India’s GDP growth at 7.9% in FY17...!!!

Goldman pegs India’s GDP growth at 7.9% in FY17

Country's GDP is expected to grow by 7.9 per cent next fiscal driven by rising domestic demand and higher capital spending by the government, even though global economy will remain anaemic, Goldman Sachs said today.

By: PTI | Mumbai | December 9, 2015 7:31 PM

Country’s GDP is expected to grow by 7.9 per cent next fiscal driven by rising domestic demand and higher capital spending by the government, even though global economy will remain anaemic, Goldman Sachs said today.

“India is already the fastest growing large economy and will remain so in FY 2016-17. We have positive views on the economy. The cyclical upturn will continue to be driven by the domestic demand,” Goldman Sachs India chief economist Tushar Poddar told reporters here.

He said the investment demand will improve gradually, driven by greater government spending on infrastructure — particularly railways and highways, lower interest rates, rising FDI inflows and ongoing improvements in ease of doing business, including some improvement in stalled projects.

“Moreover, the economic activity can be boosted by both monetary and fiscal policy being looser next year,” he said.

The Wall Street major further said the economy should also reap the benefits of the 125 basis points reduction in interest rates by the Reserve Bank and the continued weakness in commodity prices.

“Higher productivity growth from improvements in technology, education and the ease of doing business (TEEs) can boost potential growth to 8 per cent from FY 2016-17 through FY 2019-20,” Poddar said.

However, on the inflation side, he was not so sanguine, saying headline inflation will inch up to 5.3 per cent in FY 2016-17 as against the projected 4.9 per cent in FY 2015-16, driven by an uptick in both core and food inflation.

“We see upside risks to inflation. There is still a structural supply-demand imbalance in the food economy. Consumption growth rates remain much higher than production growth rates,” Poddar added.

The inflation trajectory would be influenced by the effects of El Nino, which could add about 35 basis points to headline inflation and by a narrowing of the output gap.

“We see risks to our inflation forecasts skewed to the upside, both from higher food inflation, as well as the inflationary effects of the central government employees’ wage hike and if GST were to be implemented in FY 2016-17,” he added.

Poddar further said while the RBI has retained the option of cutting rates again, the bar for another rate cut is not very high and expects the RBI to remain on hold through 2016.

“If the US Fed is going to hike rates by 125 bps (between now and end of 2016), and inflation is going to surprise on upside, and you have a pay commission wage hike, and if you get GST which will also have an inflationary impact, then the room for monetary easing is really limited,” Poddar said.

On the current account deficit, he said it will widen to 1.7 per cent of GDP in FY17 from a projected 1.1 per cent of GDP in 2015-16.

“Our expectation of a larger improvement in domestic demand compared to external demand is the main cause, leading to a somewhat wider trade deficit,” he said.

However, he added that there is no room for a larger deterioration given the continuing fall in oil and metal prices.
Balance of payments in FY17 will be in surplus due to rising FDI inflows, as well as some improvement in portfolio flows from their current low levels with improving growth prospects, he said.

The brokerage expects rupee to depreciate gradually against the dollar, with its three, six and 12 months forecasts at 66.5, 67 and 67.5 respectively, driven by a stronger greenback.

But there are significant risks to its rupee forecast due to the potential for capital outflows after a Fed rate hike, as well as from any sharp yuan devaluation.

“Therefore, we see risks to our rupee forecasts as tilted towards further depreciation,” he said.

He further said while the government has made progress in ‘nuts and bolts’ reforms such as ease of doing business, boosting FDI, infrastructure investment and financial inclusion, which has improved India’s rankings in global indices, deeper structural reforms which involve legislative action have been difficult to achieve.

“For 2016, we think that the most likely reforms are GST, a new bankruptcy code, reforming power distribution and the formation of a monetary policy committee,” he said, adding there will be only limited impact of GST on growth in the short-term.

