George Chen

By George Chen
The opinions expressed are the author’s own.

I am hearing more complaints these days from trader friends about how boring the market is these days. Why boring?

Trading volume is low and there are apparently more risks than opportunities as investors seek clear signals about the central bank’s monetary policy direction and about what global funds think of China for the second half of the year.

With investors uncertain about the outlook for the Shanghai and Hong Kong stock markets, some are beginning to rethink their positions on Japan. Concerns about radiation are easing and I hear more people talking about the big potential for Japan’s market and economy to rebound amid massive reconstruction there. An old and new question then arises: can we bet on the Nikkei, again?

Australia also looks like a good bet to some rich Chinese investors. They say the property market alongside the long beaches in Australia offers profit-taking opportunities over the next few years.

Remember my recent column about many rich Chinese trying to emigrate in the next few years? Australia is always a popular destination. A number of local media reports also indicated some family members of top Chinese leaders already bought nice villas in the resource-rich country whose diplomatic relations with China have been up and down in recent years.

In China, an influential fund manager friend told me privately: “The property market in China is basically done this year and next year before Premier Wen Jiabao retires and we get a new government.” But he quickly added: “Premier Wen must do something to keep his promise to keep property prices under control, and he’s done almost all he can. The next government will be a different story.”

So, until we see clear signs of how much further China’s property market can go, some investors are naturally starting to shift their focus. Japan? Australia? What’s your say? I think the same logic can apply to China’s stock market amid record high banks’ reserve requirement ratio, now already 21 percent for most banks, and the country’s benchmark interest rate that Beijing keeps raising so far this year.

The fast-changing market sentiment about investors shifting focus in Asia may be a bad sign or even a sort of warning to the Chinese government, which is keen to fight asset bubbles but also doesn’t want to see huge foreign money outflows and a lack of confidence in its capital markets.

The Shanghai exchange remains keen to launch an international board to welcome HSBC “home”. If the main board of its local currency yuan-denominated A-shares sinks, how can you convince investors of the value of the new international board?

Li Daokui, an influential adviser to the People’s Bank of China, said yesterday that the valuation levels of most A-share companies were pretty low and he saw investment opportunities. To some investors, this is almost government propaganda to encourage buying.

However, he also warned that Beijing needs to raise interest rates further to rein in inflation and that’s not really good news for stock investors.

Remember what Warren Buffett said? Choose right and sit tight. However, Mr. Buffett may also be feeling a bit lost about his Chinese investment portfolio these days. Oh yes, that’s just another China story …

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: A woman carrying an umbrella walks past an office building that includes a China Telecom office and a branch of the Industrial and Commercial Bank of China in central Beijing August 25, 2010 REUTERS/David Gray

By George Chen
The opinions expressed are the author’s own.

My readers on Reuters.com know me as a columnist who regularly writes about China and I also run a Chinese-language column, Mr. Shangkong, about Shanghai where I was born and Hong Kong where I call home now, on Reuters.com.cn, the China portal.

In fact, my day job is not just about writing columns but more about Trading China, a young and energetic Thomson Reuters project. It’s a public holiday in China today and the markets are relatively quiet, so I’d like to share something different in today’s column as I want to talk a bit about Trading China, which comprises Carmen, Joseph and myself.

Since receiving a call about a year ago from my boss North Asia Editor Phil Smith, aka “chart guru” in the Trading China community, I was quickly sent to Dubai to learn about and launch Trading China. Dubai is the place where Sex And The City 2, the movie, was not allowed to be filmed and our sister project Trading Middle East was launched smoothly.

Since then, most Trading China members know me as the man behind The Day Ahead, an email newsletter I write and send before the bell rings on the Shanghai and Hong Kong stock exchanges on every trading day. Whenever I meet our members, I’m usually  greeted with a similar exclamation: “Oh, so you’re the man who writes The Day Ahead column I see every day”. Yes, that’s me, composing about 300 emails a year if I’m not on holiday. I hope you find most of them useful. Drop me or Phil a note if you’d like to pass on a comment.

The Day Ahead is just one part of Trading China, which also consists of a real-time online forum where top CEOs and fund managers speak and a China-dedicated news site. If you ask me how we envisage Trading China, my short answer would be as a professional Facebook-like network, but by invitation only.

