Venturing Into HKG / CHN Market - My Experience







My experience with HKG/CHN market just started few months back and I am considered as “newbie” as far as investing in HKEX is concern. As we know, HKG market is much bigger than Singapore as HKEX is the 3rd largest stock market in Asia in terms of market capitalisation. HKEX have more than 2000+ stocks listed there as compared to SGX which have around 700+ stocks. With so many stocks listed in HKEX , I am sure one will be able to select more fundamentally strong stocks from the pool , especially if you are an income investors looking for dividend stocks with clean balance sheet.

Of course Hong Kong was in the limelight recently for wrong reason not because of it being the most free economy and world leading financial centres , with low taxation , free-port trade and free capital in & out flow. As financial blogger , I shall not touch on political issues that causing the current social turmoil and riots which has been the headlines for world international media and news. The protest and riots may continue to wreck HKG for quite some time even with their recent peaceful local district council elections.





Till date, I have invested almost 15% of my capital into HKG/CHN market in total 30 stocks.
Yes , you are not wrong , 30 not 5 or 10 counters. But why so many counters ?

First of all, HKG is still a new market and territories for me and as you know , I am a very “kia-si   person that afraid of picking wrong stocks with huge allocation. As an investor who are not really good in stock analysis and picking multi-bagger stocks like Amazon/ Apple / Facebook or Google , the only reason for me is to diversify and “play safe”.



Not like DBS/ OCBC/Keppel Corp / Capital Land etc which we are quite familiar with and have confidence to allocate more than 5-10% of our capital into of these stocks , for HKG , I still prefer to allocate less on each and try to monitor from there on. Although such “ net casting strategy may not produce superb result even if you are lucky enough to have 1 or 2 baggers stocks. But at the same time, if any 1 or 2 stocks go bust , the impact will also not be that huge as well.


By using such strategy , we will be able to catch mixture of big fish and small fish , if you are lucky enough , you may get more big fish than small fish , the most important is to have lesser “dead fish “.


“There’s a famous fisherman saying: This is called fishing, not catching! Sometimes you go out and despite all of your preparation, all of your knowledge, you still don’t catch anything. That’s fine with me because it is not for the catching of the fish that I go fishing. It’s the whole experience of being out on the boat, being on the Gulf that I love.”

Investing is a long journey and is the process of having a “practical and achievable “ goal , seeing the companies you have invested growth day by day , re-investing your dividend and let the compounding effect take place.

Furthermore, you will not always win in stock market , sometimes you catch nothing and lose , like I lost money in M1 / StarHub and few small cap companies ( Design Studio / Sarine Tech/Duty Free Int & TTJ Holding).






## If we diversify to 9 stocks instead of 3, it would allow us to make more "mistakes" and as mentioned earlier, I am not good in analysing financial figures and picking good stocks. As dividend and income investor, I often fall prey into value trap by picking wrong stocks e.g “Design Studio / Sarine Tech / Duty Free Int / HPH etc “.  Hence, I will need a larger margin of safety to protect my capital.

HKG is a much more volatile market and with so many listed companies , it tend to have “lemon “ and “ rotten” company same as our S-Chips , one would have to be very careful in selecting fundamentally good company to invest if you are going to have a “concentrate” instead of diversify portfolio. Is quite normal to see my stocks with daily fluctuation of more than +/- 3% without any valid reasons. One will really need to have a strong “heart” to stomach the risk and looking at the price swings.


Below is just an example of how “wild” the price swings could be ….  A drops of -98% in a day !!

MSCI snub erases Hong Kong stock's mysterious 3,800% rally in minutes <Source: Straitstiems.com>



It is not a shame to admit our “inability” to identify multi-baggers but it might be too risky to just depending on few stocks in such volatile market , unless you are an astute investor with acute and in depth knowledge about the industries and market, I would suggest you to have a more diversify portfolio to mitigate the "unsystematic risk".

“Super Investor” Warren Buffett famously stated that diversification is a protection against ignorance.” I would have to 101% agree on that statement, that in actual fact, I am quite ignorance about HKG/CHN market, hence I choose to have some kind of “protection” against downsides as well as limiting the upsides.


Cheers !


STE



Disclaimer:

“All stocks mentioned in this blog is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell .Please do you own due diligence before acting on any information given at your own risk.”





"Appendix"








Yield on cost : 7.4%
Estimated Dividend : $31.4 K p.a
Portfolio Return : YTD ( +1.07% )
Dividend Collected / Announced : $6,080

Total Return ( including dividend) : ( +2.51% )






Although Hong Kong economy been affected by recent political turmoil and protest , but we have seen the HSI actually holding quite well with index just slightly below the mean level. Main reason could be many of the 50 companies that comprise the benchmark HSI (like HSBC/AIA / Tencent /CNOOC/ Geely Auto /Ping An/MengNiu etc) derive most of their revenues and profit from countries outside Hong Kong.

