shareswizard of 10years and still going strong

Goldman Sachs Says Hong Kong Set to Benefit Most from Quantitative Easing

By Nick Gentle - Nov 3, 2010 8:04 AM

Goldman Sach Group Inc. raised its 12-month target for Hong Kong’s Hang Seng Index to 29,000, saying the city has the most to gain from extra liquidity released by quantitative easing programs and China’s growth.

Hong Kong will benefit most from a structural capital relocation away from developed markets to emerging ones, Goldman analysts said in a report today. They said the MSCI Hong Kong Index offered a better proxy for Hong Kong growth than the Hang Seng Index, for which China stocks make up 56 percent of its market capitalization.

The analysts said Hong Kong property stocks such as Sun Hung Kai Properties Ltd. and Cheung Kong (Holdings) Ltd. would benefit from liquidity-driven real estate inflation.

Wednesday, December 1, 2010
People's Daily: International Investment Bank Caused Crash
By staff reporters Sun Huixia and Ma Yuan 12.01.2010 20:00

People's Daily Says Investment Bank Responsible for Plunge
In an apparent effort to influence the stock market, the People's Daily opposed big fluctuations in stock market

(Beijing) - China's official mouthpiece, the People's Daily, said December 1 that an international investment bank manipulated stock markets for its own gain and a group email that it sent to investors triggered off a plunge in share prices on November 12
In a commentary contributed by Shi Jianxun, a professor at Tongji University, an unnamed international investment bank allegedly sent emails to investors, advising them to sell their shares. The article, titled "Where is China's stock market heading in the next two decades?" said that rumors of impending stamp taxes also sent the market into a tailspin.

On November 12, the Shanghai Composite Index fell 5.16 percent, the largest single-day drop in 2010 so far. China Securities Regulatory Commission has started a probe into the alleged manipulation and has not released their findings.

The article, published on the front page of the overseas edition of the People's Daily, said that China should avoid dramatic fluctuations in the stock market and make it a major vehicle to increase the wealth of the masses. The overseas edition targets audiences outside of the mainland.

"Big fluctuations on the stock market have a remarkable impact not only on economic development, but also on the harmony and stability of the society," said the commentary.

About 150 million Chinese invest in stock markets and investors are from all walks of life, said the commentary, adding that any move in the stock market would rattle the nerves of millions of people.

The commentary was the second in two weeks for the state-run newspaper to voice its strong support for a bullish market. In the commentary published last Wednesday, the stock market was described as the best place to absorb excess liquidity.

"China's fight against inflation will not come at the expense of a stock market collapse. The market should not overreact to the measures by the government to curb inflation," said the previous commentary.

The commentary added that stock markets still lack fairness, accountability and transparency.

The Shanghai Stock Exchange and Shenzhen Stock Exchange were launched two decades ago with the official mission to facilitate state-owned companies in their corporate financing. All listings still need to be approved by securities regulator, rather than by the exchanges.





Goldman Advises Clients To Take Profits On "Long China" Trade
Submitted by Tyler Durden on 11/11/2010 12:16 -0500




After last night's completely unsurprising "beat" of Chinese annualized inflation of 4.4%, Goldman today has come out with a note which, however, is very surprising: Goldman's Robin Brooks and Dominic Wilson have decided to close out their "long China" recommendation, which was one of the firm's Top 2010 Trades presented previously on Zero Hedge. And while the profit on the trade of 11.3% is appealing, the reason for the unwind makes little sense. As everyone had been fully aware (see our note here) in advance, the inflation number would come out at 4.4% (and so it did). To use this as an argument for tightening expectations seems a little disingenuous. Which begs the question: why is Goldman truly no longer bullish on China? And does this mean that the firm no longer buys Jim O'Neill latest decoupling thesis? Lastly, as China has been a key dynamo for world growth, if there is little equity upside to be had in the one last capitalist country, what can we say about the less than capitalist America? This is further compounded by Jan Hatzius' suddenly rosy again outlook on the US economy (coupled with Goldman's ongoing demands for up to $2 trillion in QE, which with every passing day is becoming increasingly more improbable)...

