Saturday, April 11, 2015

Oh China, That Don't Impress Me Much

Anyone who is reading the right kind of news would know the insane move that has happened in China stocks. A massive 5 sigma move to the upside as calculated by Tiho from ASSOL.

Guess what? Back in Jul 2014, I did give a shoutout that I was eyeballing China as a contrarian play with a lot of potential. It was about 38 when I talked about it, and it just went up to freaking 51.

That's a pretty intense 34% explosion in roughly only 9 months. However, most of the move was made in the past month. 24% since March. Sheer madness.

Guess what again? I did queue up and placed bids for the UOB China ETF back then in Jul 2014, but my orders never got filled. After the run up in September, I thought for sure it's going to cool off for quite a bit and I could enter in a long term position. Instead, it has been marching steadily up since Oct until it's crazy parabolic now.

(From Jul 2014. Up 34% since then. 100% more to go to catch up with SPY?)

Sure, it's hella far away from catching up to other indices around the world so upside might seem plausible, but given the time factor in this equation, I think not. I think China stocks have been priced far too pessimistically just a year ago, but with the intensity of this move, I question if this upside swing is sustainable. I highly doubt it is.

Some of the spillover effects has leaked into other Asian markets, but to a much lesser degree. I have long held the view that places like HK and SG are cheap markets to be in, but vulnerable to collateral damage if there is a financial fallout. Other Asian markets like Malaysia and Indonesia, not really.

If the water settles down a little, I would be more bold in entering my position. If my order had filled in Jul 2014, I would most definitely confirm plus chop be taking my money out and locking in my profits now. I haven't seen a more clear cut example of a panic-buying, market melt-up like this in a while.

While China has much less ridiculous valuation that most of its Western peers, China is not without its own problems.

New paradigm, or same old shit? You decide.

It's funny to me, because I still much rather invest in Russia than China, but I know most people prefer the opposite. YTD, Russia is up 21%.

I have been putting my money where my mouth is at since I blogged about it in Sep 2014 all the way until Mar 2015. Because since market soundbites dictates that "only losers average down losers", I have been a labelled loser engaging in this losing strategy by averaging down my losing positions (yes, my precious metals positions too). My current "averaging my losses" strategy for Russia is up 7%. I expect this to go up a lot more in the long term future. Sorry for the disappointment lads, but I don't invest just to beautify my monthly report card to impress you.

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