A few months ago, Sino-Ocean was the market darling, shooting up from a low of 1.45 to a high of 9.40, a 540% gain over a matter of months. Currently, however, it is rather limp, and has broken below its 200-day MA since 3 days ago. What happened?
I thought I found the answers following a report comments made by Andy Xie on the state of China and Hong Kong's stock markets today.
He said that China's property and stock markets are a "bubble" that will burst when inflation accelerates in 2011. China's asset markets are a ponzi scheme, and property is heading for one huge bust that will take a year and a half to unfold. He also said that the Chinese market is going to struggle in the next three to four months due to concerns that the gvernment will step up measures to curb property speculation soon and then afterwards, China's lending policy may help it along in the second half. It is possible that the A-share market may make a new high in terms relative to the Aug 4 high this year.
Andy also said that Hong Kong stocks are about 30 per cent "overvalued" and may face a "major correction" in the next 4-5 months as the market factors on a possible stimulus exit by the US Fed. The market may recover in the second half of next year.
Any implications on my trading?
Yes. For one, I should be looking at shorting Chinese property counters. Second, I should think of an exit strategy for F&N, since Hong Kong leads STI.
Therefore for F&N, instead of "buy-and-hold", here is what I will do:
TP1: 4.14 , exit half
TP2: 4.54, exit the rest
SL: Raised to EP
As for Sino, it has convincingly broken below its 200-day MA, and I am looking to be a seller now.
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