Written by Michael Vass

When Warren Buffett speaks the world listens. Not only that, they world markets react. That is what happened when Buffett announced that Berkshire Hathaway was willing to back-up reinsurers on municipal bonds up to $800 billion. That took the U.S. stock markets on a rally, with the Dow Jones Index ending up 124 points.

Across the world the reverberations have been felt. The Hang Seng Index started the morning with a 1.89% increase, up 433.11 points to 23,354.78. The general mood inspired by Mr. Buffett is being further supported by the continued pressure from Venezuela on the threat of cutting off U.S. from its oil supply.

PetroChina was up 3.84%, and CNOOC was up 2.3%. beyond the oil stocks, there was a strong boost that originated far from America. UK-based Children’s Investment Fund has stated that it will raise its stake in Guangzhou Investment from 4.99% to 5.13%. This caused a increase of over 9% in the Chinese firm.

Also showing activity were:

China Essence Group Ltd , a potato processor, up 3.9%. It said its net profit for the third quarter to December rose 85% due to strong sales and higher prices.

China Dairy Goup Ltd was up 1.9%, after DBS Vickers downgraded it to ‘hold’ because of government-decreed price freezes.

China Kangda Food Co Ltd fell 4.1%.

Overall the return from the Lunar New Year holiday has come upon a move to the upside. But some technical analysts advise caution and expectations of a downturn.

Looking at the Shanghai Composite Index which recently rebounded from a 6 month low, Wu Yiping, analyst at Haitong Securities, stated

“After the holidays, people may have to revise their pre-holiday optimism. One must still be careful about the medium-term trend.”

Also looking at the technical analysis Andrew Torchia of the Guardian.co.uk believes

“Many fund managers think the market will not sink that far — the economy is still booming and corporate profit growth remains strong, though it is slowing. The government, unwilling to see a crash threaten its success in building a viable equities market over the past two years, might well intervene again.

But if intervention supports the market, it may also stop the formation of a widely accepted floor from which stocks could stage an extended rebound — meaning China might not enjoy the recovery seen in the Nasdaq after 2002, but something closer to the years of stagnation suffered by the Nikkei.”

It’s still far too early to determine, but in the short-term the outlook I would suggest is that Warren Buffet, Venezuela and the power outages in South Africa will keep all the Chinese stocks in the positive.