The global financial markets eased into the typical quiet 2nd quarter of the year after the usual exciting 4th and 1st quarter of the year. With the exception of China, the global markets traded in a listless directionless manner. Investors have gotten so used to the concerns of oil prices, Greek crisis and falling USD that it became just an irritating buzz in the background of a very quiet April month. The Chinese stock market are going through their usual ethics again, with the Shanghai stock index dancing to every word and whim of the Chinese policy makers.
It had been an extremely boring April.
The rapid rise in the China stock markets have caught the eyes of my investors at last and they have started inquiring how to get into the Chinese stock market. This trend will often let loose the "Sheeps are coming in!" alarm in my head and it often indicate that the man on the streets have caught on to a trend which is probably at the peak of its cycle. Than again, the Chinese stock market is a totally different animal from the rest of the world, as its rise and fall depend on the directives of the Chinese government and woe to any analysts and investors who try to guess what goes behind the minds of the Chinese policy makers. Investing in the Chinese stock market right now, is akin to playing a game of Baccarat, the favorite casino game for a typical Chinese gambler.
As usual, there are pundits on both sides calling for a Bull or a Bear. Here are some articles:
Bulls
China Bull Market Not Over Yet (Dow Jones News)
Rule No.1 in China's Bull-Market Rally: Don't Look at Earnings (Bloomberg)
Bears
It's Time to Get Ready For the End of China's Bull Market (Bloomberg)
This is the craziest story yet in the irrational world of China's dotcom stock bubble (Washington Post)
I have no doubt that the Chinese stock market has still some steam in it given that the irrational exuberant of the crowd will not stop until the last dollar has been committed. Right now, the roaring Chinese stock market has caught the eyes of the average foreign investors and I will expect more funds to flow into the Chinese bubble fueling it's rise. However, history has shown that no single organization in the world is more powerful than Mr Market and it is just a matter of time when Mr Market demands a payback for all the favors bestowed onto the investors. I will not want to be there when the time to repay the favors comes around.
Portfolio Strategy
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| Sharp correction in USD |
With the sharp correction to the USD due to the perception that the US Central Banks will delay rising interest rates, it make sense now to get back into the weakened USD given that the correction in USD was overly sharp in the past few weeks, but has stabilized since than
. Given that stock valuation is pretty high across US, Europe and parts of Asia, it make sense to follow the adage of "Sell in May and Go Away" and reduce the equity exposure. Given that both USD and interest rates are probably going to rise, it makes sense to invest into a USD denominated money market fund to catch the higher interest rates yield.
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