"Have you noticed how bearish the China bourse is performing relative to Wall Street (the first is clearly in a bear trend; the latter may be bottoming)? Does this mean that the outlook for American equities is much more positive than for the Chinese? Or is China once again taking the lead of global markets? Your view would be appreciated.

"Finally, you should start watching Thailand again more closely. You were in the past (rightly) a supporter of Thaksin Shinawatra's economic management, which was so good for Thailand. I suggest that the "shadow shogun" (for legal reasons, he lives outside the country) is once again, through his sister's new government, implementing economic policies that are going to be very good for the economy. In essence they amount to stimulating domestic demand, through populist and pro-corporate measures, which are forecast to give a boost to the economy equivalent to 2.5 per cent of GDP. This poses an inflation risk, but that won't matter too much if it also raises the growth rate of the economy significantly. There may also be valuable social and political consequences, although that's more controversial. Surely in this way Thailand is again the showing the way of what the high-surplus nations of Asia need to do, stimulating their domestic demand?

"Should you choose to "print" any of the above comments about Thailand, please don't mention my name. It's a sensitive issue, foreign residents commenting about Thai politics!"

David Fuller's view Many thanks for this informed email, certain to be of interest to other subscribers. I can assure you that we watch Thailand very closely. All three of the markets you mention are of considerable interest to us, albeit for somewhat different reasons.

As part of the often super-strong ASEAN group of economies, Thailand ticks many favourable boxes, not least for its rice and other agricultural exports to China and the Asian region in general. Thailand remains a favourite tourist destination and Thaksin Shinawatra helped to nudge that further in the direction of family and medical tourism rather than girlie bars. Thailand is also competitive in light manufacturing and assembly.

I previously invested in Thailand via the Aberdeen New Thai IT (ANW LN) (monthly, weekly & daily), which I bought in 2003, experienced a sometimes volatile ride due to the politics and of course 2008, but eventually took a good profit last year. Frankly, I would have been better off holding onto ANW which continues to outperform and sells at a 14% discount to NAV. Here are ANW's top-ten holding by capitalisation. Most of these shares can be found in the Chart Library.

I could justify buying ANW once again on the basis of relative strength but would more likely diversify risk by opting for Aberdeen's Asian Smaller Companies Investment Trust (AAS LN) (monthly, weekly & daily). Here are AAS's top-10 holdings, many of which are in the Library. Unfortunately, it currently sells at premium to NAV of just over 1%.

China's stock market underperformance relative to the USA over the last two years is a concern but the economic cycles are very different. China has been fighting inflation with tighter monetary policies - always a headwind for equities, while the US is keeping rates at record lows, creating a tailwind. China's market has seen a significant increase in supply, not least as previously untraded government bank shares were floated publicly to beef up capital reserves. In the US, corporate buyback programmes have reduced supply.

In tackling inflation, China has been responsible but has also given the impression of being impervious to the stock market's downward drift. In the US, we know that Mr Bernanke favours a firmer stock market to increase confidence. Wall Street is clearly discounting some form of additional stimulus from the Fed and we will soon see if this optimism is justified.

Meanwhile, China still has the stronger economy and is the lead engine for Asian-led GDP growth. Valuations are similar if we compare China's Shanghai A-Shares Index (monthly, weekly & daily) with the S&P 500 Index (monthly, weekly & daily). The A-Shares Index sells at an historic PER of 13 and yields 1.98%, while the S&P's current PER is 13.36 and the yield 2.13%.

For those of us who are not citizens of China, the more relevant valuations are the Hang Seng Index (monthly, weekly & daily) and the Hang Seng China Enterprises Index (monthly, weekly & daily). HSI currently has an historic PER of 8.75 and yields 3.6%, while the PER for HSCEI is 8.47 and the yield 3.24%. These compare favourably with the S&P data above, especially if you expect Asia to maintain its superior growth rate, as I do.

Among major US indices the Nasdaq 100 (monthly, weekly & daily) remains the out-performer and not surprisingly has the higher valuations - historic PER 16.3 and yield 0.94%. Interestingly, NDX has pushed well into this year's top area and I would give the upside the benefit of the doubt while the progression of higher reaction lows is maintained. The August lows remain important for the S&P 500. The three Chinese indices illustrated above need to break their current progressions of lower rally highs to signal a positive shift in the supply demand balance. This may not occur until the market senses a moderation in China's monetary policy.

Nevertheless, on valuations and with HSI and HSCEI trading at levels not seen since 2009, I regard this market as being in an accumulation zone. My main personal investments in China are via the JPMorgan Chinese IT (JMC LN) (monthly, weekly & daily) (top-10 holdings) which currently sells at a discount of 5.6 to NAV, and the Atlantis China Healthcare Fund (ATCHLTH) (weekly & daily) which was listed in June 2008. Atlantis CHF has outperformed but costs are high.

Given Wall Street's secular valuation contraction, which I last wrote about a week ago, I would not be surprised if the S&P 500 Index ranged above and below 1300 for the next few years. I am more optimistic for China. Nevertheless, Fullermoney not only recognises Wall Street's relative performance among big-cap markets, it has more world-class companies than any other stock market.


Successful US multinational companies leveraged to Asian-led GDP growth remain a Fullermoney secular theme. Eoin has reviewed these regularly, including the 'dividend aristocrats'. Some are on this list of US New 52-Week Highs, prepared yesterday by colleague Jackson Wong of Investors Intelligence. However, several of these companies have mainly domestic business interests. This is another reason why we remain hopeful that the August sell-off produced most of the short, sharp bear market that we have often referred to and that we are likely to see for the US market.

Subscribers interested in these US market leaders will find charts in the Library.


My personal portfolio: gold and silver long futures trades reopened - On seeing a further pullback and with short-term stochastic indicators oversold for gold (weekly & daily) and silver (weekly & daily), I decided to reopen trading longs. I paid $1808.2 for December gold, and $40.235 and $39.830 for December silver. These prices include spread-bet dealing costs.

Risks in these trades include a further mean reversion correction towards the MAs, volatility, renewed USD strength, and further global deleveraging.