First Published on December 09, 2015 7:31 pm

http://www.financialexpress.com/article/economy/goldman-pegs-indias-gdp-growth-at-7-9-in-fy17/176659/

$438 bn in railway construction in CHINA

China plans to invest $438 bn in railway construction in 5 yrs

China's railway construction has been on a fast track as annual investment surged by 11.3 per cent from 580 billion yuan in 2011 to 800 billion yuan in 2014.

By: PTI | Beijing | November 28, 2015 1:33 PM

China plans to invest a total of at least 2.8 trillion yuan (USD 438 billion) in railway construction during the 13th Five-Year Plan period (2016-2020) making it a stimulus to halt the slowdown of the economy.

National railway network will grow by more than 23,000 kms over the next five years, with intercity projects and ones in Midwest regions being priority, China’s Economic Information Daily reported.

China’s railway construction has been on a fast track as annual investment surged by 11.3 per cent from 580 billion yuan in 2011 to 800 billion yuan in 2014.

During the 12th Five-Year Plan period, China spent a combined 3.47 trillion yuan on newrails, exceeding the original target of 2.8 trillion yuan by far, according to the newspaper.

High-speed railway which covered about 16,000 kms in China still remains as one of the key infrastructure projects, according to the 13th Five-Year plans released by local governments.

President Xi Jinping has directed the officials to keep the GDP to be around 6.5 per cent in the 13th plan as the economy in the Q-3 slipped below the seven per cent for the first time since 2009 causing uncertainty at home and abroad.

China ruled out a major stimulus but has been announcing huge projects to keep up the investment driven growth.

Projects that are expected to be underway include lines from Yinchuan to Lanzhou, Baotou to Xi’an, Chongqing and Guiyang, Datong to Taiyuan and Zhanjiang, and Xiamen to Changshaand Chongqing.

Beijing plans to expand its suburb rail lines by 800 kilometers, and urban transits by 900 kilometers, according to 13th Five-Year Plan proposal, state-run China Daily reported.

The Belt and Road Initiative will also boost exports of high-speed rail technologies and related products, the report said, adding that China expects rail equipment sales to exceed 650 billion yuan by 2020.

http://www.financialexpress.com/article/economy/china-plans-to-invest-438-bn-in-railway-construction-in-5-yrs/171570/

Halloween Indicator = STOCK-MARKETS RALLY...??

By

MARK

 

HULBERT

COLUMNIST

CHAPEL HILL, N.C. (MarketWatch) — Odds are that the Halloween Indicator will be especially good for the stock market this year.

That’s encouraging news, since the Halloween Indicator already carries decent odds of success. But when the stock market is riding a wave of momentum into Halloween — as it most definitely is this year, including another 200+ point rally in the Dow Jones Industrial Average DJIA, +0.90%  on Thursday — then the odds become even better.

The Halloween Indicator refers to the stock market’s seasonal tendency to produce its best returns between Halloween and May Day (the so-called “winter” months). This indicator is also known as “Sell in May and Go Away,” since those who mechanically follow it go to cash during the “summer” months (from May Day until the subsequent Halloween).

Notice from the chart above that the Indicator worked like a charm over the last year. Over the seasonally-favorable six-month period that began on Halloween 2014, the Dow gained 2.6% — versus a loss of 2.6% in the unfavorable summer months that began last May Day.

Retirement savers: Stop worrying about the Fed

(4:22)

If you're investing for retirement, don't focus

 on the Fed and short-term rate hikes. Stick

to your long-term investment goals, beware

 of inflation and keep an eye on asset 

allocation, say MarketWatch panelists.

What’s particularly noteworthy about this seasonal tendency is that it has persisted despite being widely known. If anything, in fact, it’s been stronger over the last 15 years than it was before. That’s significant, since it was in the late 1990s that academic research into the Halloween Indicator first began circulating widely.

Why this year’s Halloween effect could be even stronger

These already-impressive statistical odds become even better when the stock market is able to buck the seasonal odds and eke out a gain over the September-October period — the last two months of the seasonally unfavorable summer period. That’s exactly what’s happened this year, with the Dow currently 5% higher than where it stood at the end of August.

