China Elec. Sector - mild up.

#Elec Chi Aug09 Elec. Consume YOY+8.2%, MOM+1.2%. Fcst Mkt good : Fcst.GDP+10%. Cost stable: Coal price stable. Buy when consolidate.

China's Aug 2009 electricity consumption

YOY +8.2%

MOM +1.2%.

Market Demand Positive: Forecast China GDP YOY+10%.

Cost Positive : Coal price stable.

Related Stocks

China Power (2380) PE Low. Turn loss to profit. Most upside.

Investment Mega Forces and Long Term Investment

Mega Forces

Yesterday Heng Sang Index went up by 5.26% in reaction of the news of improving US consumer sentiment and the market reaction on the month end closing of the future market. That’s just a lagging indicator and a metric to gage the market condition. The reasons behind such explosive growth are:

1. Inflow of funding into the Asia sector with China as a focal point. Hong Kong being part of China benefits from this inflow of funds.
   
   
2. The world appetite for risk is expanding with improving economic data in US. 
   
   
3. Investors around the world are almost forced to take on riskier investment to anticipate the coming of the super-inflation due to the inflationary strategies used by so many central banks around the world to recover from the financial crisis.
   

On the other side of the world in US, they have completed selling of USD40b of 2 years Treasury bill in the program to push USD101b of treasury debt notes to the market. The selling of the first USD 40b seems easy. However, the price of the 10-year Treasure note was driven down by the market resulting sharp increase in long term yields. This selling of Treasury Debt is really a continuation of the increase in national debt of the US market. (see FT's Article) US Government’s debt is now accumulating to 80% of US’s GDP. US’s debt to foreign countries amount to 97% of the national GDP. This is an incredible amount of debt and it will for sure create pressure for the deflation of the USD. Funds will have no choice but to search for area of better investment. For now, there is nothing better than the China and Asia market.

Long Terms Investment – New Energy Sector

I have always believes that the world’s economic development has always been driven by technologies. From invention of paper, steam engine, mass production of manufacturing technologies, software, internet, bio-engineering and so many other technologies have been the hot chapter of the investment history story book. Frankly it’s nothing more than we human has learned to be smarter in deploying natural resources to better our living at the rate of mass increase of human population on Earth. Anyway, let’s not go to far back to be too philosophical and let’s come down to Earth. The market has increased by folds in many volatile stocks since March. If we are to get into the market now for many short term trades, chances are you are facing way too much risk. If we are to get into the market with still area of growth, it better be some kind of longer term investment opportunity. Mind you, market with growth potential does not mean it’s stable and safe. However, there is at least foreseeable market potential in long run.

I personally believe that New Energy Sector is one worth looking at. The reason is simple: we need to continue to produce and consume in such a crazy manner to help the economy to recover. Just like the continuation of selling of the US Treasury and the inflationary approaches by the central banks of the world. We will need to continue to produce our cars, run our needed electricity and continue to use energy to produce all kinds of goods. On the other hand, we have learned that we are destroying the Earth’s econ system and over-consuming our resources. So to keep the Earth a livable planet (at least for human), we need to learn how to consume and produce smartly. Energy is really at the very center of all productions. Be it farming, bio-engineering, computing or even our very basic of moving from point A to B, we need energy. We need to increase our energy production efficiency and we need to produce clean energy that is environmental friendly. All things point to the pressing needs of New Energy Technology. If I were to look for a real long term investment portfolio, new energy is likely on that is evergreen!

