Asian Stock Markets' Drop Presents Buying Opportunity

Discussion in 'Wall St. News' started by S2007S, Mar 4, 2007.

  1. S2007S


    Not even a week into the sell off and there talking about Buying Opportunities. Find it amazing how quick they yell out that its time to buy, I would give this sell off time to work itself out. Anything could happen. Why take a risk.

    Asian Stock Markets' Drop Presents Buying Opportunity (Update1)

    By Darren Boey

    March 5 (Bloomberg) -- Asian stock strategists are calling for investors to buy shares after last week's rout, which wiped out more than $300 billion of the region's market value, because the losses are unlikely to be sustained.

    The Morgan Stanley Capital International Asia Pacific Index last week tumbled 3.5 percent, the most since July, sparked by the biggest plunge in Chinese stocks in a decade. The index's slide from a record high was exacerbated by U.S. government reports that suggested the world's largest economy is slowing.

    ``We haven't changed our positions,'' said Mark Jolley, Deutsche Bank AG's chief Asian strategist, based in Hong Kong. ``We expected a pullback in February and March. We consider any market correction as a buying opportunity.''

    Asia kicked off a global slide as the Shanghai and Shenzhen 300 Index in China, the world's fourth-largest economy, tumbled 9.2 percent on Feb. 27. MSCI's Asia Pacific Index fell 0.8 percent at 9:25 a.m. in Tokyo, headed for its lowest close since Jan. 31.

    Concern about a Chinese government crackdown on loans to finance share investments dragged the Shanghai and Shenzhen 300, tracking yuan-denominated A shares listed on the nation's two stock exchanges, down 6.3 percent for the week. The benchmark closed at a record on Feb. 26 and is still more than double its value a year ago.

    Japan's Nikkei 225 Stock Average lost 5.3 percent for the week. Hong Kong's Hang Seng Index fell 6.1 percent. Malaysia's Kuala Lumpur Composite Index dropped 9.3 percent.


    The MSCI World Index slid 4.5 percent, marking the worst week for equities since September 2002, with benchmarks in the U.S. and Europe wiping out this year's gains. The Standard & Poor's 500 Index lost 4.4 percent and the Dow Jones Stoxx 600 Index tumbled 5.2 percent.

    ``We had a small contagion effect, given the weight of China now that it has risen quite a lot and also because of what happened in the U.S. after that,'' said James Rodriguez de Castro, the Hong Kong-based head of Merrill Lynch & Co.'s global markets business in Asia. ``What happened in China was the final catalyst of a correction that was expected for some time.''

    MSCI's Asia Pacific index beat its global counterpart in four out of the past five years as the region's faster economic growth lured investors. The regional gauge doubled during the five-year period, advanced 13 percent in the past year, and closed at an all-time high of 148.69 on Feb. 27.

    At the peak, the index was valued at about 19.5 times earnings, the highest ratio since December 2004, according to data compiled by Bloomberg. It ended last week at 18.2 times.

    `Long-Term Story'

    On the day of the record close, the MSCI Asia Pacific's relative strength index rose to 75, above the threshold of 70 that some investors use as a sell signal. The indicator, based on its 14-day moving average, has since fallen to 43.5.

    Asian equities are more attractive after the declines because the economic growth underpinning the region's corporate profits and stock markets hasn't changed, according to Henderson Global Investors Ltd.'s Andrew Beal, based in London.

    ``The long-term story is a positive one'' for China and Hong Kong, said Beal, who helps manage Henderson's $429 million Pacific Investment Trust and owns shares of companies in the two locations. ``As the dust settles and sentiment improves, we will be looking to buy into both these markets, while looking for other good buying opportunities elsewhere within the region.''

    Deutsche Bank's Jolley likes markets in Southeast Asia including Malaysia, Singapore and Thailand. Merrill's Rodriguez favors India and Vietnam, two of the region's fastest-growing economies.

    Faster Growth

    China's economy will expand 10 percent in 2007 after four straight years of growth exceeding that threshold, according to International Monetary Fund estimates. The IMF sees 4.9 percent global growth this year. India is forecast to grow 7.3 percent. Vietnam's gross domestic product climbed 8.2 percent last year, according to government estimates.

    The Feb. 27 plunge in Chinese stocks took place after the State Council, the country's highest ruling body, approved a task force to clamp down on illegal share offerings and other banned activities in the market. Some investors applauded the government's effort to control investment.

    ``Cooling of the Chinese stock market fever is a positive step for its market's long-term development,'' said Kevin Yang, chief investment officer at Paradigm Asset Management Co., which oversees $360 million in assets. ``It isn't sensible to expect any economy to maintain a double-digit growth rate forever nor a stock market to double every year.''

    Valuations `Stretched'

    Marc Faber, who oversees $300 million at Marc Faber Ltd. in Hong Kong and predicted the U.S. stock market's 1987 crash, said shares are still costly relative to earnings prospects and there is more selling to come.

    ``My sense is that we could go down in markets like India, China and also some of the other markets that have become stretched,'' especially Vietnam and Singapore, Faber said in a March 1 interview. ``We could easily drop 30, 40 percent before the markets really become buying opportunities.''

    One hurdle for any regional rally is the specter of an economic slowdown in the U.S., Asia's largest export market. A government report last week showed gross domestic product rose at a 2.2 percent annual rate in the fourth quarter, less than an initial assessment of 3.5 percent growth.

    Former Federal Reserve Chairman Alan Greenspan said on March 1 that a U.S. recession is possible this year, though not probable. Ben S. Bernanke, Greenspan's successor, told Congress the Fed still expects the economy to pick up later this year.

    ``We will not have anything serious, rather it will be a temporary slowdown,'' Merrill's de Castro said. ``Even with the U.S. growing at a moderate pace, the level of demand for Asian products is still going to be quite high. I'm telling clients to stay calm.''

    To contact the reporter on this story: Darren Boey in Hong Kong at
  2. They always have to fool someone.
  3. Arnie


    You go first.:D
  4. More "buying opportunities" coming up.

    Shanghai B shares are in free fall again Monday, down over 5% so far.
  5. Sweet.

    They'll come out with a Buy! Buy! Buy! Jim Cramer style "buy" if they fall another 20%.
  6. Passed 6% as lunch break halted the trade. There were hardly any up ticks in the last 20 minutes.
  7. :D If you are anything but short in this market you are a goner:D

    I'm loving this!...for the past 3-4 months I've been buying puts like crazy and telling people to do the same

    People have generally looked at me like I fell from Mars back here at the office.

    The old "Its different this time...private equity blah blah"

    Just out of curiosity what happened to the 'Commodity Super Cycle and the 'Goldilocks Economy'


    Nikkei DOWN 482
    Hang Seng DOWN 601

  8. I thought this was a stock_trad3r thread :)
  9. Neet


    The YM is at 12025 as I type this.
  10. Dow will close below 12,000 tomorrow.
    #10     Mar 5, 2007