For example, according to a Hulbert Financial Digest analysis of the Dow back to its creation in the late 1800s, the Dow produced an average Halloween-through-May-Day gain of 4.0% whenever the market was a loser over the two months prior to Halloween.

When it was a gainer, in contrast, the Dow’s subsequent Halloween-through-May-Day gain was 6.8%. This difference of 2.8 percentage points is significant at the 95% confidence level that statisticians often use to determine if a pattern is genuine.

Note carefully that the Halloween Indicator doesn’t guarantee that a bear market won’t occur. But if the future is like the past, the worst of any upcoming bear market will wait until after May Day of 2016 — since the bulk of market damage during past bear markets has occurred during the summer months.

During the 2007-2009 bear market, for example, losses during the summer months were twice as big as those during the winter months. The contrast was even more stark over the 30 months between the bursting of the Internet bubble in March 2000 and the October 2002 bear market bottom: The Dow during the winter months during that decline actually produced a small gain — plus 3.5% — while during the summer months it produced a loss of more than 36%.

http://www.marketwatch.com/story/the-best-six-months-for-stocks-is-about-to-begin-2015-10-23

CHINA-yuan to get IMF reserve-currency..!!

What will it mean for the yuan to get IMF reserve-currency nod?

Many major economies, including the US, Germany and UK, say they’re prepared to back the yuan’s inclusion if it meets the IMF criteria

Washington: International Monetary Fund (IMF) representatives have given China strong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights, Chinese officials with knowledge of the matter told Bloomberg News this week. Here’s a primer on what that means.

What is a Special Drawing Right?

The fund created the SDR in 1969 to boost global liquidity as the Bretton Woods system of fixed exchange rates unravelled. While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket—currently the dollar, euro, yen and pound—to meet balance-of-payments needs. So the ability to convert SDRs into yuan on demand is crucial. Its value is currently based on weighted rates for the four currencies.

How much of these SDRs are out there?

The equivalent of about $280 billion in SDRs were created and allocated to IMF members as of September, compared with about $11.3 trillion in global reserve assets. The US reported about $50 billion in SDR holdings as of August.

Why does China want this status so badly?

In a 2009 speech, People’s Bank of China Governor Zhou Xiaochuan said the global financial crisis underscored the risks of a global monetary system that relies on national reserve currencies. While not mentioning the yuan by name, Zhou argued that the SDR should take on the role of a “super-sovereign reserve currency,” with its basket expanded to include currencies of all major economies.

Chinese officials have since been more explicit. After meeting President Barack Obama last month at the White House, President Xi Jinping thanked the US for its conditional support for the yuan joining the SDR. Winning the IMF’s endorsement would allow reformers within the Chinese government to argue that the country’s shift toward a more market-based economy is bearing fruit.

Why is the IMF likely to approve this?

Global use of the yuan has surged since the IMF rejected SDR inclusion in the last review in 2010. By one measure, the currency became the fourth most-used in global payments with a 2.79% share in August, surpassing the yen, according to the Society for Worldwide Interbank Financial Telecommunication, known as Swift.

The IMF uses several indicators to determine if a currency is “freely usable,” the benchmark for inclusion in the SDR basket. IMF staff members said in a report in August that the yuan trails its global counterparts in major benchmarks, such as its use in official reserves, debt holdings and currency trading. But staffers have also stressed that the fund’s 24 executive directors, who will make the final call, will need to use their judgment.

Many major economies, including the US, Germany and UK, say they’re prepared to back the yuan’s inclusion if it meets the IMF criteria. Supporting the yuan may boost relations between China and countries such as the UK, which has sought to make London a major yuan trading hub.

Adding the yuan to the basket may also help the IMF improve its standing with the Chinese. China and other emerging markets were supposed to gain greater representation at the fund under reforms agreed to in 2010, but the U.S. Congress has yet to ratify the changes.

What’s likely to happen to yuan assets in the longer term?

At least $1 trillion of global reserves will migrate to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.

