UPDATE released 04 mar 16

it has been some time since the last update which was way back in 2003, the reason for this long overdue update is because i was overloaded with work.

stocks

for those who have treaded the utility CLP should have gained tremendously captial wise and from dividend.

if you have not taken any positions so far, avoid those that have gained 30-40%, look for stocks with p/e around 10-13 not more.

for your information, usa will have 100m in population aged 60+ in 10 years time, do you think the stock market has any chance to break further ground within this 10 years? hold your breath, i guess not more than one boom.

currency

some of you have already been advised, euro will decline significantly from top 129 to 119 in the short term and possibly lower at 115/6 in the medium term.

china

the challenges it faces are huge:

• great divide - china's great divide is even greater because of corruption.
• squeezed margins - wofe and soe are being squeezed at both ends, the inflexibility in pricing from customers plus the increase in material prices. the pricing power is eroded by the great divide [read attachment] while the only way to cut costs and improve margin is to cut costs of labour. such cutting will inevitably cause social problems. chinese workers being the most industrious workers in the world and further pressure on them can cause factory unrest.
• weak state banks - outsiders estimate of NPL is in the range from 40-60%, it does not pose any problem now because rmb is gaining greater acceptance in the peripheral countries that her citizens visit. this in turn encourage their citizens to keep their savings in rmb instead of foreign currencies.
• the trade deficit - china is used to trade surpluses, however, the jan/feb figures show that it runs huge trade deficits. if this trend continues, yuan will be under pressure to devalue and forcing the NPL problem into the open.

real estate

many markets here or overseas have seen big runups, these runups will not turn around so soon, they will only turn around and go south when the stock markets are hit by withdrawals from the aging population when they retire or are short of resources because of dwindling current income. that does not mean you should go after real estate at all costs though prices do go up, it might be difficult to unload once any downturn materialized which can be forthcoming within the next few years. trying to guess the top is extremely dangerous as experience in HK tells you that unloading in a difficult market means marking down by 8-15% which most people would not dare to do so until they realized that it is too late.