I have been busy traveling lately, first heading to Shanghai before moving to Taiwan. I led a delegation comprising clients of Standard Chartered Bank to Shanghai, visiting several places with the aim of learning about its property market, industrial development, retail industry and ports. Thereafter, I went to Taiwan on the invitation of Fu Bang Bank, where I gave several talks recommending Hong Kong stocks to Taiwanese investors.

At both places, I kept reiterating the fact that the current bear market is in a Phase 2 rally, which could reclaim about half to two-thirds of the total losses. Over the past month or so, I have been telling everybody not to miss this opportunity as this could be a strong rebound. But please remember that this is a bear market rally and not the start of a new Bull Run and thus, we must all be nimble so as to avoid the possibility of being caught at the wrong end of the musical chair.

The Dow Jones Industrial Average is now trading near 12,800, which is only 9% off its historical high. The US is the culprit guilty of ending the Bull Run by its subprime mess, but why is the stock market so strong?

On the other hand, the Chinese stock market has been falling non-stop since last year. What is the relationship between China companies and the US subprime issue? None. There is no relation but why has the Chinese market fallen by so much?

The Chinese government has no choice but to stop big sellers from selling stocks in the open market as well as take the step of cutting stamp duty.

The stock market rises and falls just as much and just as quickly, which follows the theory of Logarithm and Linear Regression. For the past 20 years, the model that I developed has correctly predicted the peak in October 2007 and the bottom in 2003, not forgetting the peak in 2000 and the bottom in 1998.

Events such as the subprime issue, SARS, tech bubble and financial crisis are only excuses for the stock market to correct from their highs. When the stock market has risen long and high enough, it will definitely correct.

As at this point in time, the Straits Times Index has rebounded quite substantially and we must get in and out very quickly so as to avoid taking risks. Do not panic and do not sell out too early.

I still like bank stocks because these stocks were hit by the credit crisis. Every rebound is led by the banks.

Furthermore, we should also pay attention to China stocks as the China government has decided to rescue the stock market.When the China stock market revives, it would also stimulate the S-shares. There’s also no harm in paying attention to Taiwan related stocks. Ma Ying Jiu winning Taiwan’s presidential election brings a bright future to Taiwan’s lackluster economy, which has been longing for a revival.