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The Current Global Market Crisis: A Golden Opportunity Or A Potential Threat?
In the Spotlight | 21 October 2011

Market sentiment was dealt another blow as euro woes escalate with France’s prized Triple-A rating at stake.

Moody’s Investor Service warned that it might ascribe negative outlook on the Eurozone power in the next three months should slower economic growth and the costs of bailing out banks as well as other euro zone members stretch its budget too thin. Moody’s had also pared Spain’s credit rating by two notches to A1.

Elsewhere, economic growth in China had slowed into its third consecutive quarter.

The statistic bureau in Beijing said China’s economy grew at a rate of 9.1% in the third quarter from a year earlier.

The growth was the slowest since 2009. The world’s second largest economy had raked in a growth of 9.5% during the second quarter. Going forward, China is expected to expand by 8.5% during the fourth quarter, thus, bringing its 2011 growth to 9%.

In essence, it was a domino of events with the US having a bad flu; Europe followed on, and China thereafter (though a flu bug of a different kind).

While it looks like an epidemic that everyone is pitting to contain, control is by far non conclusive.

On a positive note, the slowing economic growth in China, according to market observers, might just be the antidote for its high inflationary pressure.

Though potential credit default risks loom in the Chinese soil, the slowing economic growth and controlled inflation is perceived to be a more tolerable problem. Despite slowing, its 9% growth rate is respectable.

Hong Kong, being a proxy to the Chinese growth (albeit slowing) story, offers a good alternative that investors could explore and tap.

According to Louis Wong, a veteran fund manager in Hong Kong, a mid-term rebound in the Hong Kong’s Hang Seng Index (HSI) might be on the cards. Having fallen from a high of 24989 in November 2010 to a low of 16170 on 4 October 2011, or a total of 8,819 points, Louis had placed a mid-term target of 19540 using the golden ratio of 38.2% (being one of the five percentages used for Fibonacci retracements to indicate areas of support or resistance). Following the expected completion of the short-term consolidation, Louis had tipped the index to test the 19000 level for a start. With change being a constant, specifically the situation in Europe, investors are pre warned that should the HSI fell through its 10-day moving average to 17800, cautiousness is called for as this could signal the end of rebound.

This is, indeed, the tradeoff between opportunity and threat.


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