From Goldman Sachs:

Following yesterday’s RRR hikes, overnight China’s CPI inflation came in at 4.4%, above consensus of 4.0%, while industrial production rose by 13.1%, slightly short of consensus expectations of 13.4%. Money growth remained robust at 19.3% yoy. These data reinforce our view that activity remains solid even as inflation is picking up, so that more tightening measures are likely on the way. Jobs data in Australia was stronger than the headline number suggests (5.4% vs consensus of 5.0%), with the rise in the unemployment rate due to a jump in labor force participation. The main even today and tomorrow will the G-20 summit of heads of state.

Yesterday we closed our long China (HSCEI) equities recommendation and long EEM/SPX recommendation with potential gains of roughly 11.3% and 2.3% respectively. With the US cyclical data (ISM and Payrolls) surprising on the upside last week, initial jobless claims continuing to trend lower, and inflation and policy tightening back squarely on the EM policy agenda, the near term outlook for this type of relative trade versus the US is more muddied than it has been for some time. The China (HSCEI) equities top trade too has moved up strongly in the last few months on the back of better cyclical data and easier policy. With successive inflation prints above the policymakers’ comfort zone, another hike in the reserve rate earlier today, and more policy tightening likely in the works, the near-term risk/reward for this position also looks unappealing as we approach the year-end ‘roll-off’. This “risk-management” aside, we continue to like the long-term outlook for EM equities: growth remains robust, and low interest rates in the majors should continue to exert downward pressure on the cost of funding for EM corporates. In the near term the inflation risk in some EM economies is growing and real, but as long as it is dealt with, equities should remain broadly well-supported, but after a strong run since September, it will be important to be more selective going forward.

As for how Goldman's top 9 trades of 2010 have fared so far, below is a summary - of the 9 original trades, 4 have been closed (2 at a loss, 2 at profit), and 5 remain still open.

Stay short S&P 500 Dec10/Dec11 Forward Starting Variance Swap, opened at 28.20, with a target of 21, now at 25.466.
Stay long Russian Equities (RDXUSD), opened at 1645.9 for a target of 2050, now at 1804.00.
Stay long GBP/NZD, opened at 2.29, with a target of 2.60, now at 2.0531.
Close short 2-yr GBP swap rates vs. long 2-yr AUD swap rates on a 1-yr forward basis, opened at -268.5 bp, for a potential loss of 24 bp (inclusive of carry).
Close short 2-yr TRY rates through cross-currency swaps, opened at 8.77%, with a target of 12.0%, for a potential loss of 168 bp (inclusive of carry).
Close long 5yr credit protection in Spain vs. short 5yr credit protection in Ireland at 13 bp, opened at 70 bp, with a target of 20 bp, for a potential profit of 2.9% (inclusive of carry).
Stay long the GS FX Growth Current, opened at 103.5, with a target of 111.8, now at 104.1.
Stay long PLN/JPY, opened at 32.1, with a target of 37.5, now at 28.9471.
Close long Chinese Equities (HSCEI), opened at 12616.01 on 01 April 2010, with a target of 15000, for a potential profit of 11.3%.

HOW CAN HSI LONG,HSCEI SELL?THIS NEVER HAPPEN IN HISTORY!!!LETS CHECK THE PERFORMANCE OF HSI, HSCEI AFTER THE GOLDMAN REPORT

HSI:24876 ON NOV 5TH 2010(day of report) DEC 15:22975---DOWN 7.6PERCENT

hscei:13889 ON NOV 10 2010( day of report) DEC 15: 12585---DOWN 9.3PERCENT

BOTH DOWN RIGHT?I WANT TO SEE HOW HSCEI CAN PLUNGE WHEN HSI GO UP TO 29K

GOLDMAN SUCKS