Foreign companies’ issuance of yuan-denominated securities in China, known as panda bonds, could exceed $50 billion in the next five years, according to the World Bank’s International Finance Corp.

“Once the Chinese yuan becomes part of the SDR, central- bank reserve managers and institutional investors will automatically want to accumulate yuan-denominated assets,” Hua Jingdong, vice president and treasurer at IFC, said in an interview in Lima earlier this month during the IMF and World Bank annual meetings. “It will be strategically important for China to welcome all kinds of issuers to become regular issuers in China’s onshore market.” Bloomberg

Bonnie Cao in New York and John Quigley in Lima contributed to this story.

http://www.livemint.com/Politics/t9azL5zeY1yAl4dbgVxNRP/What-will-it-mean-for-the-yuan-to-get-IMF-reservecurrency-n.html

50% CRASH...expected!!!

PAUL B. FARRELL 

Opinion: 100% risk of a 50% stock crash if Donald Trump wins nomination

Published: Sept 5, 2015 8:43 a.m. ET

By

PAUL 

B. FARRELL COLUMNIST

“Who will get the Dreary Recovery Going?” taunts Mort Zuckerman in a Wall Street Journal op-ed. The head of U.S. News & World Report warns America that a recession is coming: “They occur about every eight years and America is ill-prepared to weather the one on the horizon.” Ill-equipped.

Yes, the clock is ticking, every 8 years. 2000. 2008. Next 2016, even with a President Trump.

Another great newsman, Bill O’Neill, publisher of Investors Business Daily, author of perennial best-seller “How To Make Money in Stocks,” agrees: Markets have peaked and crashed roughly every four years for the last century, with bigger crashes, long recessions, every eight years. And still most investors will be ill-prepared.

Sounds like a double-teamed confirmation of Jeremy Grantham’s famous BusinessInsider prediction for 2016: “Around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.”

Get it? A mega crash is coming, dropping half off its peak, down below Dow 5,000. Not just another 1,000-point correction like last month. But a heart-stopping collapse coinciding with the 2016 elections ... then a long systemic recession ... probably lasting till the 2020 presidential election, maybe longer ... no matter who’s in the White House, Doanld Trump, Jeb Bush or Hillary Clinton.

Yes, recessions hit every eight years. The last was just about 8 years ago, warned Zuckerman with these facts: “The period since the Great Recession ended in 2009 has seen the weakest U.S. recovery since World War II,” Our aging bull is actually warning us ... recession dead ahead.

Why no “urgency from the White House,” no push to strengthen the U.S economy, avoid the coming recession? asks Zuckerman. Why? GOP candidates are worse, immature teenagers offering a “handful of Band-Aids.” Any leaders? Trump the egomaniac? God help us.

Next another disturbing Journal op-ed gets tossed into the mix: Dick Cheney is on the attack, sounding like fellow Republican Trump’s motto, “Make America Great Again.” Build a bigger Pentagon war machine, says the architect of the $5 trillion Iraq War fiasco. His latest rally cry: “Restoring American Exceptionalism.” Sorry folks, but the GOP’s relentless efforts to sabotage the White House the last six years (like 50 repetitive and futile House votes to repeal Obamacare) was the exact opposite, an “exceptional” failure of leadership.

The former vice president also quoted conservative columnist Charles Krauthammer: We’re at a “hinge point in history.” And former New York Times war correspondent Chris Hedges one-upped Cheney in Salon.com: The “world is at a crisis point the likes of which we’ve never really seen.” Like the 1848 European revolutions. Hedges even warns liberals, “climate change is the least” of the world’s problems, don’t even think that “voting for Hillary will make any difference.”

Tell Trump the ISIS War will increase taxes, add trillions of new debt

Yes, folks, the GOP neo-con hawks are back at it again, want new wars ... liken Obama to Hitler ... fueling Cheney’s latest bout of extreme hubris ... arming another Bush effort to take over America a third time ... Cheney claims America is weaker today than at the start of his costly ill-fated Iraq War. He should endorse Trump, they both want a new superpower military ready to start new wars, fight revolutionaries, add big debt, run up casualties.

