The dramatic rise in markets over the last two months has removed some of the lowest hanging cyclical fruit from the investor’s orchards, with some of the most remarkable rises coming from a reduction in perceived bankruptcy risk as bond markets have reopened, equity has been raised and investors start to believe that bankers may one day make another loan. There are still many opportunities in cyclical sectors, but some profits (100% to 300% in some extreme cases) are too tempting to turn down.

Luckily the upward move in the indices has not been mirrored in many of the ‘defensive’ sectors such as telecom and consumer non-durables. » Read more: “Expensive” defensives in Asia are no longer

We were waxing positive on prospects for the Australian market the other day.  We said that even property down under does not look so bad.

Following on from this, we were interested to read earlier in the week that over 42,000 Australians have now taken up the First Home Owners Boost (FHOB) offered at the end of last year as part of the Federal Government’s stimulus response to the crisis.  A newly constructed home attracts a $21,000 FHOB while an existing home $14,000.  In addition, first time buyers interested in properties below A$500,000 are exempt from stamp duty. » Read more: Australian property

Up until last week most investors were arguing that China could not save the world.  And we agree.  China is just not big enough to drag the world out of the mire by itself.  But it can save itself.  Here are some of the positive developments:

a) property transactions in China have picked up across the country – most notably in the Guangdong residential market, which suffered the full brunt of the export slowdown driven by a weaker world

b) loan growth, fixed asset investment and power consumption have all moved up, showing strong indications that China’s fiscal stimulus is taking hold sooner than many could have imagined

c) PMI numbers and consumer confidence have all returned – indications of continued strong sell-through of consumer electronics and autos in China » Read more: China? Buy it!

A lot of global investors are assuming that as an Anglo-Saxon economy, Australia cannot avoid the travails of its peers in the Northern Hemisphere. We disagree. Here are the reasons.

Although the embattled Aussie consumer is highly geared, his cash flows have been improving due to a dramatic reduction in mortgage rates (a function of rates coming down from a nominally high level in the first place and a plain vanilla variable mortgage structure) and a startling degree of fiscal largesse in the form of cash handouts to families and first-time home buyers, which has sparked a mini boom in parts of the Sydney house market.

The Australian banking system is solvent, liquid and functional. » Read more: Australia – nothing like as bad as one would infer from the media and market performance

Nobody buys the idea that China will save the world.  Rightly.  China is just not big enough to drag the world out of the mire.  Of course China is a major player in certain areas of the global economy e.g. commodities (it accounted for around one-quarter of global copper consumption last year, for example), but if the US and Europe continue to contract China is not going turn the world around on its own.

However, even if China is not going to save the world, it is our belief that: » Read more: Nobody buys the idea that China will save the world

We never used to use the ANR function on Bloomberg – it always seemed a bit pointless tracking analysts’ recommendations and target prices which for the most part followed share prices with a six month lag – but we have now become converts. The reason? It has become an interesting and occasionally timely source of contrarian ideas, with a significant number of former ‘blue chip’ companies reaching the pariah status of having NO buy recommendations. In some cases this may be justified as bankruptcy looms, but in others it represents a vitriolic response by previously over-optimistic analysts who vent their spleen on company management for their inability or unwillingness to accurately predict their own earnings, irrespective of the underlying strength of the business. Telecom New Zealand and Brambles are two good examples of these ‘fallen angels’, and while the problems of both businesses are well known, they do still produce stable cash flows and a decent return on investment – and in both cases are integrated into business processes in a way that keeps a lot of their revenue ‘sticky’. » Read more: Asia to rally