Stocks with more exposure or derive their revenue mostly from Hong Kong only have (will ) seen (see ) their profit drops significantly , especially the industry like retail and tourism .

Hong Kong market also boosted by recent multi billions IPO of Budweiser Brew Co. APAC ( raised about $5 Bil ) in September and of course the world largest IPO in 2019 of close to $11.2 Bil from Alibaba’s secondary listing in HKEX.













Due to prolong trade war since 2018, as below report highlighted, there is no winners in this US-initiated trade war, both end ( elephants ) also suffered from economy downtrend and productivity lost due to protectionisms.


US-China trade war is pushing the world economy closer to the edge. The longer it goes on, the harder it will be to undo the damage <Source:SCMP.com>



Macroeconomic impacts: No winners in this trade war

There are no real winners in this US-initiated trade war. Countries facing new tariffs, including the United States, experience declines in real exports and GDP. Other countries are hit indirectly through weaker demand for their own exports, either through supply chains or in response to weaker global economic growth. These effects outweigh any potential gains from trade diversion to avoid tariffs. In the protectionism scenario, the level of global real GDP is reduced 0.1% this year, 0.8% in 2019, and 1.4% in 2020.

China's quarterly economic growth sinks to 26-year low amid US trade war <Source:Theguardian.com>



“The world’s second largest economy grew by 6% in the three months ending in September, compared with the same period last year. That was down from 6.2% in the preceding quarter, and was the weakest rate since China began reporting quarterly data in 1993.


China may not be able to maintain it’s 6% GDP growth in 2020 and will need the continues economic reform to boost the domestic consumption. But I do believe that every war will end and recover eventually , without exception including this trade war.

Comments

  1. Hi STE, if u want diversification, maybe hang seng index or/plus other etf is easier than buying/monitoring 30 stocks.

    Separately, noted that u have CKI. Have you considered CKH?

    ReplyDelete
    Replies
    1. Hi TNF,
      Thanks for the comments and advice. Yes , HSI and ETF seems the best way to diversify but I still prefer to pick my own stocks and hope could beat the index :D ....I don't really like some of the stocks components listed in HSI , same like STI..
      Yah, CKH is in my watch list , as parent company , it seems more diversify with better PE & PB...it just that as conglomerate , debts is higher side ,which is quite normal.
      Cheers ! :D

      Delete
  2. Hi STE,
    Just to clarify, the % portfolio in your diagram, total adds up about 15%. So this is % of your bigger portfolio (including singapore etc)? Or Each counter is % of HKG/CHN market portfolio only which you didn't show the rest? :)

    ReplyDelete
    Replies
    1. Hi JB,
      Yes, the 15% is against my total portfolio including SG stocks. Each counter is less than 1% of my total portfolio value (except BOC HKG), this is more on position sizing in case I would like to add more if price drops.
      Hope this clarify.
      Cheers! :D

      Delete
  3. Hi STE,

    Would you mind sharing what is your selection criterion of the 30 companies and how you find them to be sustainable in the dividend payout in the long term? Also analysing on 30 companies is definitely not easy. Thanks.

    ReplyDelete
    Replies
    1. Hi blackranchu,
      Thanks for the comments, yes, is hard and near to impossible to hv close monitoring for all these 30 stocks...I am not a " figure" guy n not really good in analysing company...I mostly pick those with good dividend track record and strong( better) balance sheet in terms of cash and debts ratio...of course do understand different biz will have different levels of risk for dividend sustainability...one or two may not be able to pay out well in future...hope not all ...😃 cheers

      Delete
  4. Venture to oversea market, a benefit to diversify geo risk too. and also we learn from other market.
    wish you 旗开得胜

    ReplyDelete
    Replies
    1. Thanks for the comments n kind words... cheers :D

      Delete
  5. A good strategy but in my opinion, quite difficult to monitor so many of them!
    I am researching the HK market, will not touch mainland stocks though!
    I feel the HKSE 2800 tracker with Low costs is a good proxy plus additional large caps including HSBC, AIA, Ping Ann, SWIRE, etc etc plus CK groups etc, will be my choice
    Yet to initiate as I am now focussing on buying beaten down Aussie banks first eith the SGD: AUD in our favour at 1.08
    Looking forward to hearing more about your portfolio and moves!

    ReplyDelete
    Replies
    1. Hi garudadri, yes, is hard to have close monitoring for all 30 stocks and thanks for the info on HKSE 2800, will hv a look, but sometimes, I don't like the stocks listed in this kind of tracker or ETF...but of course,we can't have the cake and eat it too... cheers

      Delete

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