So here we go again. Be exceptional. By fighting bigger wars? Show China we’re more macho? All as the Chairman of the Joint Chiefs Gen. Martin Dempsey is over in Iraq admitting this won’t be a short war, in contrast to Cheney’s claim we’d be in and out of Iraq fast after the shock-and-awe wave, even “greeted as liberators.”

Another $10 trillion loss, long recession dead ahead

Meanwhile, Dempsey admits the current ISIS war could take decades, with multiple deployments, bigger Pentagon budgets. On top of that, retired Navy Rear Admiral Len Hering warns that the risk to America’s national security is growing fast due to global climate change and rising resource conflicts, a product of the endless droughts and food shortages that intensify regional wars.

Yes, bigger wars, more costs. But unfortunately that’s “not a message the White House or Congress wants to hear,” says Foreign Policy’s Dan de Luce. Why? Politicians are lost without a moral compass, playing endless myopic political games, blind, in denial, threatening costly new wars that pile up more and more debt on top of the debt we were forced to borrow from China to finance Cheney’s Iraq War.

Perfect Storm: New president, Dow 5,000, recession, growth drops

All the recent turmoil is but a prelude to a “Perfect Storm” dead ahead: The recent 1,000 point drop ... slowing global economic growth... China’s market crash ... a Fed rate hike ... worst Dow volatility in 100 years ... the slow death of the oil era ... a long costly ISIS War ... droughts ... forest fires ... irrational climate science denialism ... and more.

And history tells us it doesn’t matter who’s elected president. Trump? Sanders? Hillary? Jeb? Doesn’t matter. Markets don’t care. Remember, McCain? Big crashes, recessions happen, about every eight years. Nobody really cares. Why? Once again we’re playing the game of musical chairs, gambling on the race for the 2016 White House.

And everyone’s playing: Everybody. We instinctively know the market’s headed for another fall. Again. Part of the game, right. In fact, knowing a big crash is coming makes the game more exciting, right! So we all just keep playing for another point, praying we can time our exit just before the coming collapse.

If 250% isn’t enough ... keep playing the game ... but play defense

Yes, the market is up over 250% since 2009. Time to get out? Yes, except the Wall Street casinos keep stirring the pot, there’s more life in this bull. So we keep playing for more gains, more thrills, in the race to the 2016 peak.

How big a crash? Twenty percent? Grantham’s 50%? Lose $8 trillion like 2000? Lose another $10 trillion like 2008? Seems nobody really cares anymore. Today’s game of musical chairs reminds us of that fabulous upbeat bank CEO in our favorite Robert Mankoff New Yorker cartoon who is sounding like Trump:

The CEO is at a podium motivating shareholders: “While the end-of-the-world scenario will be rife with unimaginable horrors, we believe that the pre-end period will be filled with unprecedented opportunities for profit.”

And that is the answer to Zuckerman’s question: “Who will get this Dreary Recovery going?” Answer: Nobody. Why? The question was rhetorical, he gave us the answer: “Recessions occur about every eight years. And America is ill-prepared to weather the one on the horizon.”

Yes, another recession is “on the horizon.” Also another $10 trillion crash. And another painful GOP loss in the 2016 elections.

http://www.marketwatch.com/story/100-risk-of-a-50-stock-crash-if-donald-trump-wins-nomination-2015-09-04?link=kiosk

MONEY MAKING IDEAS...

7 money secrets the rich don't want you to know The Motley Fool

Ask most personal finance experts and they'll tell you the secret to becoming rich is no secret at all: Work hard, live below your means and save every dime. The nation's One Percenters, however, might disagree.

There's no shame in a modest lifestyle -- even Warren Buffett lives frugally. But if your goal is to get rich, it's helpful to know these seven secrets the ultra-wealthy aren't likely to share.

