The market grinds higher as corporate profits came out better than expected
We are also entering the traditionally slow months of August and September whereby the stock market is not expected to perform
However, we are optimistic that the ongoing adjustments of the markets will stop soon and the market will continue upwards given the trend of better than expected earnings worldwide. The present market prices have factored in current global events and the upward push of the markets will most probably be driven by corporate profits.
The Breakdown of the China Market
One of the biggest risk that few people actually take note is the dangerously fast growing China market. The Chinese government is trying to curb the growth of the property market, controlling inflation, with little success. Past history has shown us that any economy that is growing too fast, is a bad thing. During roaring 90s, Asian economies are growing at a blistering double digit growth. The property market doubles every 3 years. With speculation at a feverish peak, trouble comes knocking when the bubble burst, bankrupting the whole nation when hot money pulls out. Ask your friends who have bought property in Shanghai and you will be shocked how much the price of the property there now cost.
China is now rapidly taking over US as many countries top trade partner. A collapse of the China economy will lead to severe consequences in the various Asian markets, especially to the neighbours to our north. The question now is that can the China financial infrastructure handle the kind of shock and buffer the damage such that the economy will recover quickly.
The Fall from Grace - India, Japan and Korea
The darlings of the stock markets in 2005 has now became the bane of investors after May 10. These markets are the top performing stock markets in 2005 and these are the markets that are also hurt the worst, during the correction. The lesson to be learnt from this episode is to be careful with markets that has performed extremely well during past periods. However, we cannot discount the fact that many markets still performed well even after a extremely good year. For example, India market was the top performer in 2004 and still emerged the top in 2005. The total returns from 2003 - 2005 was more than 100% and the benefits still out paced the losses for the May correction. So the conclusion is that we should be breware of these markets and not to avoid them all together.
Conclusion
The market is at it's low now. There is war in middle east. The bird flu is breaking out at different parts of the world. North Korea looks threatening with their missle launches. Oil prices has reached new highs with disruptions from various sources and global tension. Despite all these market shocks, the market is still resiliant. Short of a all out global war, what worse can happen?
We are also entering the traditionally slow months of August and September whereby the stock market is not expected to perform
However, we are optimistic that the ongoing adjustments of the markets will stop soon and the market will continue upwards given the trend of better than expected earnings worldwide. The present market prices have factored in current global events and the upward push of the markets will most probably be driven by corporate profits.
The Breakdown of the China Market
One of the biggest risk that few people actually take note is the dangerously fast growing China market. The Chinese government is trying to curb the growth of the property market, controlling inflation, with little success. Past history has shown us that any economy that is growing too fast, is a bad thing. During roaring 90s, Asian economies are growing at a blistering double digit growth. The property market doubles every 3 years. With speculation at a feverish peak, trouble comes knocking when the bubble burst, bankrupting the whole nation when hot money pulls out. Ask your friends who have bought property in Shanghai and you will be shocked how much the price of the property there now cost.
China is now rapidly taking over US as many countries top trade partner. A collapse of the China economy will lead to severe consequences in the various Asian markets, especially to the neighbours to our north. The question now is that can the China financial infrastructure handle the kind of shock and buffer the damage such that the economy will recover quickly.
The Fall from Grace - India, Japan and Korea
The darlings of the stock markets in 2005 has now became the bane of investors after May 10. These markets are the top performing stock markets in 2005 and these are the markets that are also hurt the worst, during the correction. The lesson to be learnt from this episode is to be careful with markets that has performed extremely well during past periods. However, we cannot discount the fact that many markets still performed well even after a extremely good year. For example, India market was the top performer in 2004 and still emerged the top in 2005. The total returns from 2003 - 2005 was more than 100% and the benefits still out paced the losses for the May correction. So the conclusion is that we should be breware of these markets and not to avoid them all together.
Conclusion
The market is at it's low now. There is war in middle east. The bird flu is breaking out at different parts of the world. North Korea looks threatening with their missle launches. Oil prices has reached new highs with disruptions from various sources and global tension. Despite all these market shocks, the market is still resiliant. Short of a all out global war, what worse can happen?
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