China Market Thoughts – Downside earnings risk to MSCI China due to the economic deceleration $CAF

• China Market Thoughts – Downside earnings risk to MSCI China due to the economic deceleration due to the combined ripple effect of the crackdown on the property sector and the slowdown in banks’ lending to local government-funded investment projects; 
• Policy risks such as the resource tax, which may hurt earnings of and de-rate multiples of energy and upstream resources companies;  tight liquidity situation in China
• Possible additional tightening measures in property and FAI areas. The uncertainties on domestic and external front, you should continue to stick to sectors with most visible growth, such as consumer staples, and low- and middle-end consumer discretionary sectors whose sales are least affected by the economic slowdown. 

Breakfast with David A. Rosenberg April 12, 2010 Report $SPY

---------------------IN THIS ISSUE---------------------------------
• While you were sleeping — Greek default concerns should abate on a new rescue package.
• More on US profits: Financial sector profits have accounted for 85% of the overall increase in corporate earnings.
• Remarkable rally? Even with the Dow touching 11,000 for a nanosecond, we don’t have all-clear, especially with lingering problems in Greece.
• Frugality abates? We don’t think so. If left to their own devices, Americans would be focused on frugality and saving for the future if politicians created the incentives to do so.
• Setting the record straight on the bond debate.
• Update on our propriety valuation models – US equities still the most overvalued asset class.

India IT Good fundamentals likely to be marred by currency movements [J.P. Morgan] $QQQQ

4QFY10 preview: Good fundamentals likely to be marred by currency movements

• Good 4QFY10 fundamentals likely to be marred by adverse exchange rate movement: We expect US$ revenues to increase 3-4% Q/Q driven primarily by volume growth and helped by stable prices. GBP, Euro appreciation vs. US$ is likely to impact US$ revenues by 0.5-1% and rupee appreciation against US$ should lead to a ~1-2% Q/Q rupee-based revenue growth. EBITDA margins should be flat to slightly down Q/Q due to rupee appreciation and salary hikes (Wipro). EPS growth would vary depending on hedging losses/gains, in our view.

Calendar of events to watch 04/09/10 $BAC $JJ $SPY

• Obama will speak at 1:20pmET today; will address the W VA mine explosion and Justice Stevens’ retirement, among other items.

• China –There could be some news out of China this weekend (per the NYT, China may announce a yuan revaluation as soon as Fri night; we will be getting China trade balance and import/export #s Fri night/Sat morning; China is expected to post a trade deficit this weekend for the first time in a while).

• Greece – activation of IMF-EU rescue this weekend? Reuters reported that a deal has been reached on the specific terms of a rescue but its not clear if Athens has requested the plan to be activated. In terms of the parameters of IMF debt, for loans up to three years, Greece will be charged the SDR rate plus 300 bps plus 50 bps service charge (per Reuters).

Corporate Calendar for the week of Mon Apr 12 – earnings season for Q1 will kick off w/AA coming Mon after the close. PKX (S Korean steel company) will hit overnight on Mon w/a call on Tues morning. There will be a bunch of tech results. For the semis, watch for INTC and LLTC on Tues, ASML on Wed, and AMD, FCS on Thurs. In the internets, GOOG kicks things off Thurs night. JPM is the first financial earnings of the season (Wed morning) and will be followed by PBCT (Thurs night) and BAC, FHN (Fri morning). GE reports Fri morning also. 

Morgan Stanley Strategy Forum 02.16.10

Introduction — On the heels of sovereign problems in Greece and peripheral Europe, we recently published a cross-asset report, Sovereign Crisis Roadmap (February 11, 2010) on selling risky assets into strength over the near term. The current problems are about much more than Greece alone, and our global economist Joachim Fels helps to frame the context. Huw van Steenis from our European banks team looks at the European banking system, which could be the transmission mechanism for potential contagion. And global equity strategist Jason Todd assesses the backdrop for global equities, reiterating our call to own the US over Europe.

Link here

The Party is over, No More Free Rides

Downunder Daily Reconsidering the Set-back

Quick Comment: We didn’t expect a setback to risk assets so soon in 2010. We’re still not convinced that this is the ‘big one’ – we expect a 20%-plus peak-to-trough decline in developed equities some time this year – but we’re learning to be less dogmatic about that. Here are some thoughts:

First, correlation is back. We had thought that there would be more diversity in returns this year, but risk assets have again been highly correlated (Exhibit 1). There’s been nowhere to hide. To be fair, this is partly because there’s been adverse news on a broad front (sovereign stress, Chinese tightening, financial sector taxes and/or re-regulation).

Second, the equity performance pecking order remains unchanged. Those markets that did worse in 2008 did best in 2009 and have done worse (again) this year (Exhibit 2). There have been a few outliers, but they are easy to explain (no surprise, for example, that Spanish and Greek equities have under-performed).

This suggests that most investors now hold their views (and positions) with low conviction. After a cycle where the unthinkable happened, it seems few are willing to stand in the way of a sentiment shift. This will make for fast, flighty markets for some time. Nimbleness will be
important, even if, for now, discrimination is not.

It also suggests that low-conviction investors are playing by the standard rule book even though, in our view, the rules should have changed. So, for example, seeing Asia as the high-beta play on the global growth cycle ignores the fact that one uncertainty from two years ago is now gone. We now know how Asia would cope with a western-world downturn: it coped well. Asia passed the 2008 crisis not unscathed, but in sound structural shape.

That matters: we think a new synchronized globaldownturn remains unlikely. It also suggests that Asian equities (and EM generally) should do better than DM on a medium-term view.

VENTURE CAPITAL HERE

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