7 / 24
weekly claims closely. This
economic data is reported
and analysed in every issue
of
i
Capital in the economics
section.
For now, after plunging
steeply in 2016 and with the
S&P 500 and the NASDAQ
Composite near to some
minor support level, a weak
rebound is expected. A
rebound would be a time for
investors to sell; it is not a
time to buy.
i
Capital revises
its bearish
short-term
outlook
of the NYSE to a range of
1,650 to 2,000 for the S&P
500. See Stop Press for the
latest. For the
medium-term
,
i
Capital is retaining its bearish
target of 1,350.
i
Capital will
review its
long-term
outlook
of the NYSE at a later stage.
Given these bearish targets,
a good question to ask now
is whether
i
Capital is bearish
enough on the NYSE and
NASDAQ or whether the bear
market will turn out to be more
savage than anticipated.
comparable at 8.5% and 9.1%
respectively. Siva argued
that the Yen’s weakness
contributed substantially to
Japan’s rise in profit margin
and ROE but the Yen is now
soaring and has even broken
the 117 level and Japan has
seen five consecutive months
of downgrades to the 2016
consensus earnings per
share.
2016 will be the year that
will show Emperor Shinzo
Abe has no clothes. With
the full force of Chapter
Two of the 2008 US-led
global financial crisis already
unleashed,
i
Capital retains its
bearish
short-term
outlook of
the Tokyo stock market with
a revised range of 14,000
to 18,500 for the Nikkei
Average. See Stop Press for
the latest.
i
Capital is retaining
its bearish
longer-term
outlook of the Tokyo stock
market with the Nikkei going
all the way back below the
10,000 level.
When the CEO of Capital
Dynamics said in 2015 that he
expected the Nikkei Average
to plunge all the way back to
10,000, there was not a single
believer. When one reads
the Western media and the
analysts and fund managers
in the global investment firms,
a vast majority of them say
buy Tokyo or Japan even as
recently as a month or 2 ago.
Despite all these optimism
over Tokyo and Japan, the
CEO of Capital Dynamics
stood firm in his pessimistic
views of the Land of The
Setting Sun and he kept
saying and saying that Shinzo
Abe is a liar and should be
ousted. Well, at the time of
writing this analysis of the
Tokyo stock
market, the
Nikkei Average
closed at
16,416, plunging
3.71% in a
single day. The
forecasted target
of 10,000 for the
Nikkei by Tan
Teng Boo seems
so near now.
Figure 2
shows that the
Yen has been
strengthening. It
has fallen below
its 200-day
moving average
and is poised
to appreciate
further to
101-102, a 50% retracement
of the Shinzo Abe-led
“For analysts to
dismiss the occurrence
of a 2016 US recession
amidst the surprising,
nasty NYSE and
NASDAQ plunge is
too rash. The Russell
2000 Index, sensitive to
domestic US economic
conditions, is already
in a bear market”
Tokyo
“Despite all these
optimism over Tokyo
and Japan, the CEO
of Capital Dynamics
stood firm in his
pessimistic views
of the Land of The
Setting Sun and
he kept saying and
saying that Shinzo
Abe is a liar and
should be ousted.”
Hong Kong
growth as it adjusts its
currency policy and shifts to
consumer-led growth. This
positive role has been hidden
and ignored by the Western
media in the current market
meltdown. He added, “
My
sense is there is underlying
growth in China ……… It’s
not falling off a
cliff.
”
What Rajan
said next
about China’s
currency is
valuable and
again, this has
been cruelly
ignored by the
Western media.
He advised that
the Chinese
authorities
should be taken
at their word
when they say they are not
deliberately depreciating the
currency. He explained, “
The
China has been lambasted
in the Western media for
causing the latest market
meltdown; whether it is the
Shanghai stock market or
the economy or her currency,
China is at fault. It does not
take much for an average
person to know how ridiculous
these relentless attacks are
but how can the average
person respond or react to
such baseless tirade ? For the
average person nothing much
can be done but the average
person can read as widely as
possible, especially views of
the people who do not have a
hidden agenda to see China
fail, and arm oneself with the
correct facts and picture.
In this context, it pays to
listen to Raghuram Rajan,
India’s respected central
bank governor. According
to him in a recent interview
with Bloomberg, China is
still contributing to global
“What Rajan said next about
China’s currency is valuable
and again, this has been
cruelly ignored by the Western
media. He advised that the
Chinese authorities should be
taken at their word when they
say they are not deliberately
depreciating the currency.”
Chinese move to a basket
is understandable because
the dollar is strengthening,
but the yen and the euro
are weakening, so clearly
some of the actions that
have been taken to weaken
currencies do have effects
elsewhere.
” Certainly well
said and China’s currency
move cannot and should not
be seen in isolation from what
devaluation in end 2012.
When this happens, the
Nikkei will be smashed all
the way to 10,000 and below.
Woh, let us hope Shinzo Abe
is in hiding by then.
One person who agrees
with
i
Capital’s
bearish views
is Credit
Suisse‘s
strategist,
Sakthi Siva.
She says
that Tokyo
is still too
expensive. By
her standards,
despite this
year’s sell-off,
Japan is
still more
expensive
than Korea
because its
price-to-book
is at 1.22
times versus
Korea’s 0.82
times, even though their
returns on equity (ROE) are
FROM PAGE 6
is happening elsewhere. To
do so would be distorting the
real intentions behind China’s
move. To be sure, Rajan has
repeatedly cautioned against
the “beggar-thy-neighbor”
policy of competitive currency
devaluations.
The statistics from China
supports his assertion
that China’s economy is
not falling off the cliff (see
the 5 figures on China’s
economy in this week’s
KLSE Conclusion for more)
and in fact, remains a major
contributor to world growth.
In addition, one can simply
Source:
www.sshomme.inRaghuram Rajan, respected governor of
Reserve Bank of India, talking about China
TURN TO PAGE 8
Source: Barrons
Even William Pesek is slamming Shinzo Abe.
Figure 2 USD/JPY
A
| Market Opinion
7
Capital Dynamics Sdn Bhd
The week of 21 January – 27 January 2016
Volume 27 Number 21