Some analysts and financial newswriters are calling for an end to the stock market rally soon. Goola Warden has mentioned that "Both long- and medium-term technical indicators are waning in tandem, for the first time since 1Q2009". Does this spell the end of the stock market rally?
Not, if you believe in Bob Doll and Marco Polo's Aaron Boesky. Aaron Boesky's China Fund has averaged annual returns of 30% since its inception since 2004, so he is definitely an authority worth listening too. According to him. we are in a new bull market in China, a cycle that could last up to 6 years. We are currently only in the third year, and halfway through to the next peak. That means investors can make over 100% returns in the Shanghai market over the next three years.
Why is he so optimistic on China? Valuations are cheap at 13 to 14 times earnings compared to 72 times in2007. These are lower than in NYSE and Singapore. He believes corporate earnings growth of 25% this year, and this should drive the re-rating of the Shanghai market.
He does not buy the argument that China is slowing its economy. Instead, he believes that the government is just trying to rein in runaway real estate prices, and at the same time, grow consumption at home. Some key themes to watch out for will thus be: credit cards, insurance, securites, internet stocks and infrastructure(eg. nuclear), transportation (eg. railways, water), PCs, mobile phones, sporting goods, breweries, tourism and hotels. He is however, not very keen on property and banks, as he feels that banks in China are also tools of government policy and not always profit-driven. He did not specify what stocks he is currently invested in/ looking to invest in.
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