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Sunday, February 10, 2013

Views by market research analysts, would the Snake bite 2013?

The 12-year zodiac has turned from the last year dragon to Snake 2013. Would the snake bite as the snake's reputation might be? Remember 2001 was the year of the 9/11!

Welcome to Year of the Water Snake! Snake is the Yin to last year's Dragon Yang. That said, Snake does not settle for mediocrity, either. We're likely to see significant developments in the area of science and technology this year. Research and development are apt to flourish. This is a Water year as well, the element most closely associated with education and research, making 2013 a very special year for scientists and scholars. Snake is a great sign, a positive one, with energy that can help us face all of the challenges ahead of us. Let's take advantage of this vibrant influence to improve our lives -- and our world!

THE world markets have always been a subject of focus whenever a brand new year comes a-calling.

Will they perform well or are investors in for a tough time?

As usual, while some have looked to the study of feng shui to predict how markets will perform and react in this Year of the Water Snake, a few analysts and fund managers have mostly chosen to stick to regular facts and figures when giving their opinions.

Here are the views of some of them randomly selected by StarBizWeek.
VINCENT KHOO
Head of research
UOBKayHian Research

Do you believe in using feng shui to predict market movements?

For fundamental research, we do not take feng shui into consideration

What are your top picks in the Year of the Snake? Why?

The over-riding investment theme for the year's market is laggards. Market laggards dominate our “buy” list.

We also advocate three categories of stocks to focus on for timing purposes. These are stocks which are immediate “buys” such as high-yielding stocks including number forecast operators and construction stocks, noting that positive newsflows are already emerging, stocks to accumulate on slight weakness such as telecommunication stocks, and stocks to accumulate on deeper retreats, such as the perceived politically-linked stocks which feature exciting growth prospects

Our contrarian view includes being overweight on construction stocks.

What are some of your “predictions” for financial markets this year?

The local market has predictably fallen after a short year-start rally. We expect a significant retreat in small-mid caps after an impressive January-Effect' rally. We also expect market to dip further before elections, but downside is limited, and it should recover significantly thereafter.

THOMAS YONG
Chief executive officer
Fortress Capital Asset Management (M) Sdn Bhd

Do you believe in using feng shui to predict market movements?

We don't use feng shui in our work.

What are your top picks in the Year of the Snake? Why?

In Malaysia, our top picks are UMW Holdings Bhd and CIMB Group Holdings Bhd. Despite a return of 70% in the year of 2012, we think that the prospects for UMW continue to remain bright.

The automotive division has been performing well as its Toyota brand continues to gain market share, while the Perodua brand dominates the budget segment.

Earnings contribution from the oil and gas division has improved vastly and the earnings momentum is likely to pick up in coming years, buoyed by the potential of raising funds via an initial public offering.

In the near-term, weakening of the US dollar and Japanese yen arising from quantitative easing would also be favourable to UMW Holdings.

CIMB Holdings has been delivering consistent earnings but its share price has under-performed the market, due to political concerns in Malaysia.

The group actually derives about 40% of earnings outside Malaysia and the overseas earnings contribution is expected to increase further with the strategic regional expansion.

Besides positive enhancement of the CIMB brand, its recent acquisition of Royal Bank of Scotland investment banking operations has also provided CIMB Group with an established platform to compete internationally.

Notwithstanding the solid fundamentals of the two stocks, one need to be cautious in determining the entry level for the stocks in light of the recent market volatility on the back of election politics.

What are some of your “predictions” for financial markets this year?

As the US and Japan are expected to continue with quantitative easing, we expect interest rates to stay low for the year 2013, stoking asset inflation.

While alternative investment such as property has traditionally proven to be a good asset inflation play, the sector will likely face continued policy curbs.

Taken with sight of economy recovery led by China and the United States, we believe equity as an asset class provides a very attractive risk return potential.

HWANGDBS VICKERS RESEARCH
MALAYSIAN RESEARCH TEAM

Do you believe in using feng shui to predict market movements?

Feng shui is just an additional tool used to make certain predictions.

Our bread-and-butter research approach has always been fundamental analysis supported by technical analysis.

