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Traineeinvestor's diary - HK and Far East Focus


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Is that YOUR CAT in the bookshelf?

 

haha. very good

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Looking for bookworms, maybe

 

Either that, or she has an IDEA to share with you. (haha)

How to avoid Cat-astrophes ?

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India doing well both before and after the election. Stock market is up and the Rupee is up as well. I've held the iShares India fund (HK:2836) for a while and it is nice to see some decent upward movement.

 

Still trying to figure out how to post a chart????

 

 

 

 

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Some initial thoughts on...

 

winners and losers following the Russia/China mega-gas deal.

 

The obvious winners which all say big share price increases today are the gas distributors such as China Gas (HK:384) and CR Gas (HK:1193) (among others). Not only do they benefit from a supply of gas for distribution but what appears to be favourable pricing. The latter comes with the caveats that the pricing is not transparent at this stage and it is not clear how much of the below market pricing will filter down to the distributors. It also signals a commitment to reducing pollution.

 

Other winners are the pipeline builders such as Tianda Pipe (HK: 839) which jumped 14% today.

 

Less obvious winners are power companies (lower input costs) and some manufacturing (lower energy costs - one of the things that is helping US manufacturing).

 

The biggest losers are coal companies (China will burn less coal and use more gas instead) and US/Australian gas/LNG companies who are currently or intending to ship gas/LNG to the China. Their pricing power just took a big hit as did the potential demand for their product (which may result in lower energy prices at in their home countries).

 

The gas is not likely to start flowing until 2018 so it will be a while before the benefits/losses filter through to corporate earnings (or maybe not - price pressure may begin immediately) and it has to be remembered that China is a command economy so there is plenty of time for the powers that be to regulate away whatever benefits have been gained.

 

Politically, it enhances Russia's financial position and provides China with improved energy security. It also makes the US + Allies ability to impose meaningful sanctions against Russia over Crimea look even weaker than it already is.

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Charts-2_zps4c34e8b8.gif

 

 

I had a look at Russia. While in many respects, Russia is a badly managed basket case, the valuations still remain cheap (even by Russian standards). As the chart of the HKEX listed Russia ETF shows, the US led sanctions have been utterly ineffectual.

 

Tempted.

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Some initial thoughts on...

 

winners and losers following the Russia/China mega-gas deal.

 

The obvious winners which all say big share price increases today are the gas distributors such as China Gas (HK:384) and CR Gas (HK:1193) (among others). Not only do they benefit from a supply of gas for distribution but what appears to be favourable pricing. The latter comes with the caveats that the pricing is not transparent at this stage and it is not clear how much of the below market pricing will filter down to the distributors. It also signals a commitment to reducing pollution.

 

Other winners are the pipeline builders such as Tianda Pipe (HK: 839) which jumped 14% today.

 

Less obvious winners are power companies (lower input costs) and some manufacturing (lower energy costs - one of the things that is helping US manufacturing).

 

The biggest losers are coal companies (China will burn less coal and use more gas instead) and US/Australian gas/LNG companies who are currently or intending to ship gas/LNG to the China. Their pricing power just took a big hit as did the potential demand for their product (which may result in lower energy prices at in their home countries).

 

The gas is not likely to start flowing until 2018 so it will be a while before the benefits/losses filter through to corporate earnings (or maybe not - price pressure may begin immediately) and it has to be remembered that China is a command economy so there is plenty of time for the powers that be to regulate away whatever benefits have been gained.

 

Politically, it enhances Russia's financial position and provides China with improved energy security. It also makes the US + Allies ability to impose meaningful sanctions against Russia over Crimea look even weaker than it already is.

 

Question : What are your tactics here:

 

+ Do you ride the move, as long as it lasts?

Or

+ Do you sell into the volume generated by the news,

and look to buy back in after a few weeks or months, when the inevitable correction comes?

 

So are saying this is very big news, and may be transformative of the trade between the two, in the long run.

But nothing happens in a straightline, and it could be many months or years before we see big changes

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I'm trying to be disciplined here and stick with looking at fundamentals rather than short term price swings. At the moment I am doing nothing - which is working just fine. Most likely, I will look to add positions after the dust has settled and/or we see a pull back. If that doesn't happen soon enough there are plenty of other fish in the investing sea.

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  • 2 weeks later...

Spent a bit of time reviewing my twenty largest holdings of individual equities. All but one are in positive territory (one is at or slightly below break even), all but one pays dividends and most have increased their dividends over the last few years. Right now, I see no reason to sell any of these and could even add to a few.

 

(I have several investments which are under water so to speak - fortunately, all but one involve much smaller amounts of money.)

 

 

RANK COMPANY CODE 1 China Gas 384 2 HWL 13 3 CNOOC 883 4 Sinopec 386 5 Henderson 12 6 CCB 939 7 NWS 659 8 GDI 270 9 Sinolink 1168 10 K Wah 173 11 Swire 19 12 Ping An 2318 13 COSCO 1199 14 Fairwood 52 15 Dynam Japan 6889 16 Beijing Airport 694 17 Westpac WBC 18 Hua Han 587 19 Hang Seng 11 20 CKI 1038
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interesting.

which 2 or 3 have the best yield?

