has been clearing the fibs I’ve talked about earlier, and I would say it is primed for a rise until at least the 1705-1730 levels where we get the 61.8% fib and neckline which sparked the 1 900-run.
2: Basic materials. Fitting now both Jiangxi Copper and Angang Steel. Really interesting play and looking slightly weaker off the Chinese data (inflation, lending, exports) out last week. Still valuable to be here just as a massive beta bet, and any outperformance is likely to either indicate government policy easing or a strong economic rebound being traded into stock prices. Still, the reason why its interesting would be that this could swing short in the near future, so this is a trade at the moment.
3: Energy. Unchanged.
4: Gambling. Unchanged, still here.
1: Financials. Still here, but reducing exposure this week (closing HSBC) off the turmoil in Europe and its potential near-term political support. The ride could however be very bumpy, and a closer eye is put on the Hong Kong and Mainland China lenders for any potential runs or quick falls, but it is slowly going more towards the Glancing Gallery.
2: Properties. Rallied last week off the general market rally, but the view is that the fundamental picture that would depress property is somewhat linked to advances in the economy, and I do not believe that property would outperform in a rally or fundamentally clearing picture.
I am adding telecoms and IT firms here since they seem to have been performing rather well during the last turmoil, but on the other hand have not shown a willingness to run quickly either in the bounce.Otherwise, what I keep my eye on has remained somewhat the same.
MTR Corp is till being watched. it’s been about as dead in the water as one would hope.
Chinese financials added here as a specified group, since they vary quite a bit in their fundamentals from the HKEx play.
Kunlun Energy was looking nicely allthe way over to Friday, when it had a precipitous fall and erased all of the weeks gains and then some! I am expecting this to bounce back slightly and recover, especially given the worldwide increases in oil price and other energy commodities that came off the US data last week and potential continued relief rallies.
HKEx rallied! it could be a sign that it was slightly depressed before, but on the other hand, this is HKEx which is one of the biggest beta plays you can get, and the index is approaching the 19 000 previous support level, so it will be highly interesting to see whether the undervaluation is enough to still outperform the Hang Seng Index if it fails to clear 18 800 – 19 000. I still maintain position.
The long awaited bounce for Chinese metals did in fact happen this week, and both Angang Steel and Maanshan Iron rallied as well, off horribly depressed valuations and trends. It will be interesting to see if this is a short-term relief, or whether there will be further sustained long term gains. However, this will require more fundamental support in the form of policy, but I am currently looking into what nickel prices/inventory levels tell us (these are a somewhat more reliable indicator of demand than iron itself, given nickel’s use in stainless, and the mess of ore/scrap and stored refined iron out there) for the more market-based insights.
Macau Casinos are up slightly, but like the rest of the market this week is wait-and-see.
Account Adjustment and Report:
Starting balance: HK$995,404 (-0.46%)
Entered on Limit: Jiangxi Copper, HK$30,000, long (3%).
Exiting: HSBC, Net Value HK$19,318.
Sum long: HK$137,297 (13.79%)
Sum Short: HK$110,188 (11.07%)
Net Position: Long, HK$27109 (2.72%)
New Account Cash Balance: HK$989,282