1. Salary isn't the whole story: Climbing the corporate ladder will only get you so far; at some point, you reach your earning potential and plateau. The rich know that in order to grow wealth, it's important to make your money work hard for you -- not the other way around. In fact, Robert Kiyosaki, author of the No. 1 best-selling personal finance book "Rich Dad, Poor Dad," built his entire money philosophy around this concept.

Generating income from passive, rather than active, income sources is the best way to do this. Investments that yield passive income include dividend-paying securities, rental properties, profits from a business you do not directly manage on a daily basis -- even royalties on creative work or inventions.

2. Take advantage of time, not timing

If the recent Dow Jones crash proves anything, it's that no one can predict what the market will do tomorrow. The wealthy know this and make no attempt to moonlight as day traders.

"Time is more important to investment success than timing," explained Peter Lazaroff, a certified financial planner who manages portfolios upwards of $10 million for Plancorp, LLC. "Most of the population believes that timing the market's moves is the key to growing rich through the stock market. The wealthy, however, understand that time and compound returns are the most important factor in growing wealth."

Though it might seem counterintuitive, getting rich requires investors to adopt an unsexy buy-and-hold strategy, ride out market fluctuations and ignore speculation.

3. Put it in writing

The difference between having an idea and putting it on paper is often what separates the uber-successful from average folks. And if you equate success with wealth, it might be time to start writing down your goals, both large and small, in order to become rich.

Thomas Corley, author of "Rich Habits: The Daily Success Habits Of Wealthy Individuals," noted that 67 percent of the wealthy people he surveyed wrote down their goals, while 81 percent kept a to-do list. If your goal is to become a multimillionaire, write it down along with an action plan for making it happen.

4. Understand value over cost

According to Justin J. Kumar, senior portfolio manager at Arlington Capital Management, "The wealthy person has three best friends: her attorney, her accountant and her advisor. The wealthy tend to use the law and tax code to their advantage when figuring out how to maximize their wealth, especially over multiple generations, and they are not afraid to spend money up front for counsel to get these answers."

Kumar explained it's common for middle-income Americans to cut corners in order to save money, yet ultimately find the results lacking. "The wealthy look at value over cost, but they are still prudent in their decisions," he said.

5. Eat out less

People who are concerned with saving money often skip the daily latte. The rich enjoy small splurges such as Starbucks whenever they want and instead look at saving from a bigger picture.

Author Paul Sullivan and colleague Brad Klontz, a clinical psychologist with an academic appointment at Kansas State University, conducted research on the difference in spending habits of the 1 percent and the 5 percent. The 1 percent spent 30 percent less on eating out and saved it for retirement instead. "And that, more than the cost of a Starbuck's latte, is what, over time, separates the wealthy from everyone else on the wrong side of the thin green line," Sullivan wrote in Fortune.

6. Be your own boss

Employees work to make their bosses rich. If you're aiming for true wealth, consider starting your own business. According to Forbes, nearly all of the 1,426 people on its list of billionaires made their fortunes through a business they or a family member had a hand in creating.

"Many middle class workers think that starting a business is too risky," noted Robert Wilson, a financial advisor and frequent contributor to CNN, NBC and CBS. "The wealthy understand that what's risky is allowing your time and earnings to be dictated by a boss who couldn't care less about whether you get what you want for your life."

7. Use other people's money

To the average person, "it takes money to make money" might sound like a tired cliche used to justify irrational spending. For the rich, it's a golden rule of wealth.

The key is leveraging other people's money to increase your own wealth.

"Trading time for dollars is a losers' game, especially as technology destroys many jobs that don't require a highly skilled human being," said Wilson. "Using money from banks/investors and hiring people to work for you is a time-tested formula for building wealth, not to mention the tax laws, which heavily favor businesses."

Whether you're fundraising to start a business or flipping real estate for a profit, relying on other people's money to do the heavy lifting greatly increases the return. Of course, it's also riskier than relying on your own funds. But if you follow the sage words of the great Warren Buffett, consider that "risk comes from not knowing what you're doing."

