Week Aug 20 -24

The S&P 500 rose around 2% this week despite the subprime worries. IMO the subprime effect is largely priced in to the market already. After all the US and world economy are strong right now, unemployment is low, housing data is beginning to show improvement as new home sales finally went up. Investors and fund managers who bought CDOs deserved to lose money on this crisis. It was obvious to them the party couldn't last forever. The Fed is not going to drop rate either because the economic condition is still good. HK stock is even crazier, rising almost 9% for the week. Just as I thought the sell off was overdone and the market has recovered quickly. Now stocks went from cheap to not so cheap in just a week. The volatility is as great as I've seen (at least HK stocks). My view to the market still haven't change: always stay fully invested because it is difficult to time the market.


QDII's effect is over-hyped. HK market volume isn't just going to increase by how much mainland Chinese invest in HK stocks. Because of market effect, as the demand for stocks go out of hand, other investors are going to sell their stocks. If for example mainland Chinese put in $20B per day in HK stocks, the market volume is not going to increase by $20B. Foreign investors are going to sell their stocks on profit taking. So I believe that the QDII effect is exaggerrated by the media. The most important factor affecting stock prices is still the companys' fundamentals. It is true that the policy helps strengthen HK's position as the world's financial center because more trading = more efficient market = more firms willing to issue equities via HKEX = larger market, but how much does it going to affect stock prices in general?