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China's Stocks Advance on QFII Speculation

China's Stocks Advance on QFII Speculation - This is an informative article from Bloomberg on China's new policy regarding the stock market. Here are several paragraphs:

China's stocks rose the most in a month after the head of the securities regulator said the nation can increase by 10 times the size of two investment programs that allow foreign investors to buy securities.

The Shanghai measure has risen 18 percent from an almost four-year low on Dec. 3, while the CSI 300 climbed 22 percent on signs economic growth is picking up. Government reports last week showed exports expanding more than economists forecast, while inflation accelerated.

A gauge of brokerages, banks and developers in the CSI 300 jumped 4.8 percent, the most among 10 industry groups and the steepest gain since Dec. 14. Citic Securities, the biggest brokerage, climbed 6.9 percent to 13.59 yuan. Haitong Securities Co. (600837), the second largest, added 7 percent to 10.26 yuan.

The government scrapped a ceiling on investments by overseas sovereign wealth funds and central banks in its capital markets last month, part of government efforts to encourage long-term foreign ownership and shore up slumping equities.

China has also started preparations for a trial program that would allow individuals to invest in overseas capital markets as the nation seeks a greater role for its currency in global finance.

The People's Bank of China will proactively prepare for the trial of its qualified domestic individual investor program, it said in a statement on its website on Jan. 11, without giving further details. The central bank lists the so-called QDII2 initiative as one of its major goals for 2013.

My view - The clear message here, in case there was any doubt, is that China's new government wants its mainland stock market to appreciate.

This feature continues in the Subscriber's Area and contains two additional articles.

China Allows Media to Report on Air Pollution Crisis -
This is an important development, reported by the International Herald Tribune (subscription required but see also Subscriber's Area). Here is the opening:

BEIJING - The Chinese state news media on Monday published aggressive reports on what they described as the sickening and dangerous air pollution in Beijing and other parts of northern China, indicating that popular anger over air quality had reached a level where Communist Party propaganda officials felt that they had to allow the officially sanctioned press to address the growing concerns of ordinary citizens.

The across-the-board coverage of Beijing's brown, soupy air, which has been consistently rated "hazardous" or even worse by foreign and local monitors since last week, was the most open in recent memory. Since 2008, when Beijing made efforts to clean up the city before the Summer Olympics, the air has appeared to degrade in the view of many residents, though the official news media have often avoided addressing the problem.

The wide coverage on Monday appears to be in part a reaction to the conversation that has been unfolding on Chinese microblogs, where residents of northern China have been discussing the pollution nonstop in recent days.

The problem is so serious - the worst air quality since the United States Embassy began recording levels in 2008 - that hospitals reported on Monday a surge in patient admissions for respiratory problems, and Beijing officials ordered government cars off the road to try to curb the pollution, which some people say has been exacerbated by a weather phenomenon, called an inversion, that is trapping dirty particles.

My view - This is an alarming situation but in allowing all the media coverage I assume that China's new government intends to tackle the pollution problem vigorously. It will have to.

Tim Price: Eastern Promise -
My thanks to the author for his ever-stimulating letter. It is posted in the Subscriber's Area but here is the concluding paragraph:

So it is possible to resolve hideously warped markets with the quest for attractive equity investments at sensible valuations. But it necessitates conviction investing, a respect for traditional investment principles, and a healthy disregard for the benchmarks that will snare many less discerning investors (and their advisers). And in the words of Wayne Gretzky, don't skate to where the puck has been, but to where it's going. The puck is going to Asia - we have no doubt about this secular trend whatever. And cushioned with the buffer of a heavily defensive equity thesis, we're very happy to follow it there.

My view - I agree.

My personal portfolio: A trade closed -
Details are charts are in the Subscriber's Area.

Additional commentary by Eoin Treacy

RIM Rises to Highest Level in Almost a Year as Apple Stumbles This article by Hugo Miller for Bloomberg may be of interest to subscribers. Here it is in full:

Research In Motion Ltd., the maker of the BlackBerry smartphone, is trading at its highest level in almost a year amid signs that demand for Apple Inc.'s market- leading iPhone is ebbing.

RIM's stock rose 9.4 percent to $14.83 at 10:37 a.m. in New York, following a 14 percent gain on Jan. 11. Shares of the Waterloo, Ontario-based company climbed to $15.04 earlier in today's session, its highest intraday price since Feb. 22.

Apple reduced its orders for iPhone 5 screens this quarter, Japan's Nikkei newspaper reported today, signaling that demand is slowing. After years of losing market share, RIM is counting on its new BlackBerry 10 lineup to win back customers from Apple and Google Inc.'s Android. The company plans to unveil the phones on Jan. 30, before they go on sale in February and March.

RIM's stock has more than doubled since late September, fueled by optimism that the struggling company can build a comeback around BlackBerry 10. Sprint Nextel Corp. reiterated its support for the BlackBerry last week at the Consumer Electronics Show, ensuring that all of the largest U.S. carriers will offer the new phones.

My view The fortunes of two companies could not be more different than those of Apple and Research in Motion. From 2008 when the shares traded at similar prices, Apple went on to dominate the online music, smart phone and tablet markets while Research in Motion failed to keep up with the pace of innovation and its share price collapsed.

This section continues in the Subscriber's Area.

Thoughts on the Fiscal Cliff The period between President Obama's re-election and the New Year was characterised by a high degree of volatility as investor sentiment ebbed and flowed on expectations for a compromise to the fiscal cliff. As it happens, the fudge than resulted from late night negotiations at the end of the year has done little to tackle the USA's fiscal issues. Automatic spending cuts and a raising of the debt ceiling have been delayed until late February which represents the next in a series of high profile deadlines. While we can expect political manoeuvring to be ratcheted up as we approach that date, the balance of probabilities remains in favour of additional fudges rather than a grand bargain which might resolve some of the outstanding issues.

Political vacillation has resulted in some large stock market swings with the post-election period characterised by a sharp decline which resulted in a short-term oversold condition, an impressive rebound which resulted in a short-term overbought condition, a partial retracement of that gain and a surge over the last couple of weeks. The S&P500 found support in the region of the 200-day MA from January 2 nd to form an upside weekly key reversal and improved on that performance last week.

This section continues in the Subscriber's Area.

Email of the day (1) on how to benefit from the boom in the USA's unconventional natural gas supply:

I am specifically intested in a follow-up on "fr a cking" and whether you see an interesting theme to invest in? and if so, in which way?

My comment Thank you for this question. We have described the boom in unconventional oil and gas supply as a game changer for the energy sector for a number of years. However since the primary result of this surge in supply has been to depress natural gas prices, the clearest beneficiaries have been on the demand side and among companies that profit from increased volumes.

This section continues in the Subscriber's Area.

Email of the day (2-4) on additions to the Chart Library:

would you mind adding the PowerShares Build America Bond ETF (BAB) to the chart library?


Please add to the Chart Library: Sprott Physical Platinum and Palladium Trust (SPPP on NYSE). Thanks


Happy New Year to you & yours; Are you able to add Bank of Ireland 10.1% perpetual preferred share to the chart library. I am having lunch with Clive Hale on Thursday & believe you know him?

My comment Thank you for these suggestions which have been added to the Chart Library. 

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