What are your top picks in the Year of the Snake? Why?

Against a turbulent market backdrop, the benchmark FBM KLCI could swing between 1,500 and 1,750 going forward, and probably settle at our fundamentally-driven end-2013 target of 1,690 (based on one-year forward P/E of 14 times.

Hence, investors should view any market dips as buying opportunities to ride on the subsequent recoveries.

The Year of the Snake may bring good luck to industries linked to earth, metal and water elements, such as property, construction, petroleum and banking.

By being defensive, investors are expected to flock to sectors or stocks that generate strong operating cash flows and pay appealing dividend yields such as Pos Malaysia, Maybank and KLCC Property, to name a few.

What are some of your “predictions” for financial markets this year?

On the global economic front, we should see continuous gradual recovery supported by an underlying positive mood.

The recurrence of an economic fallout in the United States or a financial blow out in eurozone can happen, which can then force a downward spiral in investors' confidence.

KALADHER GOVINDAN
TA Securities
Head of research

Do you believe in using fengshui beliefs to predict market movements?

I wish predicting market behaviour could be that easy. Feng shui or even the much older Indian version, Vastu, for that matter gives you a “common sense” perspective on how certain things should be done in harmony with nature to reap the maximum benefits for health and well being but it is not a single criterion that binds everything for success or wealth.

What are your top picks in the Year of the Snake? Why?

Sell-on-strength, especially overvalued defensive plays in the consumer, healthcare and telco sectors, and turn cash-heavy to accumulate high beta plays in domestic sectors, which are mainly related to construction, oil and gas and property sectors, in the first half of 20 13. The banking sector holds good buys based on their attractive valuation, still robust loan growth and bright chances of benefiting from ongoing domestic expansion .

What are some of your “predictions” for financial markets this year?

Issues in Europe will last longer. The structural flaws cannot be undone overnight but expect bouts of positive improvements to kick in the second half of 2 013 as fats are trimmed and jobs created. China could revive its domestic growth without stoking inflationary pressure but it can be a destabilising factor if its row with Japan escalates. The same applies to Iran and the West.

LIM TECK SENG
Deputy managing director
JF Apex Securities Bhd

Do you believe in using feng shui to predict market movements?

Not at all.

What are your top picks in the Year of the Snake? Why?

I prefer good value penny stocks because the capital appreciation of these stocks are much faster and larger, compared to bigger-cap stocks. Stocks are all about packaging, style and branding.

What are some of your “predictions” for financial markets this year?

Financial markets revolve around banking, wealth management and the economy.

It has nothing much to do with stock markets. The stock market is all about liquidity and cashflow.

If there is enough liquidity, cashflow and interest in the stock, the stock will run. Liquidity is the most crucial component to the stock market.

EDMUND THAM
Head of Research
Mercury Securities

Do you believe in using feng shui to predict market movements?

Some people may use it, but I personally do not use feng shui to predict the market.

What are your top picks in the Year of the Snake? Why?

Currently I'm looking at property and crude palm oil (CPO) stocks, for both value and dividend yield.

The prices of quite a number of them have come down recently. However, they have the potential to “come back” later in the year. CPO stocks would probably only come back later in the year if and when CPO prices recover.

Property players with projects in prime areas locally (Penang island, Klang Valley, Iskandar Region) and overseas stand to perform well.

CPO picks - IOI Corp Bhd, TDM Bhd, TH Plantations Bhd, Hap Seng Plantations Holdings Bhd.
Property picks - Glomac Bhd, Mah Sing Group Bhd, SP Setia Bhd, UOA Development Bhd.

What are some of your “predictions” for financial markets this year?

For the local market, less volatility could lead to a higher KLCI level, especially in the first half of 2013.

The cautious investor sentiment due to GE13 is likely to suppress market participation for Q1 and maybe Q2.

The Dow Jones is at quite a lofty level, and we're not sure if it can be sustained above the 14,000 points level.

By YVONNE TAN yvonne@thestar.com.my 

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Saturday, February 9, 2013

Fengshui: How the Water Snake year will be?


