2009与2010：回顾与展望

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24EN Editor"s Note：The year 2009 has just passed. Now we are embracing the year 2010. It"s that time of year again to have a brief review of the performance in 2009 and to discuss the outlook of 2010. But today my discussion is only confined to the Hong Kong"s stock market, Chinese Enterprise Share (H Share) in particularly. And let"s analyse it from two perspectives: fundamental and liquidity.
 
1. Generally speaking, the Hong Kong"s market in 2009 was extremely choppy and volatile. But the overall trend is good. The Heng Seng Index gained about 50% and the Chinese Enterprise Index was also up more than 65%.
 
Fundamental:
At the beginning of the year, the market was hit hard by the international financial crisis and gradually lost ground. But after the unprecedented joint effort made by the international community, the bottom started emerging in March. The impact of the international financial crisis to China is relatively small except in export sector. The result of the 4 trillion RMB stimulus package rolled out by the Chinese government could be clearly seen in the 2nd quarter. Many Chinese Companies picked up their profits in the 3rd quarter. The confidence of investors started building up. Nobody doubt about China will also achieve above 8% GDP growth in 2009.
 
Liquidity:
Because of the low interest rate policy in the US and other major economies and the speculation on the appreciation of Chinese currency, The foreign financial institutions borrowed cheap money from low interest rate and low growth nations, such as the US and Japan, then invested them into the economies in the relatively high interest rate and high growth nations, such as China. But not every foreign investor can easily buy Chinese asset inside China except those got quota through the QFII (Qualified Foreign Institutional Investor) scheme. To work around this, therefore many of this hot money flows into Hong Kong to buy the H Share (Chinese Enterprise Shares). This phenomenon provided excessive liquidity to Hong Kong"s financial system, underpinning the V shape rebound of Hong Kong stock market. According to the figures released by HONG KONG MONETARY UTHORITY, the INTERBANK LIQUIDITY CLOSING AGGREGATE BALANCE, from HK$150 billion at the beginning of 2009 increased to HK$300 billion at the end of 2009.
 
2. What the market is going to be like in 2010?
I am optimistic on the outlook of 2010. We are likely to see the Hong Kong market to be a bit less volatile. The Heng Seng Index might be fluctuating from 20,000 to 24,000. We also might see oil hit $90 a barrel.
 
Fundamental:
The global economies are recovering. The emerging economies are taking the leading role in this recovery, China is in particular. Chinese central bank Governor Zhou Xiaochuan said in his New Year Message: China will continue "moderately loose” monetary policy. President Hu Jintao said the government will pay more attention to the quality of growth this year, continue to adjust the structure of the economy and make the development model is more sustainable. And Premier Wen Jiabao said on Dec. 27 that China won’t make the mistake of ending stimulus policies too soon. It is widely believed that china will enjoy a growth rate between 9% and 10% in 2010. Many Chinese companies are expected to report stronger earnings. The figures shows even the situation in the worst hit export sector also has been slightly improved by the benefit of global demand recovery.
Hong Kong"s stock market is very much tied up with China mainland"s economy and policies.
 
Liquidity:  更多信息请访问：http://www.24en.com/
The recent figures show the US"s economy is recovering. But as most economists believe the recovery is going to be a slow, long and difficult one. The unemployment rate is still higher than 10%. The home sales number is still low. It is very unlikely the FED will change their interest rate any time in 6 months. So the situation of excessive liquidity in Hong Kong will remain unchanged for a long while.
 
At the same we also can see the increasing risk and challenge that China"s economy is facing, such as industrial overcapacity; weakness in export; inflate asset bubbles etc. But I have confidence that Chinese government can properly handle those problems. Nobody has the crystal ball. Only time can tell what will happen in the future. So we must keep a close watch on the market and the government policies and adjust our investment strategies accordingly.