You may not have an opportunity to meet 150-plus trading peers together on the trading floor at the Exchange Square in Hong Kong but you can meet them all virtually with us in Trading China.

To many of you, Carmen Ng is known as the lovely girl in the chatroom and on Facebook. To be more professional, she runs the Trading China members-only web portal and keeps you up to date on the latest events, whether in China, Japan or North Korea. To those of you who attend our offline events such as the Christmas party at The Pawn, Carmen is also the one behind the camera putting together memorable video clips. Watch some video clips here.

Joseph Chaney is a Reuters journalist-turned business manager and my counterpart on the business side of Thomson Reuters, making sure our members and clients are happy with our service. Joe represents Trading China at many formal business occasions. He’s always well dressed, while I often look like a post-graduate student (in fact, I am doing a part-time master’s degree in international relations at the University of Hong Kong).

Of course, Trading China is a team project, with more than just those mentioned above. Many of them may not have the chance to meet you, but they work on the project behind the scenes, providing data, technical support and so on.

“Good morning, and good luck!” How can I forget to say this at the end of this note? You do know this line if you are already a loyal reader of The Day Ahead.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: A giant poster seen in the subway station in Hong Kong’s Central district on December 9, 2009 Reuters/George Chen

By George Chen
The opinions expressed are the author’s own.

Have you had breakfast or lunch yet? In Hong Kong, I’m guessing few people are choosing sushi these days.

Many restaurants in Hong Kong, even Japanese restaurants, have been quick to distance themselves from the crisis in Japan since the earthquake as concerns about food safety are growing in many Asia-Pacific cities, including Beijing, Seoul and Sydney.

The Japanese authorities announced this week that they would widen a ban on exports of a wide range of food products from areas surrounding the earthquake-hit Fukushima Daiichi nuclear power station. In fact, even before the official ban, the health authorities in China, Hong Kong and South Korea were already monitoring all such imports from Japan.

I’ve seen a number of sell-side analysts recommend Chinese food and beverage stocks, including some fisheries, which are now expected to benefit from the Japan crisis as people turn to locally produced seafood. Australian and New Zealand seafood companies should also benefit. It sounds like a perfect time for banks such as ANZ to expand, helping Australian and New Zealand farmers and fisheries extend their reach beyond their domestic markets, turning a crisis into an opportunity.

Some Chinese brokerages called such stocks “post-earthquake concept stocks”. Have you read the story about how Chinese truck maker Sany sent to Japan their innovative truck that can shoot wet concrete several meters into the air? Sany is likely to be a typical post-earthquake star pick, as are construction companies in Japan.

It’s not a fun idea but it does make sense. After all, investors can’t just sit in front of television screens feeling sad but doing nothing. What’s your say about the post-earthquake era in Japan from the economic perspective?

George Chen is a Reuters editor and columnist based in Hong Kong.

By George Chen
The opinions expressed are the author’s own.

You might consider yourself very smart, powerful or perhaps wealthy, but after watching live coverage on TV of the devastating earthquake and tsunami in Japan on Friday afternoon, what was your reaction? We’re all nobodies in the face of the forces of nature.

On Friday afternoon before the earthquake, the benchmark Shanghai Composite Index showed unexpected signs of recovery but the rebound was unfortunately short-lived. Immediately following the news alert about Japan’s worst earthquake in decades, stock markets from Hong Kong to Shanghai all retreated quickly.

This was a very natural reaction to such a massive natural disaster. Almost the same reaction was seen after the earthquake in China’s Sichuan province in May 2008. When investors feel uncertain and then the market sentiment becomes anxious, they sell. Fair enough – who really is in the mood to trade after seeing such a horrible event?

But think twice.

The phrase 危机 (wei ji) in Chinese for “crisis” is comprised of 危, danger and 机, opportunity. If you think you are smart, powerful or rich, is it time for you to turn the danger into an opportunity? It doesn’t simply mean you should immediately buy stocks to help the markets recover, so people may feel better and more hopeful about the economic outlook for Asia, but you need a plan to figure out what to do next.

So, what’s next? There won’t be any earthquake-like shock for Asia’s capital markets, I say.

Takuji Okubo, Chief Japan Economist for French bank Societe Generale, said in a research note to clients that the Japan earthquake would have a negative impact on regional equities markets over the short term but in the long run, it may help Japan’s economy grow, given the government’s big efforts to rebuild infrastructure, homes and so on.

