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Back to STL

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I got all the fun of driving in Boston traffic during rush hour. It took me more than an hour driving from Waltham to Boston Logan, and my Garmin 755T GPS helped this time.

One thing I noticed in Boston is driving is a lot more hectic than in the River city. People won’t yield to let me slip in, they will honk at me when I drive too slow, those kind of thing. Also, keep in mind Boston is a very old city, the roads are usually narrow, and they are not aligned very well, there are a lot cross intersections in 30/150 degree rather than 90/90 degree. It’s a little confusing to me. The good thing is I survived. Until at Hertz returning the rental car, the Hertz car locked the car before I took out my bag from trunk. So I had the opportunity to see unlocking a car using the tools.

Reading Psychology book

(“Influence” Chinese version cover)

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Turning point or new beginning: valuation

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Zhu Ping (朱平) is the chief investment officer (投资总监) of Guang Fa fund(广发基金), I have a lot of respect for him not because he went to the same graduate school I went (Shanghai Univ. of Finance and Economics); but rather he is an independent thinker, has a good track record managing the funds, has a good sense of value investing. For me the most important of all, I can learn things from him 🙂

The China stock market expericed a major correction lately, after huge run in last two years. There are many dis-heartening stuffs, such as the selling from major institutions, and the proposed huge secondary offerings from Ping’an insurance, and Pu Fa (Pudong dev bank). Recently Zhu Ping wrote about his view on the China market, economy and investing, the title is “拐点还是新起点“(turning point or new beginning). I read it and decided to translate portions into English (in series). He talked about the things in general in bullet one. I will start from bullet 2, “valuation”.

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Shanghai Composites and second offerings

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The Shanghai Composites Index closed above 5000 the first time on August 23, Thursday. The interesting thing is, this time Chinese goverment is not as nervous as last time around (May 30), because this run up is largely drived by so-called blue chips: especially large banks where the goverment is the majority owner (ICBC, BOC,…).

For smaller investor like us, I think we should look beyond the market, and look at individual companies. By incident (what an incident), two large blue chip companies, Vanke (000002), and Citic Securities (600030). Here is the bloomberg news for Citic Securities secondary.

The Beijing-based company will offer as many as 350 million new shares at 74.91 yuan on Aug. 27, it said in a statement today. It would be China’s third-biggest stock sale this year. The shares jumped 5.9 percent to a record 94.95 yuan in Shanghai.

Citic Securities, after passing Japan’s Nomura Holdings Inc. in market value this week, is seizing on investor enthusiasm for stocks that made China the world’s best-performing market this year. Chairman Wang Dongming, who boosted first-half profit more than fivefold, plans to triple capital at the futures unit to extend his lead over local rivals…

Valuation Premium

Today’s share price gain values Citic Securities at $37 billion, higher than Nomura’s $35 billion. The stock has more than tripled this year. The firm trails only Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. in market value.

Investors pay a premium for Citic. The stock trades at about 35.8 times estimated full-year profit, according to data compiled by Bloomberg. Goldman, the world’s most profitable securities firm, has a price-earnings multiple of 8.1.

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Hot market and smart money

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The China stock market is breaking new high again, after the May 30 “man made” crash, and amid the “housing and financial crash” in the US. Yesterday I heard from a family member, who was fairly cautious about the stock market, now thinking about put the money back to the market. This is confirmed by the warming up of “new account” opening in Shanghai and Shenzhen. After the raise of stamp tax, the interest rate, and bank reserve rate, the fearless Chinese stock investors (especially institutions) pushed blue chips such as China Merchants Bank, Vanke to their new high.

The million dollar question is: can this rally be sustained? Well, I will let the analysts and experts to comment on this. My job is provide the facts. In the weekend I saw a new newspaper named “Li Cai Zhou Bao“, or “financial weekly”, interestingly it’s being translated to “Smart Money”. Curious about its content, I shelled out 6 Yuan and got a copy. This is a title of No. 1 article “The stock most likely will go up to 100 in no time“. Well, I remember couple weeks ago, Cramer did this “80 to 120” series on his mad money, we all know what happened after his show (hint: Dow crash).


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China market cooled a bit

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The Shanghai composites went down 5% today (to about 3600), the biggest drop since May 30 when goverment increased the “stamp tax”. I heard one reason for today’s big drop is incoming new issues such as the IPOs from Bank of Nanjing, Bank of Ningbo.

Hello?! How many new shares are B. of Nanjing and B. of Ningbo’s issuing? Can they issue more shares than the Citic Bank, and Bank of Comm in late April, early May? Why the stock continued going up then? Excuse, lame excuse,…

It’s interesting to watch as the China market cools, we are seeing fewer posts about FXI and China market bubble at seekingalpha.

Separately, I swapped some Home Inns (Nasdaq: HMIN) stocks with Mindray (NYSE: MR) today. I sold HMIN at 34.50 and bought MR at 31.67.