This article originally appeared on GOBankingRates.com.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

http://www.msn.com/en-in/money/topstories/7-money-secrets-the-rich-dont-want-you-to-know/ar-AAdYPlF

China Trade - Burning Investors

The Irresistible China Trade That Keeps Burning Investors

 Cindy Wang, August 6, 2015 — 9:30 PM IST

Updated on August 7, 2015 — 12:17 PM IST

It looked like a no-brainer for buyers of Chinese shares in Hong Kong.

Valuations in April were 25 percent cheaper than in the mainland, monetary stimulus was just getting started and money was pouring in through Hong Kong’s new exchange link with Shanghai. Bulls snapped up funds tracking so-called H shares at a record pace, while analysts at some of the world’s biggest banks predicted big gains to come.

The only problem, though, is that the trade hasn’t worked. Dragged down by weak Chinese economic data, a crash in mainland markets and signs of an imminent lift-off in U.S. interest rates, the MSCI China Index has tumbled 21 percent since the end of April -- the biggest drop among global benchmark indexes tracked by Bloomberg.

It’s the latest setback for a market with a long history of investor disappointment. The MSCI China gauge has returned less than 1 percent annually since 1992, versus about 9 percent for the Standard & Poor’s 500 Index. Strategists at CLSA Ltd. and Chart Partners Group Ltd. who predicted this year’s sell-off say H shares have further to fall.

“You will only get a bull case in H shares when there is stability or positive momentum in the economy,” said Francis Cheung, the head of China strategy at CLSA in Hong Kong, who turned negative in early June. “The bear case would be the economy continues to slow. The bear case is more likely.”

Economic Slowdown

The MSCI China index rose 1.6 percent at 2:46 p.m. in Hong Kong.

China’s latest economic data suggest growth in the world’s second-largest economy is still weak. Profits at industrial companies declined by 0.3 percent in June and a private gauge of manufacturing in July sank to a two-year low. Data due this month will probably show declining imports and exports, according to economist estimates compiled by Bloomberg.

Meanwhile, the flood of money into H shares through the exchange link has slowed to a trickle as China’s government encouraged domestic funds to shore up the local market instead. After an $8 billion influx in April, net buying since then has amounted to just $966 million.

International investors have also been cutting their holdings amid speculation the Fed will raise interest rates as soon as next month, making riskier emerging markets less attractive. The Hang Seng H-Share Index ETF, which lured record inflows in April, has recorded withdrawals for the past two weeks.

Too Cheap

China’s H shares will probably drop about 10 percent over the next two months as slowing economic growth and collapsing commodity prices boost the chance that indexes will fall below key support levels, according to Thomas Schroeder, the founder and managing director at Chart Partners. He advised investors to sell in April as H shares were peaking.

For Roger Xie, a Chinese equity strategist at HSBC Holdings Plc in Hong Kong, valuations are too cheap to ignore after the slump. The MSCI China index trades for 1.4 times net assets, versus 2.1 for the MSCI All-Country World Index, near the widest gap since 2003.

“Value-oriented and long-term focused investors should look at some high-quality H-share companies,” said Xie, who predicts a 26 percent rally in the Hang Seng China index by year-end.

Value Trap

H shares are also attractive relative to their mainland-traded counterparts, according to Bin Shi, a managing director at UBS Global Asset Management in Hong Kong. The valuation discount on dual-listed shares in Hong Kong is still around 25 percent, according to the Hang Seng China AH Premium Index. Aluminum Corp. of China, the largest mainland-listed aluminum smelter, trades at a 67 percent discount.

Hong Kong-listed shares may be cheap for good reasons, said Daniel So, a strategist at CMB International Securities.

Benchmark indexes are dominated by banks and raw-materials companies, which are coming under pressure from bad loans and falling commodity prices. On top of that, foreign investors are concerned about increased government intervention in markets as policy makers seek to prop up mainland equities, according to So.

“H shares are deemed a value trap by some investors,” he said. “There is not much upside or re-rating potential.”

http://www.bloomberg.com/news/articles/2015-08-06/the-irresistible-china-stock-trade-that-keeps-burning-investors