Friday, July 25, 2008

Good Morning Malaysia -- Part II

Good morning Malaysia. Nice stock markets rally around the world, one catalyst: crude oil price drop. Nonsense - why stating the obvious? After a while, the media will create different headlines excitement, slow oil demand = slowing consumption = slowing economy = slower earnings growth, then they will sell again. If I'm trading, I will hold positions and looking forward to sell KLCI around 1,300 ~ 1,350. Enjoy the rebound! If you are a Buffet-type, ignore what I've just said.

Back to China, one big problem when China reduced VAT tax rebate from 17% down to various rates depending on product categories(click image) since 1 July 2007.

The effects of this 1-year old policy can been felt as many of the Koreans and Taiwanese and others begin to pull out their manufacturing base from China. Those stay have been forced to go up higher value added sector or take a whack to their bottom line. By moving away from export oriented sector, China is trying to develop its service and consumption sectors, to move their economy to a more advanced level.

My Korean friend told me it is a very punitive measure and the logic for China as low cost manufacturing base no longer apply. I'll be really careful with any Malaysian or other manufacturing stocks that not producing products for domestic consumptions.

No comments: