CURRENT MARKET TURMOIL

The current market turmoil seems to be driven by news coming out of Greece and China.

We will know the outcome for Greece tomorrow as the Greek government propose a reform package tied to a 3 year bail out. I doubt the European Union will accept any change from the original proposal outlined prior to the referendum as signals coming out from several countries within the union reaffirmed the EU's desire not to budge from the original deal. It remains to be seen how this will play out. While some would hope for an eleventh hour solution, I personally believe it has reached a state of "take it or leave it."

If a Greek exit occurs, I expect a global knee jerk reaction and we may yet see some drubbing in the stock markets, but as the world acknowledges the exit is not as much feared as expected, then we can see some uptick in the global markets. The ECB and EU in fact are preparing for the worst case scenario.

The major concern is actually China. In the recent crash, many have seen their livelihood fall into pieces and savings dramatically trimmed. The problem with China's market is that it is retail investor driven and not institutional driven. So this create a highly dynamic environment not based on sound fundamentals but on sentiments. And right now fear rules. Unfortunately China is highly restrictive of foreign participation in its listed companies. In the absence of this, there is also the absence of institutional and hedge funds providing a key support level.

The crash may burden the economy further as China is a highly indebted country. It remains to be seen what measure the government would take to arrest the problems of a slowing economy, high indebtedness among its population, and the problem of shadow banking.

I still see the Shanghai Index falling further, perhaps below 3,000 points and this will continue to impact upon the Asia Pacific markets, most notably Hong Kong's. I think the HKEX is oversold, most probably due to fear of China's economic collapse. But I think the Chinese government will put in all measures to stop the decline and may open up the market for foreign participation. The government should let more companies (local and international) and entrepreneurs participate in building the economy and not rely on government spending or government linked companies to take the lead. Having too restrictive an economy will kill the entrepreneurial spirit and without it, will limit the potential for growth. Most importantly, the government should intensify its role in improving the environment and ensure food safety and healthcare standards are met.

You should also observe the HKEX. If it falls below 21,000 points, it is a good time to buy into several high dividend stocks like Regal REIT, Bossini, Hopewell and Giordano, Also look out for Nagacorp dropping to the HK$4s region. It pays 70% of its net profit as dividend.    

These are all my opinions.