When the American bull meets the Chinese dragon
The British Pound was sliding down in March against
US Dollar. After a rebound in February
from USD 1.506 : GBP 1 to 1.544, Sterling against the Dollar dropped to 1.482
at the end of March. On 10 April, a low
was reached at USD 1.463 : GBP 1. 9
months ago on 10 July 2014, the GBP USD exchange rate was 1.713. The British Pound has weakened by 14.6%
against USD in 9 months. Why? It is easy to blame it on Greece and the
money printing policy by European Central Bank.
Also need to give US a round of applause as the mighty Dollar is gaining
across the board as FED tighten up their monetary policy and looking at
increasing interest rate. Will GBP keep
falling against the USD? There are some
fund managers starting to take profit on the long Dollar story. So perhaps there will be technical rebound in
GBP against the Dollar. With the UK
election poll looking indecisive between the Conservative and the Labour, GBP should
be choppy and could have more downside.
Chinese stock market daily turnover reached GBP 193
billion (CNY 1800 billion) on 20th April.
The Shanghai Shenzhen 300 index has gone up 120% in one year. Yes, it is not a typo, 120%. Over 30% gain since the beginning of this
year. Most of the stock names will sound
very foreign to the western world. Ping
An Insurance, China Merchants Bank, China Vanke (property developer), Kwei Chow
Moutai and Wu Liang Ye (these two are Chinese vodka makers). Maybe easier to buy ETFs or funds that track
the Chinese stock market. Let’s learn
more about the Chinese dragon.
Every netizen in China knows about BAT. BAT stands for Baidu, Alibaba and
Tencent. Baidu is the Chinese
Google. Alibaba is the Chinese Amazon. Tencent is Chinese Whatsapp and an online
game giant. Funny enough, BAT are not
listed in China. Baidu and Alibaba are
listed in US. Tencent is listed in Hong
Kong. Baidu is up 33% in a year but the
share price actually came off from USD 250 level to USD 210 since last
November. Baidu is a USD 74 billion company versus Google USD 377 billion as of
24th April 2015. Alibaba
(stock code is BABA) was listed last year at USD 68 in September last year and
reached USD 120 in November. Similar to
Baidu, BABA share price has gone south and now to USD 80 level. BABA is a USD 203 billion company versus
Amazon USD 181 billion. Tencent share
price is up 51% in 1 year and it is currently 20% higher than its November
peak. It is a USD 194 billion company
versus Facebook USD 233 billion. Looking
at these numbers, the Chinese BAT can put up a good fight against the American
FAG (Facebook Amazon Google).
“One Belt, One Road” means China President Xi
Jinping’s plan to develop the Silk Road Economic Belt. Building roads, railways, ports and other
infrastructure projects to develop a modern version of the Silk Road. To come up with the investment, China led the
formation of Asian Infrastructure Investment Bank. It is kind of a World Bank with an Asian
spice. The market expects a lot of money
will be poured into this plan and this is one of the trigger points of the
China stock market rally.
The Chinese dragon sent a fire ball to Hong Kong
after Easter and Hong Kong stock market recorded HKD 252 billion (GBP 22
billion) on 8 April breaking all turnover record in the last bull run in 2007. The Hong Kong Exchange and Shanghai Stock
Exchange launched HongKong Shanghai Connect last year which allow investors
from either exchange to access the other.
Mainland China investors can buy Hong Kong shares through Shanghai Stock
Exchange and the flow spiked up after Easter as hot money spilled over to Hong
Kong. Hang Seng Index is the benchmark
index for the Hong Kong stock market and it is up 27% in a year, 18% year to
date as of 24 April. Considering Hong
Kong went through Occupy Central last year, such performance in the stock
market does not quite fit the picture of thousands of protestors camping on the
main road.
