Asian Value Circle

This is the correction all market watchers were expecting. And then it happened. The Shanghai A Shares index fell some 6% today after the government tripled the tax on securities transactions.

See Bloomberg article here.

However, several distinguished individuals do not think that the contraction will affect the international economy as China is "a relatively small casino".

Full article here.

Whilst the Shanghai Composite Index may have closed above the 4300 level for the first time today, many analysts are calling for a correction in the near term.

Yale Professor, Robert Shiller, who correctly called the 2000 dot com boom a bubble, has said a high degree of "irrational exuberance" among investors could lead to a major correction in the Chinese market in the next few months, which could have a knock-on effect for the world economy.

Get the full take here

Read about Prem Watsa, the man behind Fairfax Financial holdings. Prem has successfully modelled his approach after Buffett's.

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The ATtimes says that in China, nearly everything can be easily politicized. The stock markets are no exception. As the stock-market bubble continues to inflate, some people are now tempted to make political interpretations.

According to one theory, what keeps the retail investors and speculators bullish is their belief that the government won't take harsh measures to prick the bubble before or shortly after the 17th National Congress of the Chinese Communist Party (CCP) in the autumn, because Beijing wants to see people smiling during the all-important meeting of the party elite. On the other hand, a market crash would mean a big loss of face for the party, and in that case heads would roll, as some officials would be held responsible.

More here

In the last few posts, we have featured articles on the great Chinese stock market boom. Today, the Shanghai benchmark broke 4000 points for the first time. See this BBC article.

In the wake of this rally, the Chinese Education ministry has also warned college students not to dabble in the stock market. More here.

A Fool.com columnist attempts to discuss style drift - specifically drifting from value investing. He cites Bill Miller's Value Trust as an example.

Full story here.

Besides behind one of the world's richest duo, Buffett and Munger have clearly set the bar very high on doing businesses the ethical and wholesome way. Enjoy this Dolph Simons piece on the humble Omaha tag team.

First, it was warnings from Bank of China governor Zhou Xiaochuan. Then it was one of Asia's top businessman, Li Kah Shing. Now ex US Federal Reserve governor, Alan Greenspan, has also chimed in by calling the Chinese market "clearly unsustainable".

Read about the continuing Chinese mania here

The legendary Legg Mason Value Trust manager, Bill Miller is lagging the S&P 500 index this year to date. However, don't rule him out just yet for he has a track record of pulling ahead even in the last few days of the year.

Your first weekend piece here

Yes, Daniel Gross argues that bubbles like the Internet mania or a real estate bubble can be beneficial to the American economy. Although, personally, I am not sure about the investor's pockets though... Find out more here.

Warren Buffett, the king of stock picking, advocating indexing? Isn't that puzzling? Unravel the mystery here

The results of a new survey in China indicates that few investors know how stock markets work...

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Yes, value investing works all over the world; as long as you got Ben Graham's first principles right and grounded. Tarpon is an asset management firm in Brazil which invests "the value way". The team at the helm has decided to shoot for an IPO on the Brazilian BOVESPA.

Here are some links on Tarpon & its IPO:

• Company site
• IPO News

If you thought the IPO of ICBC was hot? Have a re-think...Demand for Belle's recent IPO in HK exceeded the 411.4 billion dollars of shares ordered by Hong Kong individuals in the sale of Industrial & Commercial Bank of China, at $22 billion the world's biggest. It also trades at a premium to SGX listed Hongguo.

Enjoy this IHT/Bloomberg piece here

Warren Buffett sits down with Charlie Rose in this interview of 10 May 2007. He talks about the performance of Berkshire Hathaway in 2006, his charity lunches that he auctions on eBay and much more.

Watch the Exclusive Video here

Andrew Gordon's of the Investor's Daily Edge writes that chinese imports of minerals from nickel to coal are continuing to prop up commodity prices. China also remains as the number-one buyer of U.S. government bonds, which is how the U.S. government raises money to pay off its debts. That allows the US to keep buying boatloads of cheap Chinese imports, which help put a lid on inflation here.

More here

On May 5th, Lindsay Torbett attended the 2007 Berkshire Hathaway (BRK) shareholder meeting (a.k.a. “Woodstock for Capitalists”) with 27,000 attendees in Omaha, Nebraska. Warren Buffett and Charlie Munger, (Buffett’s “partner” and Vice-chairman) shared their wisdom and advice on investment success in a 6 hour Q&A session.

Access the notes here

The irony couldn't have been lost on the 350 people who gathered for the Value Investing Congress West in Hollywood last week. Normally, a crowd is the last place a serious value investor wants to be. True value typically is found in investments that are hidden gems, things that are underappreciated and unwanted.

But in today's streaking stock market, there's very little that no one wants. And that's the problem for the value camp.

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I'm here to spread the good investing news, the Word that investing like a grownup with the lessons of Buffett, Siegel, Swenson and Graham saved me and it can save you too.

My conversion came at a great cost. For a time, like many of you after the crash that began in 2000, I had lost a lot of money on paper and jeopardized mine and my loved one's futures. But I got religion, worked hard, and today have beaten the market since before the crash, putting my household on an even stronger footing than before.

Having survived and prospered, I am making it my goal in life to spread the news to anyone who will listen.

