What happened in China?
So what happened? Well, it depends who you ask, what you watched on TV or what you read in the mornings newspaper. But no matter what is said, we would conclude that what we saw happen in the market on February 28 was overdone. We recognize that pullbacks are healthy for the markets, particularly for the TSX, which prior was up 15.7% since the last week of September.
OK, so the Chinese markets fell 9% in one day. Supposedly investors were reacting to comments from the government that they wanted to crack down on speculative investment and illegal IPO’s. So, lets get this straight, the government says they want to improve the quality of investments in China and they want to eliminate illegal activities. What is wrong with that? If anything, you’d think those comments would have been applauded.
We don’t want to simplify what happened to a great extent, but at the end of the day all that happened was that a bunch of Chinese stocks fell, this does not mean that the Chinese will stop buying resources, or stop building infrastructures or stop upgrading technology. We believe the GDP growth prospects for China are unchanged even if their stock markets declined.
In our opinion the North American sell off had little to do with China and was really just a scapegoat for investors to simply take profits in markets that have done very well. Investors just wanted a reason to sell. That’s it. Profit taking is one of the smartest things you can do as an investor when you’ve done well. Yes, you may miss out on some upside, but nobody is taking any money away from you once you have those gains locked in (except for the government).
We acknowledge that there very well could be further downside to the market, but some of these companies are looking attractive such as:
Shoppers Drug Mart ~ between $50.00 and $51.00
Royal Bank ~ between $54.00 and $55.00
TD Bank ~ between $68.00 and $70.00
CN Rail ~ below $51.00
Rogers Communications ~ below $39.00
Telus ~ below $56.00
TransCanada Corporation ~ below $37.00
Enbridge ~ below $37.00
Manulife ~ at $39.00 or lower
Sun Life ~ at $50.00 or lower
Thomson Corp ~ if we get closer to $46.00
Research in Motion ~ closer to $155.00
Canadian Tire ~ below $70.00