Wednesday, 27 April 2011

Asia is where it's at

Australia take notice- Asia is where it’s at!

Morning All,
I am feeling recharged after a nice 5 day holiday here in Australia. I wanted to take a step away from my usual angle in this post this morning. Often as a trader I become so bogged down in trading setups and scenarios that I often neglect other issues outside of the markets that would be great to put down on paper (and often more important). My market view has been well documented in recent posts and can be found at the links below. Bottom line, I believe the markets are going a lot higher. It has been a great few days and the best course of action as a trader is to be positioned and do NOTHING. I don't want to over think here, I don't want to be scared out of my position by news or economic data, and I don't want to day trade in a strong trending environment. We will soon see if this plays out but in strong trending environments, you do not want to miss out:

And thus, this allows me the freedom to write about the central issue of this post- Australia's continued inability to wake up to the economic opportunities in Asia. Several years ago I moved to Sydney, in part to take advantage of the huge tectonic shift that is taking place in the world economy with the emergence of China and India. We are in an unbelievably fortunate position here in Australia fundamentally and geographically.  And yet what amazes me is how preoccupied we remain with events in Europe and the US. This was a great point stressed in a weekend article in the Morning Herald entitled “wake up Australia”. I couldn’t agree more. There is an Industrial revolution going on in China and India fuelling an endless demand for commodities and raw materials. The sheer demographics of these regions will continue this thirst for years to come. Australia is in an unbelievable position to benefit from this given our abundance of Iron Ore, Coal and Natural Gas- so why don’t we give the respect to these regions they deserve? 

Time for some simple numbers. China's latest Q1 GDP number came in at 9.7% YoY and Retail Sales came in at 17.4% YoY. This is not surprising given they have hit these kind of numbers for years. The big question in China is how to keep the economy in check, and not how to keep it alive as it is in the US and Europe. Central bankers in China have been raising rates and doing everything in their power to cool speculation and asset growth. For Australia, 4 Asian countries namely China, India, Japan and South Korea counted for 55% of our exports. The value of Australia’s merchandise exports to India alone outstripped those of the entire EU. America and Britain accounted for only 10% of our exports. 

However, every morning I wake up and I am bombarded with reports and summaries from our financial institutions about economic developments and market summaries in America and Europe. We shouldn’t care. Our economic fortune is tied not to these countries but to those right on our doorstep. Why can I not be bombarded with detail about India, China or even Indonesia?  Certainly it seems easier to stick with the crowd and report on America and Europe. Both fundamental and technical analysis here in Asia is massively lacking in quality. When I turn on the TV (which is becoming increasingly rare), the financial stations spend hours debating the economic outlook of America with live interviews of various traders on the US floor. GREAT- how does that help me trade our region? There are no such interviews of a local trader in Sydney, Hong Kong or India. I have to admit we are slowly getting better but there is such a long way to go yet.

No doubt the US and Europe remain big sources of foreign investment in Australia. However, Tim Harcourt, chief economist at Austrade says China, India and the Association of South-East Asian Nations are catching up. Investment in Australia from ASEAN has trebled in the past 5 years eclipsing that of Switzerland and Germany. Why does our government want to hinder this investment by putting up massively restricting walls such as a mining tax and carbon tax to name just a few?  It’s not only our commodities that are in demand as shown by the attempted SGX bid for the ASX. There is not enough space here for me to give a true account of my thoughts regarding the failure of this deal. However, Australia has shown itself to be xenophobic once again of the highest degree and it is a real shame that our politicians cannot actually recognise what is in our “national interest”. Our national interest is actually so directly aligned with that of Asia. There will be a lot more attempted deals, more and more investment so lets no mess this opportunity up.

The reason I started this blog was to provide real value add technical analysis of the Asian region. I don’t see many other blogs doing this. I’m sure they are out there but I just haven’t found them yet. If I type the S&P Emini future into Stocktwits I can find 1000 technicians in a second offering their thoughts on the S&P 500. When I type in Shanghai, Nikkei or the Nifty, I struggle to find anything at all yet I know there are thousands and thousands of traders and technicians here in Asia trading these markets. There is no symbol for the Australian stock market (although I am in the process of getting this fixed). Let’s wake up. Lets start showing setups of the Shanghai Composite on a 1min, 5min, Daily, weekly whatever chart.

No doubt I fall prey to this US/Atlantic vulnerability. I trade the Eminis and I often blog about what I am seeing overseas, trading setups etc. I intend to tone this down. Of course events on Wall Street have a disproportionate impact on smaller markets like Australia. However, you will be amazingly surprised how many times we actually LEAD our American and European counterparts. This occurred in July 2010 and September 2010 when Australia was the first market to bottom, setting off a chain reaction across global markets. Wednesday last week was yet another great example- Australia gapped up in morning trade, Hong Kong opens in the afternoon adding fuel to the move, the Eurostoxx then gaps up and suddenly all the bears head for the exit triggering buy stops everywhere, then finally the US comes in and the market opens at 1325 vs 1310 the day before! The whole cycle continues the next day. It happens time and time again. If we are here in Asia, we don’t need to be reactive. We are part of this global game and are actually right at the forefront. Lets take advantage. 

I may be something of an idealist but I dream of a community of technicians, traders, bloggers who given the level of quality to Asian markets that is already given to Europe and the US. The economic emergence of China and India is not going away and I am sure the trading opportunities will proliferate.