THE new energies of the Year of the Water Snake slithered in at 12.15am on Feb 4, replacing the tumultous zeal of the Water Dragon.

Will the year be better? More importantly, are there wealth opportunities and will the tides of change bring about better developments?

Joey Yap, the founder, CEO and master trainer of the Mastery Academy of Chinese Metaphysics says that globally, problems will not dissolve in 2013. In fact, it will be prolonged to 2014.

“When we look at the Bazi chart for the Water Snake year, the prominent elements this year are wood, metal and fire. There is especially a lot of wood, which is likened to a big tree.

“The wood is like a small knife. Hence the year is defined as a small knife cutting a big tree,” says Yap.

As the Water Snake will continue to see a lot of volatility, Yap says the strategy of investment should be skewed towards trading. Hence, do not be so defensive and start investing!

Unlike most people who are not calling outright buys on Malaysia, Yap is especially positive about Malaysia's prospects, and sees the country doing relatively well compared with other countries.

“Malaysia has the presence of the growth star, so I feel Malaysia is actually going to do better despite what everyone says. People are willing to take more risk in Malaysia and Singapore. You will be surprised. Malaysia will be better this year than last.

Yap: ‘Despite the fears people have about the stability situation here, investments into the country will continue to pour in.’ Yap: ‘Despite the fears people have about the stability situation here, investments into the country will continue to pour in.’
 
He adds that for Malaysia, the wealth stars appears in April, July and October. There will be a total of four wealth stars this year. During this period, there will be an influx of wealth and business. Hence for Malaysia, Yap also favours the second half of the year compared with the first half of the year.

Furthermore, a very pleasant development is that money flows out of China, and comes into Malaysia! With Star 3, which is the Fighting Star governing China, people will be moving their money out of China into Thailand, Vietnam, Malaysia, Singapore and its ultimate destination, Australia.

Kenny Hoo, founder and chief researcher of Good Feng Shui Geomantic Research says that the Year of The Water Snake is the year of correction. It is signified by changes, be it new policies, new systems and new guidelines. He says people may feel uncomfortable because they will not be able to do things the same old way. It can be painful even.

“In Malaysia especially, the first half will be marked by transition. There will be uncertainty, there be repackaging and restructuring.

“We will see new products and new services coming onstream. After July, we can expect to see major improvement, whether it's in the economy and the stockmarket. In fact, the uptrend may be rather exponential,” says Hoo.

Meanwhile, Asian brokerage and investment group CLSA Asia-Pacific Markets earlier this week launched its 19th annual CLSA Feng Shui Index, which is a tongue-in-cheek look at what the celestial signs suggests is in store for stock market indexes, key sectors and each of the 12 Chinese zodiac signs during this Year of the Black Water Snake.

Based on the Fengshui index, it would appear that equity markets perform better in the first half, and experience more volatile trade in the second half. Overall, the index will finish on positive territory by year end. The big drop in the market is likely to happen in the August to September period.


The United States

So what does the analogy of the small knife cutting the big tree mean, especially for the United States, the world's biggest economy?

Hoo: ‘After July, we can expect to see major improvement, whether it’s in the economy and the stockmarket.’ Hoo: ‘After July, we can expect to see major improvement, whether it’s in the economy and the stockmarket.’

“In America, it has a debt problem. It is unable to settle this debt. The wood element is wealth. So the abundance of wood represents that it cannot control money. When wealth is too strong and the self is weak, this means you cannot control your wealth.

“So it is like a rich house with a poor person. That is the image of how America looks like. It is a rich country but the people are poor,” says Yap.

He points out that Star 7, which is the star of injury, bloodshed and fights is present in the United States this year.

“So the US will be mired in shootings and security issues. Security becomes a major problem in the United States. That affects business negatively. Star 7 is also a star of fear.

People in America are afraid of spending. So they stop spending their money, meaning the economy is not going to move, it's going to contract. In America, they may be talking about boosting this and that, but it's all talk and no action,” says Yap.

Nonetheless, the fortunes of America will not be uniformly in the doldrums as Star 7 is a metal star which runs all the way until July before its energies start to dissipate.

