Tuesday, March 15, 2011

Some overview of valuations and impacts

I was thinking about this one night and did up some quick calculations.
QE2 is ending June 2011, of which a total of $2.2 trillion were released (QE 1 + 2). (All USD)

To paint a perspective:
  • SGX mkt cap is $600 bn
  • HKEX is $2.7 tr, Japan $3.8 tr, US is abt $20 tr mkt cap 
  • World mkt cap is about $50 tr, so QE is abt 4.4% 
  • Asia exchanges are mostly 1 trillion or less except for China, Japan and Hong Kong
  • Est. about 7 significant exchanges in Asia, so its $7 trillion +2.7 + 3.8 = $13.5 tr
  • With investors for QE 2 money investing 40/60 in west/east investment allocation,
    • QE 2 withdrawal will at least bring a 10% decline in indices 
    • A 50/50 will mean 8.8% decline and 0/100 hints at over 16%
  • I am assuming money goes to equities, as everyone has been "Buy stocks, sell bonds"
  • This excludes money propping the markets 60% from the lows when world grew <10%
    • But of cos, the sharp decline in 2008 was oversold largely due to fear
  • Now investors will invest only in higher quality indices
    • Likely declines in excess of the estimated figures for the better indices, HKEX, SGX etc 

Japan has 55 reactors in the nation, although not all in the hot spot, still poses a major headache and a high probability of another accident on top of an unlikely second natural disaster. So if you think that the recent 15% decline over 2 days for Japan seems to be it, perhaps one should reassess the situation. The odds are high, and causal losses high. I will try to display some compelling figures to back up my point.

On the sides, if you are able, lend the Japan a helping hand. I am impressed by the attitudes and the "non exploitation" of situations in the nation vis the chaos and looting seen during Hurricane Katrina at Oregon.



Some stocks are always overvalued.

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