Dragon Whisper

A week ago HSBC reported a gloomy outlook of Chinese factory activity  the HSBC PMI was reading 49.8 points, which is clearly indicating a slow down in factory outputs. Few paid attention to this report except few analysts and DragonWhisper that started reporting about Chinas tight credit situation and Chinas upcoming crisis.

A month ago Dragonwhisper was able to recognize that there was danger brewing with the Casino stocks and this danger was coming from their operations in Macau. That report seemed a bit childish a month ago and was dismissed by many readers as unserious but a month later we find the Casino stocks in the middle of a crash due to reports and rumors from Macau.

The Casino stocks in Macau are exposing the credit danger that is starting to hurt China, many Junkets operations are finding it very difficult as of late  to collect their credit given to the VIP gamblers in Macau. Usually this VIP gamblers are factory owners, real estate tycoons and business men from Mainland China.

Now you get a report like this from the junkets in Macau, a report from HSBC that factory activities in Mainland China are slowing down plus another report that 20% of Real Estate sold in Hong Kong this year was owned by mainland Chinese and a 12% increase on Chinas CDS this Monday (3rd October). It doesn’t take a genius to figure out that the rich in China are getting hurt by the slow down in Europe and US and that credit is getting tight in China.

At dragonwhisper we have been warning about the slowdown in China and have pointed at this signals. One of the signals that people should have paid more attention to was when HSBC announced to eliminate up 3000 employees(30.000 worldwide) in Hong Kong as part of their saving cost strategy . Why would you fire people in a country that apparently has the fastest growth in the world and will continue to grow, this raises questions of course. During the time that HSBC made this announcement the Hang Seng was trading at 22000 points and it should have served as a warning call to investors. This reminded me on February 2008 when HSBC announced that it will reduce the exposure on US mortgage market at that time the DOW was trading at 14000 pts and it served many investors as a wake up call.

We believe that the Hang Seng has few more points to go down until it finds major support and that support is at 15400 pts. Until than enjoy the ride and read through the lines. We will notify our readers which stocks to purchase once the Hang Seng hits 15400 pts.