I am living in Hong Kong and trade in Hong Kong. Unfortunately there are only a few stocks that belong to the “New Energy” sector. Fortunately, however, that they are all China related stocks. It means that buying these stocks align with the other mega trend of global funding rushing into Asia and China. The remaining home work will be to select the right stocks to invest! The New Energy Stocks are:

Alternative Energy Stock Listed on Hong Kong Market
Company	Stock Code	PE	Debt Ratio	Turnover Growth (%)	Market Cap HKD' million
Enviro Energy	8182.hk	63.75	-	-53.70	1191.8
Smart Rich	1051.hk	na	-	114.58	1209.75
Singyes Solor	0750.hk	23.94	2.31	49.38	1823.28
GCL Poly-Energy	3800.hk	5.44	134.5	100.22	1993.99
China Windpower	0182.hk	5.17	7.26	409.61	4878.49
Solar Giga	0757.hk	6.60	16.98	47.01	4725.95

However, these stocks are already at a very high risk level. Better to use your own judgment to invest into them. Looking at the PE, it seems rather high.

Oil price reach USD62 level.

Oil Price increased to USD62/barrel level.

Why:

1. US Oil Inventory decreased by 2.1m barrels, which is more than expectation

2. Political turmoil in Niagara. 

Impact:

Beneficial to profitability for Upstream Oil Producers:

- Petro China (00857.hk)

- CNOOC (00833.hk)

China Mobile 00941.hk - Behind Market Growth

China Mobile stock price droped 6% Year-To-Date. Other 2 major mobile operators has increased growth 2% and 19%. Hang Seng Index and MSCI China increased 20%. Potential to catch up with the market.

Current Price: HKD73.3.
Target Price: HKD 85.5
Potential Growth: 17%

Risk: There is a market rumor that China is going to have a national policy to let go of the Roaming Fee and the Basic Monthly Fee. Thsi will impact All Mobile operators' income.

HSBC Lower Interest Rate and Another Financial Bubble?

The big trending signal last week is the reduction of the saving interest rate from 0.1% to 0.01% by HSBC. This is an attempt by one of the most influential banks in Hong Kong to reduce interest rate from a level of very near to zero interest rate. Just a matter of joke I think they are trying to do collect empirical experimental data for testing the interest rate and the financial market reaction at the near absolute zero interest rate. Just kidding.

However, the action does indicate something. There is too much money in the banking system. The banks will likely be forcing the excess money in their saving accounts to the investment accounts. Now this action is very much align with the recent news that the Hong Kong Monetary Authority has been injecting money into the banking system to maintain the HKD-USD currency peg due to influx of "Hot Money" into the Hong Kong system.

With so much money printed and injected by many central banks around the world (most obviously represented by US and China), the market is once again "rescued" by another formation of a future bubble. Let's not argue if this is a proper way to save the world's financial system but we are almost for sure that we will be receiving another era of Super Inflation. As to when the bubble will burst, I don't know. I think most people don't know as the bubble is not a thing measured by some financial or economic figures but by the human feeling (greed and fear) about when it is "too much" to bear.

Frankly, the world's economy wouldn't have expanded so much if we having un-peg the currency from the scare gold standard. Since the deviation from the gold standard, the world has been "stimulated" by too much money in the system. That gave us a "feeling" of security and the confident to focus on production since consumption were "there". It is only logical to restart our confident to produce by stimulating more consumption power. However, the key is who is now doing the buying? China?

In a way I think it's yes. It is, perhaps fortunate in a matter of bad taste, that an average man in China has not consumed that much compare to the developed countries. So we have market potential to grow. That is, to continue to buy more. From this logic, we will be shifting our global financial drivers from US, Europe, now China, to India, Russia, Africa...and so forth. Geographic segment by segment and generation by generation as the human race "develop" they will want better living standards. That needs and wants will be yet another reason of the global growth.

For this to happen, stable political systems around the many new countries is a must. So people will have a chance to learn and educate their next generation and to grow to such a degree that they will want to buy more. And that is what "Consumption" is all about. Anyway, this is something obvious and there is no point of talking about it.

Back to the Interest Rate reduction by HSBC, this is an obvious signal that we are going into another inflationary period. Buying real asset is a way to protect ourselves. The key, however, is what to buy? Gold? Real-Estate? Commodities? Stocks?

Let's talk about that in next articles.