“So you will feel the effects in the first half of the year, but it gets better until the November period. Then the energies will come back in the beginning of 2014,” says Yap.

So the United States will think it is recovering, but later on discover that the small knife cannot cut a big tree, so this illusion of a recovery disperses. Hence they become disillusioned,” feels Yap.

In the United States, it is an issue of people losing confidence in their politicians. They do not see light at the end of the tunnel.

Hoo also feels that America will not see much progress.

China

As the opposite of the West is the East, the opposite of the United States is China. When the United States is not doing well, China will do well.

In China, there is Star 3, which represents growth. The problem with Star 3 is that it is a Fighting Star. There is fight for power.

The problem in China is about who is in control. There is a lot of corruption. Star 3 is also a star of corruption.

There will be a lot of scandals, with people in power losing their grip, parties being divided two to three-folds,” says Yap.

Yap adds that the 3 Killings Star is also present in China. With Star 3 being a wood star, and wood-based industries include manufacturing and production, manufacturing will slow down. Thus the picture painted is the 3 Killings Star killing Star 3.

“It's like throwing strong cyanide down to the plants. So growth will slow down in China,” says Yap.

Europe

Now, in the middle of China and the United States is the Middle East and Europe. This area is governed by Star 5. Star 5 is a star of change and renewal. Picture the entrance of a new king.

Yap foresees Europe continuing to remain on a standstill with no improvement. Everyone continues to look inward.

“Hence wars in the Middle East get worse. There will also be a dose of natural disasters. People will be divided. This poison will spread to Europe, and hence there will be change,”

“Germany has been the one which has been in power, but it is now losing its grip. It will affect its stability. The 5 Yellow star is present in the entire eurozone area. This star does not represent growth.

He says Germany is focusing very much on its internal issues. Correcting its own scandals, throwing out the rubbish. “They are looking inward this year.”

Meanwhile, in France, it is governed by the Horse animal sign.

“This year, the Horse has nobility stars. Thus despite all its issues, it will get its act together. The tides turn to its favour.

Malaysia

With all the bad stars roiling across the major economies, is there any bright spot at all?

Yes, and fortunately for us, it is right here in SouthEast Asia!

“South-East Asia is governed by Star 4, which is a star of growth. Star 4's wood element is able to control and counter the 5 Yellow earth star. Furthermore, Malaysia is born in the Year of The Rooster. The combination of the Rooster with the Snake year is a good one. So as a comparison to the whole world, South-East Asia is doing well, and Malaysia will grow,” says Yap.

“We are in a region where there is a growth star. Despite us having the small knife cutting the big tree. We don't have big problems. So people will turn to South-East Asia for manufacturing or business prospects. Despite the fears people have about the stability situation here, investments into the country will continue to pour in. China will be bringing more money here,” says Yap.

Hoo agrees. He says that southern countries do well.

“There will be clashes in the first six months, but things get a lot more smoother and stable in the second half.
Hence my strategy will be for investors to start accumulating now and sell during the second half,” says Hoo.

Zeroing in on Malaysia, Yap says the Malaysian Bazi chart has the animal signs of Monkey, Rooster and Boar, which spells a positive start for the snake.

As Malaysia has a Wood Day Master, this shows that wood-based industries will do well. Wood-based industries include the timber, furniture, healthcare, medicine, herbs and anything which has anything to do with improving health. Hence the sports sector will also do well. Education, speaking, teaching and training sectors will also do well.

The other element that is expected to do relatively well this year is the Fire element.

For Malaysia though, the fire is rather muted. In Malaysia, the fire sector includes sectors such as oil and gas, palm oil and the airlines. He does, however, foresee a challenging time for airlines.

Hoo says that the fire sectors such as telecommunications, oil and gas and electronics will be facing new competition and new guidelines.

As for the property sector, which is defined by earth, there is no clash with the other elements. Growth is, however, slow, as the earth element is not in abundance this year.

“So you will need to look at the developers and property launches. If they are launching their ready product this year to be sold, it won't be too good. If they are launching their products this year to be sold in the next few years, then it is ok. Property is still a good long-term bet,” says Yap.