What does that mean to China? Can Chinese materials and construction companies help? Because of growing concern about nuclear radiation, food safety is becoming another big challenge for Japan, especially to exports and this may be another angle worth studying about what a role China can play in and after the crisis.

We won’t be always in danger so your opportunity should come in next.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: A man steps over a crack in the road as he walks towards the devastated area of Rikuzentakata, northern Japan after the magnitude 8.9 earthquake and tsunami struck the area, March 13, 2011. REUTERS/Lee Jae-Won

By George Chen
The opinions expressed are the author’s own.

Is history going to repeat itself? I am talking about the 2008 market crash in China, which was partly triggered by a company’s mega-sized fundraising plan. The company is Ping An Insurance, whose Chinese name literally means “safe” and is China’s No.2 insurer.

Ironically, Ping An may be considered one of the most “unsafe” stocks in the market given its bumpy trading track record. Yesterday, shares of Ping An slumped soon after the market opened and many investors cited market rumours about Ping An’s new plan to raise as much as 100 billion yuan (US$15 billion) as the cause of the slump.

The buzz spread fast and wide in the market. By midday, a number of brokerages including CITIC Securities issued research notes to clients saying Ping An needed more money to boost its capital base and expand business, in particular after its landmark acquisition of Shenzhen Development Bank, though different brokerages had different views on the potential size of the fundraising. Some said 40 billion yuan would be enough. But still, 40 billion yuan? That’s a ton of money.

In early 2008, Ping An surprisingly announced its 160 billion yuan fund-raising plan, mainly to cover its investment losses abroad and quickly gained massive criticism not only from investors but also from some regulators. In addition to the impact of global financial crisis, Ping An’s 2008 fund-raising plan, which didn’t work out in the end, became a trigger to turn China’s stock market into a bear market from bull-run.

To me, it is understandable why many retail investors in China often like to brand Ping An as one of the most “irresponsible” listed companies, though the company claims it has won many corporate governance and social responsibility-related awards.

Late on Thursday, Ping An Insurance (Group) of China Ltd was forced to issue a brief statement, saying it does not have any refinancing plans in the Shanghai stock market, as it shares fell to a three-month low on fundraising rumours. However, the insurer did not say if it intended to raise funds on Hong Kong’s H-share market in the statement posted on the Hong Kong stock exchange. The spokesman for Ping An declined to elaborate further. As you can tell, the buzz about Ping An’s fund-raising is not going to end anytime soon in the market.

2011, A YEAR OF FUND-RAISING

Ping An is often considered a must-have stock for portfolio reason among institutional investors at home and abroad. The rumor about Ping An’s mega-sized fund-raising plan came amid growing expectations that many other Chinese financial institutions and developers may have to raise more money in 2011, which some investors have already thought of as “a year of fund-raising”.

Just few days before the end of 2010, I remember an official Chinese newspaper ran a front-page article to praise China’s top securities regulator Shang Fulin’s work in 2010, saying under Shang’s leadership, China has become one of the world’s biggest stock market by market value from “little known” in recent years and it also afforded the largest amount of IPO fund-raising in total in the world in the past year.

Oops! The editor for the story must forget compare these facts with the other more interesting thing — China is also the worst stock market in terms of its performance among all major economies in 2010. And the reason? I will say we should partly thank those big fund-raisings.

And 2011? It looks like it’s going to be another year of fundraising for China’s stock market. A day after the buzz about Ping An’s fundraising plan, Agricultural Bank of China, one of the country’s Big Four state lenders, announced a 50 billion yuan bond issuance plan. Minsheng Banking Corp, a leading non-state lender, is also said to be seeking 3 billion yuan via a private share placement soon.

Hurry up, fundraisers — the earlier the better, before you drive investors mad!

I asked my colleague Samuel Shen in Shanghai who stay in touch with China’s top fund managers closely if the new fund-raising buzz about Ping An could trigger the Shanghai index into a bear market. He replied me: “Are we already in a bull market?” He’s right.

We concluded since 2011 is going to be “the year of rabbit”, maybe “bumpy” is the best word to describe the outlook of the market. What’s your say, my friend?

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: A woman talks on her mobile at a customer service centre of Ping An Insurance of China in Beijing April 16, 2010 REUTERS/Christina Hu