Investors took cheer from Greece's new government being bailout friendly. It also opens the door for possibly more stimulus measures from other much larger economies.  Photo:

Translated by Andrew Vanburen from a Chinese-language blog by Gu Feng in Sinafinance

THE OLDEST EUROPEAN state and the creator of democracy has quite fittingly just voted the New Democracy Part -- a center-right, pro-bailout/pro-austerity party – into power.

It will now be tasked with helping drag the EU’s most financial unsound state from the brink of collapse.

What does this all mean for China shares, as the EU is Beijing’s top trade partner?

There were two market boosting events originating from both domestic and international launch pads over the weekend that put a charge in China shares as the trading week kicked off on Monday, with the benchmark Shanghai Composite Index finishing up nearly half a percent on the day.

Similarly, the closely connected bourse in Hong Kong saw its benchmark tracker – the Hang Seng Index – close Monday up over 1%.

Clearly, investors in Shanghai, Shenzhen and Hong Kong liked what they saw over the weekend, a phenomenon made all the more apparent with the sharp rises in regional markets seen minutes into morning trade.

However, things are still not back to “normal,” as the spark at the opening bell quickly fizzled and trading turnover was hardly what any objective observer would characterize as robust.

In addition, the upward momentum was peculiarly widespread which meant that no clear stars could be easily pointed out among the broader constellation of early risers.

It is this star power, this stellar performer, that the market has been hankering for these past several months – a counter or sub-sector that investors can truly "hitch their wagons to a star"... or two.

Without a few high-flying celebrity stocks, it has traditionally been rather difficult to drum up much excitement in the market that might produce anything resembling a sustained ascent.
Shaky Column? Greece has been the EU economy closest to full default so far.  Photo:

Greek Comedy? Or Tragedy?

As all worldly wise regional investors must surely know by now, the Hellenic republic voted Antonis Samaras and his pro-bailout/pro-austerity New Democracy Party into power.

The victorious politician pledged over the weekend that the crippling and unpopular austerity measures "will bring the country back to prosperity."

Following this result, the likelihood of Greece either voluntarily withdrawing its EU membership – or possibly being booted by the body itself – diminishes significantly.

Generally speaking, more conservative candidates were pro-austerity and anti-bailout, while left wing parties held the opposite views, so the pro-austerity/pro-bailout stance by the new party in power has been interpreted by markets worldwide as a happy medium, with benchmark indices rising accordingly.

But investors should be wary of reading too much into the polls.

Turnout for the elections was surprisingly on the low side, according to preliminary figures, which means that the bulk of the Greek populace has little trust in any of the political parties, and remains very critical and skeptical toward the nation’s near-term outlook given the economic uncertainty and financial difficulties at home.

That also means Greece’s 11 million inhabitants are not all onboard with the drastic reforms planned for the country’s economy.

China shares are currently down around 16% from a year earlier

That being said, most market watchers feel the outcome in Southern Europe is mostly positive news for shares in China and Hong Kong.

However, the positive response in the markets is hardly based on anything other that a long-delayed dose of relief, and the general opinion that the outcome was perhaps the least intolerable of an assortment of much more damaging outcomes.

Certainly, that is nothing to base a bull run on, and recent economic figures from both Mainland China and elsewhere are hardly pointing toward a sustained upswing.

However, by analogy, a growing number of investors see the pro-bailout victory in Greece as a harbinger of more to come, elsewhere.

Investors are likely reading into the Greek election results a gradually growing tolerance for similar such moves elsewhere, namely from Washington and Beijing.

And if the long-awaited QE3 from the States – or its equivalent from the PRC – is announced, then investors might want to get in early on the action, because that will surely stimulate some of the more stagnant and arid markets around the region.

See also:

CHILL OUT... Why Hong Kong Investors Can Breathe Easier

HK SHARES: Trash Already Tossed To Curb

In Praise Of China’s Retail Investors

Whither China Shares?

You may also be interested in:

You have no rights to post comments

Counter NameLastChange
AEM Holdings1.840-0.020
Best World2.480-
Boustead Singapore0.950-0.005
Broadway Ind0.1450.005
China Aviation Oil (S)0.865-0.005
China Sunsine0.390-0.005
Delfi Limited0.875-
Food Empire1.120-0.010
Fortress Minerals0.310-
Geo Energy Res0.3000.005
Hong Leong Finance2.420-0.010
Hongkong Land (USD)3.4200.010
ISDN Holdings0.300-0.005
IX Biopharma0.039-0.004
KSH Holdings0.245-
Leader Env0.049-
Ley Choon0.055-0.001
Marco Polo Marine0.068-0.003
Mermaid Maritime0.1350.002
Nordic Group0.305-
Oxley Holdings0.0900.001
REX International0.124-
Southern Alliance Mining0.480-
Straco Corp.0.490-
Sunpower Group0.230-
The Trendlines0.063-
Totm Technologies0.019-0.002
Uni-Asia Group0.810-0.035
Wilmar Intl3.160-
Yangzijiang Shipbldg1.750-0.020

We have 759 guests and no members online

rss_2 NextInsight - Latest News