Testing times to see which way indexes veer

Last Friday, the Dow Jones Industrial Average gained 228 points after several blue chips including Intel and IBM revealed better-than-expected first quarter earnings.

People then started to turn bullish saying the subprime crisis had only dampened the financial sector.

But as more and more S&P companies released poor guidance for their full-year earnings, the Dow could no longer sustain the gains.

Concerns over falling home prices, worsening consumer sentiment and a faltering labor market dragged the Dow lower.

At home, the Hang Seng Index is heading toward 26,000 as April index futures are set to expire this Tuesday.

In the mainland, the Shanghai Composite Index soared 9.3 percent yesterday, chalking up its sharpest advance in seven years.

Luckily, I had mentioned A50 Fund (2823) and HSBC Dragon Fund (0820) just as Beijing cut the stamp duty on stock trading to 0.1 percent. Both funds solely contain A shares.

Therefore, the unit prices of both vehicles are bound to recover.

Obviously, they have slumped since October in line with the Shanghai Composite Index .

If anyone had bought into either of the funds at their highs, then they may consider selling half their holdings early next week to recoup some of their losses. By that time, the Shanghai benchmark is tipped to rise 17 percent higher than yesterday's close of 3,583.

Investors should consider hanging on to the other half of their holdings to test whether mainland shares can decouple from the prolonged slump in equities worldwide. Dr Check and/or The Standard bear no responsibility for any investment decision made based on the views expressed in this column.

2008-04-26

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