More here

By JOSH FUNK, AP Business Writer

OMAHA, Neb. - Freight railroads and their investors can feel confident no new railroads will try to create a competing network — the cost is too high.
That enduring competitive advantage, combined with strong demand from shippers, is part of why billionaire Warren Buffett ‘s company, Berkshire Hathaway Inc., invested in three freight railroads. But investors who are thinking about following Buffett will have to determine whether strong business fundamentals or Buffett excitement drove the recent rise in rail stocks.


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If Warren Buffett can't figure out derivatives, can anybody?

For hundreds of years, the way to solve problems in the financial market was clear: Get Wall Street’s titans in one place and knock heads. It took only 24 brokers gathered under a buttonwood tree to form what became the New York Stock Exchange. J. Pierpont Morgan locked several dozen bankers inside his famous library on Madison Avenue to solve the panic of 1907. And in 1998, New York Fed president William McDonough convened representatives from the biggest Wall Street firms, 14 of which then bailed out Long-Term Capital Management.

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Singapore's economy grew faster than expected in the first three months of 2007, led by an ongoing property and service sector boom.

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View Berkshire Hathaway's latest holdings (as filed with the US SEC)

HONG KONG- Li Ka-Shing, the richest Chinese man, and also the Chairman of the Hong Kong-based Cheung Kong Holdings, Ltd., said on May 17, the bubble phenomenon has emerged in China's stock market. Li is worried that the bubble will burst and has advised investors to only purchase what they can afford.

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SHANGHAI (Reuters) - Rising to a record high immediately after the central bank hiked interest rates, China's booming stock market has entered a battle of wills with the government -- a battle that it may well lose.
Millions of Chinese investors, trading on mobile phones or in brokerage halls around the country, shrugged off the central bank's monetary tightening, which was partly designed to prevent the market from overheating.
Instead, investors pushed up stocks in massive turnover that was about 10 times year-ago levels.

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May 21, 2007

These days, Zhang Nin gladly sacrifices her short lunch breaks so she can
queue up at the bank and buy US dollars for local currency. The 24-year-old
marketing executive at a Shanghai wine company needs the money to buy
hard-currency B-shares, which recently have emerged as an even hotter
commodity than the sizzling local-currency A-shares. "I bought some
B-shares on Tuesday and two days later they had risen by about 15 percent,"
she said. "That's amazing, as A-shares I bought three weeks ago only earned
me about 20 percent of profit.

China's stock markets have skyrocketed in recent days and weeks, boosted by
massive inflows of individual investor money.

But while the A-share market has boomed, retail investors have found that
some B-shares issued by the same companies have risen even faster. A-shares
are denominated in the Chinese currency and were originally reserved for
local investors, while previously only foreigners could buy B-shares,
denominated in either US dollars or Hong Kong dollars.

The distinctions between the two have disappeared somewhat as local people
have been permitted to buy B-shares since early this decade, while
foreigners are allowed into the A-share market via qualified foreign
institutional investors. Most of the 110 B-shares are also listed on the
A-share market and they are generally cheaper than their A-share peers,
with an average discount of 20-30 percent, said Zhang Qi, an analyst with
Haitong Securities. "The price disparity of A-shares and B-shares has
always been there," Zhang said.

"But it was only in late April that retail investors suddenly woke up to
find the value of B-shares was low from the past bearish years and started
to speculate on them." The Shanghai B-share Index surged 80 percent in the
month ending Thursday, compared with a 12-percent rise in the benchmark
index in the same period. Turnover Thursday was more than seven billion
dollars, more than double that of Taiwan's market. This sharp risen made it
seem worth the trouble for Zhang, the wine company executive, to reshuffle
her portfolio.

"I think B-shares are 'safer' -- they rise faster and cost less," she said.
"I am considering cutting some lukewarm A-share holdings and moving the
funds to the B-share market." The B-share market was originally established
in an attempt to channel foreign funds into listed firms, but foreigners
have shown little interest. "Foreign investors have better options like the
Hong Kong market if they want to invest in Chinese firms, that's why
B-share market is now dominated by retail investors -- they prefer
inexpensive stocks," said Gui Haoming with Shenyin Wanguo Securities.
The once marginalised B-share market, with a market capitalization merely
two percent of the 2.3-trillion-dollar A-share market, is seeing sharper
rises now, but it may also become a spearhead should a correction come. "I
think some B issues are obviously overvalued as their fundamentals have
barely changed from years ago. We had better be cautious," said Gui. "The
B-share market would be more vulnerable to large swings as most
participants are individuals," he said. Even stock punters like Zhang Nin,
who said her trading decisions were mainly based on the advice of friends,
has become more aware of the risks. "It's too crazy," she said, "there are
so many people in the bank that I usually have to wait more than one hour."
"I'm uncertain whether I shall put more money into stocks."

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Wally Weitz is the other Oracle of Omaha. He shares his views on Berkshire Hathaway and Dell on Bloomberg TV.

Watch Video here

By JOE McDONALD
AP Business Writer

BEIJING — After watching Chinese stock prices gallop upward for months, Ding Xiurui wanted a piece of the action. The 45-year-old office worker stood in line at a bustling brokerage Friday to open her first trading account. She brought her sister, who opened an account too. They joined millions of other novice investors who are jumping into a market that has soared to dizzying heights, with prices up nearly 50 percent this year.

"We still can make money," Ding said as she stood at the counter at Tiantong Securities with the paperwork for her new account. Asked what stocks she would buy, Ding said, "I don't know. I'm still learning."

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