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The highest yields are:

 

1. CCB - 6.66% less 10% NRWT = 6.00%

2. WBC - 5.17%

3. Hang Seng Bank - 4.27%

4. NWS - 3.88%

5.Sinopec - 4.31% less 10% NRWT = 3.88%

6. Fairwood - 3.8%

7. CNOOC - 4.19% less 10% NRWT = 3.77%

8. Dynam Japan - 4.2% less 10% NRWT = 3.77%

 

These are all traling yields against today's share prices. In all cases, I have stripped out special dividends (WBC, Fairwood, HWL, COSCO) and deducted NRWT which applies to H shares and Japanese shares.

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Thanks.

Those are very respectable yields

 

Fairwood may be the most appealing to me, since I think they can benefit from:

 

+ Falling rents

+ Better demand, if we get an economic downturn

 

=== ===

 

HK Property Bears in Retreat

 

brown_bears_16k.jpg

 

In HK Property,

It looks like patient landlords have won, and the Bears are making a retreat,

tails between their legs,

as Ricacorp revises its 2014 forecast from 15% down to 5% up.

 

Whodathunkit ?

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It would seem that I am in good company in believing that property stocks represent better value than buying property directly at the moment: http://www.scmp.com/property/hong-kong-china/article/1525560/property-stocks-are-better-bet-property-says-tycoon-lee

 

Of course, equities carry far more short term volatility than property but I can live with that.

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Lower transaction costs, and easier to exit too

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Yes - and in some cases a better yield. Of course, there are a whole host of pluses and minuses.

 

A table from Credit Suisse was posted on AA Stocks this morning showing the household wealth allocations to various asset classes in 2008, 2103 and the projection for 2018. The numbers for equities were 4%, 4% and 6% which by international standards are staggeringly low and helps explain the low valuations and poor returns on PRC equities over the last several years. If the projection of a jump from 4% to 6% over the next five years eventuates, that is bullish for PRC equities (even assuming a continuation of the large pipeline of new IPOs). Add in the likely increase in aggregate wealth (i.e. it will be 6% of a bigger number) and it is very bullish indeed.

 

http://www.aastocks.com/EN/News/HK6/61/NOW.608401.html

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I can understand people paying silly fees in markets that have only limited offerings of low cost index funds, but it surprising to see that in the US (which has the cheapest funds in the world and the greatest amount of information available for investors) there are still any funds which can charge front end loads: http://www.bloomberg.com/news/2014-06-05/wall-street-fights-for-our-right-to-pay-5-fund-fees.html

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The FEES are mostly passed to the guys who convinced their naive clients to buy them

 

A clear conflict of interest IMHO

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The staggering amount of wealth being generated in Asia is no surprise, but here are some numbers: http://www.bloomberg.com/news/2014-06-09/china-riches-fuel-asia-as-world-wealth-tops-150-trillion.html

 

USD37 trillion of private wealth in Asia ex-Japan alone. A 31% increase in 2013.

 

Will we reach a point where there is too much money chasing too few assets?

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That could be why property prices in HK are not coming down - too much wealth creation

 

Certainly, this seems to be propping up the Low end, at least

 

Also...

The argument for Makati / Philippines still looks strong:

 

It is the cheapest decent CBD in the world - and the country is growing at 7% per annum

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Although this is only stating the obvious, it is one of the clearer explanations for why linear charts can very often be misleading or useless and a log-linear chart is much more informative: http://marketthoughtsandanalysis.blogspot.hk/2009/11/why-arithmetic-stock-charts-are.html

 

Unfortunately, I have not come across a site that offers free log-linear charts.

 

Also, in my view, charts adjusting for changes in the underlying base (e.g. stock indexes adjusted for real GDP or inflation) would also be more useful than the straight linear-linear charts.

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As a trader, I would be reluctant to use those,

they would destroy or obscure "normal" support and resistance levels

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I'll have to defer to you on the application of charts - after an early exposure to Robert Pretcher (awful), I somewhat lost faith in technical analysis as an investment tool but regained it after following David Fuller and Eoin Tracey at Fullermoney (now FullerTreacyMoney) (highly recommended). If they every bring their chart seminar to HK, I will attend.

 

The thing that repeatedly irritates me is people using a linear-linear chart which has a naturally accelerating slope in the right hand side as "evidence" of a non-existant bubble when it is nothing more than a simple compounding of returns or price changes over time. I appreciate that this is a very different perspective from technical analysis and the difference may well be that my concerns are more relevant to longer term charts and less relevant to short term charts.

 

Incidentally, any recommendations for a primer on momentum investing?

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I think "those people" who react that way may heard heard and seen (as I have)...

 

That nearly every market that "goes parabolic" winds up crashing.

The usually reason is that speculation feeds on speculation,

and banks often lend (aggressively) against the asset, until prices reach an unsustainable level.

 

WE identified such a move in the Silver market, and called the Top near perfectly in 2011.

 

Although I believe this is so for "nearly every market", it is NOT true for every market.

The trick is identifying the exception(s)

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