Market Thoughts 01Apr2008

Today is “April Fool” and the local market saw a UBS-led U turn……

Fundamentally, I think it is now the turn of European banks to begin writing down their inventory of structured assets and leveraged loan. A healthy amount of leveraged loans are still tucked away in accrual books so the write-downs by no means a complete picture. As a result, markdown/de-leverage is by no means completed.

Technically and sentimentally, the market is driven by the following news flows.

Ø  UBS took additional US$19bn of Subprime write-down in 1Q08 and Chairman stepping down. DB seeks E2.5bn of write offs in 1Q08.

Ø  A-shares market lost 4- 7% and has extended its loss since morning sessions and trading at lows. IR hike rumors again and seeing big cap like Chalco, Sinopec, China Unicom and Baosteel trading near 1-month down.

Ø  Also heard CBRC urged banks to relook lending policies. Means more TIGHTENING from China and markets don’t like that……Remember Premier Wen said 3500 is the fence of market bottom….

I guess we'll keep seeing these write-offs near term from banks (FT said UBS total write-downs could be $25bn) and tightening from China which will spook the market hence I remain cautious in the near term.

In fact, intraday the UBS stock moved up 10% after initial sell-off…So who ever sold the stock for the write-downs news is an April Fool today…..Market always make joke with you from an unexpected angle……Cheers!