GFA: 2010 Outlook Part 2

Hi all,

A bit late for a morning wrap, so going to post some comments over 13 Jan's mid day moves.

HSI down 2.3% in midday, with commodities, properties and china banks most hard hit, though we see a broadbase fall on the market. Overnight, we had poor results from Alcoa whilst Chinese authorities accelerates the stimulus exits b raising the RRR by 50 bps, after guiding the weekly bill rate up 40 bps. Such a move was unexpected, and leads to our part 1 of the analysis that policy risks are kicking into 2010 to create a volatile year.

Despite all these, one must note that Chinese economy may seem to have started picking up strongly the recovery trend to a sustainable level, after seeing import and export surging early last week. This points to the export-led recovery might be on the way, whilst internal consumption will, again, remain to be the focus theme for the rest of the year.

One, however, must note that the unexpected stimulus exit from Chinese side may post query to the recovery ahead of us. The main question being - DID THEY DO IT TOO EARLY?, especially they are the leading engine of digging the globe out of recession after GFC.

With a pipeline of bad data and unexpected moves, we may anticipate near term volatility to escalate, whilst sentiment will certainly be hurt. Would be a buyer on dips on inflation-beneficial stocks, such as consumer stocks, gold and oil.

happy trading.

ongy out.