Asia Investment Views 30 Sept

US indeed ended up without too much of a clear direction. DJIA: –0.21%; S&P: –0.26%; NASDAQ: –0.13%.

Early trading in Japan is slightly below, NIKKEI: –0.16%, similar to what happened in US last night.

The US House of Representatives voted for the bill to urge China to allow the currencies to appreciate, which China do not want. This currency issue has always been quite political, as anyone with some economic knowledge would know that China is not really responsible for the trade deficit in US. Now especially in a little more than a month time before the midterm election, politicians surely want to do something.

Hong Kong/China preview

Market will be closed tomorrow in Hong Kong, and will be closed for a week in China. Surely people are quite cautious in China as they have no idea what will happen in a week. Reports from China said fund managers are cutting exposure before this week-long holiday. For Hong Kong, your author believe the market will enter a week-long of directionless as Hong Kong market is increasingly correlated with China.

Headlines in Hong Kong local newspapers focus on yesterday land auction in Hong Kong, in which one of the sites with withdrawn as no one bided it. Post-auction, explanations offered to media by the developers (and sell-side research analysts are picking up on this) focus on the location of the site, the views of cemetery from the sites (which Chinese people do not like), as well as the slope with risk of landslide surrounding the site which may require substantial effort to stabilise it (Source: HKEJ). Reasonable as it might seem, there was no one mentioning this prior to the auction, and every surveyor in town was expecting good result. Together with the fact that Sun Hung Kai Properties (16.HK) bought the other site in the same land auction at high price (HK$459m or AV HK$3,083 psf), your author does not thing the whole story adds up.

Another important headline today is the further tightening measures by the Chinese government to curb home prices. The new announcement was largely a further guidelines regarding the previously released 10 guidelines. New announcement restricts the mortgage loan-to-value (LTV) ratio to 70% or less for the first home, 50% or less for second home, and prohibit mortgages for third home altogether. Government will also attempt to assess and settle the land appreciation tax (LAT), which was not strictly implemented for years, with the special focus on areas with high home prices. Property tax pilot programme will be conducted sooner rather than later.

Your author thinks that risk in China property market is very high at the moment, and there might be spill-over effect to Hong Kong market as well.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.