Thus, Yap will not advise investors to buy properties for flipping purposes. Buying for long-term investments or for cashflow will yield much better rewards.

On this note, Yap especially sees potential in commercial properties based on the formation of the water elements surrounding earth in the Bazi chart.

“Commercial properties will be snapped up fast as compared with residential properties. Earth is property. Earth controlling water is equal to money,” says Yap.

The growth star is also slowly moving towards Rawang. That will eventually be the growth property hub for Malaysia.

For this year though, the hot spots for property are north and south, which is Penang and Johor.

The Klang Valley is afflicted by the 5 Yellow star this year. While 5 Yellow does not represent growth, it is always a change for the better.

Thus for long-term purposes, Yap advocates buying property in the Klang Valley.

Meanwhile, Yap sees the banking sector being weaker this year. This is because there is too much wood element this year. This wood represents a lot of money, however, there are no takers. The question to ask is why are the banks not lending?

“The earth element is there. There is too much regulation, stopping the banks from doing business. It is like when you want to do something, and your mum is stopping you and giving you warnings. This is what happening in the banking industry. Too much earth producing metal, is like too much advice that is not necessary and will not yield an efficient result.”

By TEE LIN SAY linsay@thestar.com.my

CLSA: Better year ahead



WHILE the past five snake years have not particularly been great, this year is envisaged to be better, according to one Asian brokerage and investment group.

CLSA Asia-Pacific Markets launched earlier this week its 19th annual CLSA Feng Shui Index a tongue-in-cheek look at what the celestial signs suggest is in store for Hong Kong's Hang Seng Index, key sectors and markets, world leaders and celebrities, and each of the 12 Chinese zodiac signs during this Year of the Black Water Snake.

According to CLSA, the past five Snake years back to the Water Snake of 1953 were not encouraging.

“However, there are signs that this year's beast will be better behaved: All five of the basic elements or energies are present in the fortune charts (including the market-driver Fire!); and the annual Flying Star energies all return to their “home” sectors for the first time in nine years,” it says in a statement.

CLSA points out that in only one year did markets end the year convincingly above their opening and the size of the drops of the most recent three has been growing ever worse.

As befits “skin-shedders”, Snake years are marked by major transformation and change and sometimes great upheaval: Pearl Harbour (1941), Twin Towers (2001), Tiananmen (1989), Fall of the Wall (1989), Great Depression (1929), recessions (1953, 2001), revolutions (1917, 1989), and major conflicts (1941, 1965), it says.

Meanwhile, at a press conference in Hong Kong, Mariana Kou, a CLSA research analyst and self-proclaimed feng shui master, says the Water Snake year will see the Hong Kong's stock market perform better compared to last year.

“We see a resource-led slow burn run-up for the Hang Seng Index from the second quarter. As it builds, risk flicks on', resulting in the second half being more volatile, but there are opportunities,” Kou was quoted as saying in China Daily.

The paper reported her as saying that the first-half rally will come to a sudden end in August, which seems to be “double trouble” because the crucial Fire element dies away in the month, Earth falls, Metal overshoots and Water puts a dampener on prospects.

In terms of sectors, CLSA expects the best performances from those traditionally associated with Metal such as broking and financials and also Water like gaming and logistics.

As for the zodiac signs, Roosters, Cows and Dogs look set to be this year's “grinners”, whereas Pigs, Tigers, Sheep and Snakes may need all the pluck they can muster.


CLSA's prediction for the 12 animal signs


Tiger
It may well feel like a jungle out there this year for you Striped Types, what with all the snipes, gripes and swipes. To get you through, take your cue from the Fab Four over the Stones and Let It Be. (You can always Let It Bleed later). And read the fineprint. As the chef said to the young apprentice with a sniff: This stew's well past.'

Rabbit
Amid machinations infernal, hop springs eternal - and with good cause in your case, Bunnies. The outlook may not be quite 24-carrot just yet, but it's still leaps and bounds ahead of what you've been catching of late. And there'll be high-fiving all round when the hooves of next year's fiery Horse hit the horizon.

