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The week of 18 August – 24 August 2016

Volume 28 Number 01

Tokyo

Just how close a society

is Japan ? How insular is the

country, which is supposed to

be a land of the Rising Sun,

implying that it is a “bright,

open” nation ? Let us look

at some statistics for some

eye-opening experience and

get to the real truth about

modern Japan.

The figures from

table 1

below are from Oxfam and are

as at 31 Dec 2015.

The fact that Japan hosted

far fewer refugees and asylum

seekers than that of Germany

or the UK is not surprising.

It is already expected. How

about this ? Poor China hosted

29 times more refugees and

asylum seekers than wealthy

Japan. China’s per capita

income is substantially lower

than that of Japan, yet China

hosted a lot more refugees and

asylum seekers than Japan. Is

Japan unable or unwilling ?

The data from the table

above is shocking and

revealing but it does not stop

there. In 2010, Japan started

to accept refugees who fled

from Myanmar from camps in

Thailand. Since then, Japan

has taken 24 families. 24

families, no typing error.

Here is another shocking

fact about how insular and

closed-minded Japan is. More

than 7,500 Turkish Kurds

applied for refugee status in

2015 and not surprisingly, the

Japanese government has

“generously” granted asylum to

27 of them.

What does Shinzo Abe say

about all these ?

At the UN General

Assembly in Sep last year,

Shinzo Abe said “

the country

needed to focus on its economy

before considering whether

Table 1

Top six

economies

No. of refugees

and asylum

seekers hosted

United States

559,370

China

301,729

Japan

16,305

Germany

736,740

United Kingdom

168,937

France

336,183

to accept more refugees or

immigrants

”. For a country that

is facing a population that is

ageing and declining fast and

a working population that is

declining sharply (for details,

see last week’s

i

Capital), did

it not occur to Shinzo Abe

that accepting a lot more

refugees or immigrants may

be a solution to his country’s

economic mess ? Or is Japan

so racist and closed-minded

that allowing more foreigners in

is so completely anathema to

them ? And yet, Japan allows

so many American troops to be

stationed in Japan as if they

are permanent residents.

These facts point to one

simple conclusion that

i

Capital

previously wrote about. Japan

will become extinct before she

gets old – that is how serious

Japan’s demography problem

is.

Given Shinzo Abe’s

neo-Fascist approach, we

are simply perplexed at how

anyone can be long-term bullish

over Japan. Since Abe came

in late 2012, Japan’s economy

has not grown at all.

i

Capital

retains its bearish

short-term

outlook of the Tokyo stock

market at a range of 13,000 to

17,300 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.

In 2010, Japan

started to accept

refugees who fled

from Myanmar from

camps in Thailand.

Since then, Japan

has taken 24

families. 24 families,

no typing error.

Hong Kong

Source: www.shutterstock.com

A Myanmar refugee boy in Thailand. In 2010, Japan started to accept

refugees who fled Myanmar from camps in Thailand. Since then, Japan has

taken only 24 families.

The Hong Kong stock

market has of late been

performing. Reason ?

China is back on the rescue

again. Tourists from China

are coming back to Hong

Kong, at least based on

Jul’s visitor numbers. In

the process, investors are

going back to the tourist-

and retail-related stocks,

many of which have been

bashed down in the last

1-2 years. Then, reassuring

corporate earnings, except

for airliner Cathay Pacific,

have provided an additional

reason for investors to

jump in. Stock prices of

Tencent, China Unicom and

Lenovo for example, surged

on better-than-expected

earnings release. Then,

the long expected program

between the Shenzhen and

Hong Kong stock markets

received government’s

approval, an announcement

that is certainly bullish for

the Hong Kong stock market,

as it leapfrogs Hong Kong

onto the top of the global

league.

As prime minister Li

Keqiang announced,

China’s State Coun¬cil

has approved a Draft Plan

for Implementation of the

Shenzhen-Hong Kong

Stock Connect. This comes

after the stock connect

programme between

Shanghai and Hong

Kong was successfully

launched in Nov 2014.

The Shanghai-Hong Kong

Stock Connect allows

foreign investors to trade

Shanghai’s A-share market

through stock brokers

in Hong Kong. Chinese

investors, meanwhile, are

able to invest in Hong

Kong’s H-share market via

mainland brokers.

For international

investors, the

Shenzhen-Hong Kong

Stock Connect, like the

Source: Shanghai Stock Exchange, Hong Kong Stock Exchange, Shenzen Stock Exchange

Shanghai-Hong Kong stock

connect programme, offers

greater diversity and choice.

The Shenzhen market

has far more technology

companies, start-ups and

privately-owned firms

than Shanghai, which is

dominated by traditional

economy sectors like

financials and SOEs. The

Shenzhen link will add

880 companies available

to overseas investors,

adding on to the 567

already accessible via

the Shanghai link. The

Shanghai-Shenzen-Hong

Kong connect is easily

one of the most exciting

developments in global

capital markets. Seen as

one stock market, it will be

the second largest in the

world, after the NYSE and

will offer an amazing range

of investment choices.

The announcement

of the Shenzhen-Hong

Kong Connect also shows

that the so-called market

crash of mid-2015 is

now ancient history; it

was merely a blip in the

long-term development of

China’s capital markets.

However, the whole

Shanghai-Shenzen-Hong

Kong Connect signifies that

China’s capital market is

advancing steadily towards

internationalisation with

many positive implications,

not just for China but for the

rest of the world as well. It

would also signal that China

is confident and comfortable

with the pace of capital

market liberalisation. Over

the longer-term, China’s

stock markets offer the best

upside potential.

In the nearer-term, the

Hong Kong stock market

would have to grapple

with the long overdue US

monetary tightening, which

for now is a very formidable

obstacle to cross. The

Shenzhen stock market has

a very low correlation with

the NYSE. For its

long-term

outlook, as

i

Capital has

advised previously, it will

review it at a later stage; for

now, the Hang Seng needs

to get through a difficult

patch first.

i

Capital retains

its bearish

short-term

outlook of the Hong Kong

stock market with a range

of 15,000 to 23,500. See

Stop Press for the latest. For

the

medium-term

,

i

Capital

expects the 15,000 level

to be broken and hence,

retains its bearish outlook

of the Hang Seng Index at a

range of 10,000 to 23,500.

By that time, the Hong

Kong economy will be in a

full-blown recession.

For international investors, the

Shenzhen-Hong Kong Stock

Connect, like the Shanghai-Hong

Kong stock connect programme,

offers greater diversity

and choice.

A

| Market Opinion

11

Capital Dynamics Sdn Bhd