Dragon
The good news? Your fortune's far flasher than it was for last year. The bad news? That's probably not saying a lot, eh? We jest. Well, jest a bit. A fascinating thing, relativity - all the more so if you've got the foggiest notion of the theory behind it. Best left to the Einsteins, no doubt. Quark, strangeness and charm indeed.

Snake
It just doesn't seem right, eh? It's your year, but instead of three cheers you're more likely to cop one over the ear. It's just the feng shui of the world. So moan on your own or take it in your slide. Think of it as a great opportunity to test your mettle. And, as the doctor said to the boy who'd swallowed another marble: This too shall pass.'

Horse
Whoa! What's not to like? It's no laydown whinny-winner, but there's neigh point in looking about for trouble. Besides which, a mirror will soon show what's most likely to trip you up this year. Don't be an ass! Reload that ever-reliable Horse sense, get your head in the right place and see how easily “ordinary” becomes “oat-standing”.

Sheep
Jeepers Sheepsters, we feel your pain', as Big Bill was wont to coo in that way that you almost believed him. Being dogged by seven surly stars is no fun. But banish the bleatin' and you'll soon have the fleas beaten. And as the teacher said encouragingly to the boy struggling to unravel an unruly sentence: This too shall parse.'

Monkey
From where we're standing, it doesn't look as if it would take much to nudge that “ssso-so” up into “Sweet Street” territory or even higher up da vine. Sure, you've got seven ssso-and-ssso skunks to keep an eye on, but just look at the names who've got your back! Get your tail into gear, and razzle-dazzle with the old Monkey magic.

Rooster
As Family Guy's Peter Griffin would put it (ad nauseam): Bb- b-bird, bird, bird, b-bird's the word . . . ' You Roosters surely must be getting sick of this chicken run of spanking good luck you've been having? Wouldn't like to toss a few crumbs our way? Oh well, never mind. Now, what is it they make feather-dusters from . .
 .
Dog
Talk about a turnaround story! If only we could have bought lots of lots of you lot last year, when you were totally out in the dog house and on the cold, wet nose. Now you're baaark! And you're practically leader of the zodiac pack. Howl lovely to see. Suddenly, Iggy Pop almost makes sense: I just wanna be your dawwg . . . ' Woof!

Pig
It's more than a boar knowing some unseen, all-powerful presence is tracking your every move - and that's just Google. You poor Porkers have the Tai Sui on your tails as well. Snout to do but your best: Stuck pigs squeal and quit; stoic pigs deal with it. As the dentist said to the boy with the makings of an abcess. This tooth shall pus.'

Rat
Leaving aside the caveat of the best-laid plans' and all that, your fortune is looking well on the bright side of “average” - indeed within a whisker of “wonderful” for many, especially Water Rats. That said (and twitch his own of course), use the old Mouse nous and go easy on the squeaks and squeals of delight. Gets up a few noses.

Cow
How's “wow” sound, Cows? That's the word for the Herd once the Snake's on the make. Content is king, as a bullish Bill Gates argued, and there should be few more contented than you mob come the close, given the crme de la crme outlook. No call for grabbing bulls by horns - simply take the year by the ears and life as it comes

Friday, February 8, 2013

Japan's smear campaign, trade bards with China over radar incident near disputed isles

Beijing accused Tokyo Thursday of mounting a smear campaign after Japan said a Chinese frigate had locked its weapons-targeting radar on a Japanese warship in a “threat of force.”

 Japan Maritime Self-Defense Force destroyer Yuudachi is seen in this undated handout photo released by Japan Maritime Self-Defense Force and obtained by Reuters on February 5, 2013. A Chinese vessel pointed a type of radar normally used to help guide missiles at a Japanese navy ship near disputed East China Sea islets, prompting the Japanese government to lodge a protest with China. Image by: HANDOUT / REUTERS

The world’s second- and third-largest economies are at loggerheads over uninhabited Japanese-controlled islands in the East China Sea, known as Senkaku in Tokyo and Diaoyu by Beijing, which claims them.

The radar incident, which Japan said happened last week, marked the first time the two nations’ navies have locked horns in a dispute that has some commentators warning about a possible armed conflict.

Asked to respond to Japanese Defense Minister Itsunori Onodera’s description of the radar targeting as a “threat of force”, Beijing foreign ministry spokeswoman Hua Chunying said: “Recently Japan has been hyping up crisis and deliberately creating tension to smear China’s image.

“This move is counter to the improvement of relations,” she told a regular briefing.

“The current problem is not China being assertive but about Japanese ships’ and airplanes’ repeated illegal activities in the airspace and waters of the Diaoyu islands, which undermine China’s territorial sovereignty.”

The long-running row over the islands intensified in September when Tokyo nationalised part of the chain, triggering fury in Beijing and huge anti-Japan demonstrations across China.

Beijing has repeatedly sent ships and aircraft near the islands and both sides have scrambled fighter jets, though there have been no clashes.
The Chinese Defense Ministry has denied that a Chinese navy vessel aimed weapon-targeting radar at a Japanese navy ship in the East China Sea. It’s also called on Japan to stop violating China’s territorial sovereignty.



The Ministry says the vessel was conducting normal training on January 30th, when it detected a Japanese naval ship following it. The Chinese vessel used normal radar to monitor, contrary to Japanese claims.

The Chinese Foreign Ministry also says Japan is provoking tension over the Diaoyu islands by intentionally stirring up a crisis. It says Japan is continuously sending its ships and aircraft into the waters and airspace around the Diaoyu Islands to carry out illegal activities.

China and Japan engaged on Friday in a fresh round of invective over military movements near a disputed group of uninhabited islands, fueling tensions that for months have bedevilled relations between the two major Asian powers.

China’s defense ministry rejected a Japanese allegation that a naval vessel had aimed a weapons-targeting radar at a Japanese military ship in the East China Sea, its first comment on the week-old incident. It said Japan’s intrusive tracking of Chinese vessels was the “root cause” of the renewed tension.

A Japanese official on Friday dismissed the Chinese explanation for the Jan 30 incident. He said Beijing’s actions could precipitate a dangerous situation in waters around the islets, known as Diaoyu in China and Senkaku in Japan, believed to be rich in oil and gas.

China’s defense ministry, in a faxed statement issued late on Thursday, said Japan’s remarks “do not match the facts”. The Chinese ship’s radar, it said, had maintained regular alerting operations and “did not use fire control radar.”

The ministry said the Chinese ship was tracked by a Japanese destroyer during routine training exercises. Fire control radar pinpoints the location of a target for missiles or shells and its use can be considered a step short of actual firing.

Japan, it said, had recently “made irresponsible remarks that hyped up the so-called ‘China threat’, recklessly created tension and misled international public opinion.

“In recent years, Japanese warships and airplanes have often conducted long periods of close-range tracking and surveillance of China’s naval ships and airplanes. This is the root cause of air and maritime security issues between China and Japan.”

In Tokyo, Japan’s Chief Cabinet Secretary Yoshihide Suga told a news conference on Friday: “We cannot accept China’s explanation.”

Japan’s allegations, he said, had been “a result of our defense ministry’s careful and detailed analysis. We urge China to take sincere measures to prevent dangerous actions which could cause a contingency situation.”

Defense Minister Itsunori Onodera said this week that the incident could have become very dangerous very quickly, and that use of the radar could be seen as a threat of military force under U.N. rules.

Hopes have been rising in recent weeks for a thaw in ties after months of tension, sparked, in part, by Japan’s nationalisation of three of the privately owned islets last September.

Fears that encounters between aircraft and ships could degenerate into an accidental clash have given impetus to efforts to improve links, including a possible summit between Abe and Chinese leader Xi Jinping, who takes over as head of state in March.

China’s premier-in-waiting Li Keqiang, meanwhile, urged marine surveillance staff on Thursday to intensify law enforcement in China’s sea territories, according to the official Xinhua news agency.

“Supervising and governing seas under the jurisdiction of China is the main responsibility of Chinese marine surveillance staff,” Li, who is expected to take over as China’s premier next month, was quoted as saying.

It is believed the island chain—which is also claimed by Taiwan (a province of China)

Sources: AFP/Japan Todayh/Reauters/CCTV

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