2020 Novel Coronavirus Crisis (Buy or Sell ?) -Portfolio Update


image credit to newscientist.com





There was no “January Effect“ for world stock markets as far as 2020 is concerned. Just as the world economy appeared to emerge from the uncertainty of trade-war after the signing of “phase one” trade deal between the US and China, the world economy has been hit by another crisis of new coronavirus outbreak started from Wuhan China which has already taken a heavy toll.   


The WHO has made it official that this is a “ Global Health Emergency “ and many countries had also taken extra measures to contain or deter the virus from getting into their countries by restricting travellers from China or those been visiting China before.


The crisis may drag for quite some time as most of the experts predicted that the pandemic has yet to reach the peak, the confirmed case and the death toll will climb in coming weeks.

While we try to calculate the impact of this crisis on our portfolio and some may deem this as opportunities to buy during “crisis “, please remember to take good care of your “health” by taking more precautions as advised and keep your body healthy by doing more exercise and drink more water.



Portfolio Update :






Since my last update in Dec 2019, I continue to consolidate my stocks in SGX and reduced it to 23 counters by selling more small-cap and Tech-Semicon related stocks in early January 2020. I sold my FU YU/ Avi-Tech and Valuetronic with XIRR ranging from 17-30% and also some other small-cap like APAC Realty / HRNet / PropNex with some ended up with a small profit or loss.

Since the start of the new coronavirus pandemic, I have also decided to sell off all my holding of REITs related to China Retail ( Capital Retail China / Sasseur REIT) and Hospitality (Frasers HT).  

It is not because of current Wuhan Coronavirus crisis, I don’t think I will sell CRCT as I actually like the assets and the management of this REIT. I gave me 11.6% of XIRR returns since 2011 with close to $77K profit (including dividend) and of course also Valuetronic and Frasers Comm.


With all the available fund, I have added some HKG/CHN stocks recently and increased the total holding to 30% of my portfolio. HKG/CHN market is much more volatile as compared to SGX which you may see from recent Index performance of both markets. STI drops by around - 3.3 % while  Hong Kong HSI plummeted almost -6.6% since Jan 2020.

Overall Portfolio Performance: -4.6%
HKG/CHN stocks: -8.1%
War-Chest: 22.2%

** Overall Portfolio (including Bond/Cash ) is also under-perform market (STI) by -1.3%




Buy or Not Buy?





As I mentioned in my previous blog post ( here ), the market seems very calm crisis after crisis, even at current coronavirus crisis, STI was only down by -3.3% YTD from Jan 2020. At this point in time, STI is definitely not at crisis level and STI need to down by another -5% to reach -0.5 SD at around 2900, with the probability of winning the market increase to 85%.

As such, I am not using my war chest now and waiting for market to correct more towards crisis mode and I am OK to wait since I already have close to 80% of my portfolio in the equity market now.

Also as I mentioned before, for those who are new and in wealth accumulation stage actually is good to “buy the dips” as the index is moving below the long term mean level, with chances of moving above mean by more than 65%. Nobody knows if the market will rebound from here or keep dropping, sometimes is good to practice DCA and buying more after the market had suffered severe correction like now if you are holding it for the long term in wealth accumulation stage with steady active income.



How About S-REIT








S-REIT actually holding quite well and looks resilient against the current crisis. FTSE ST REIT is moving along +0.5SD with chances of winning the game only around 16%, but as I said before, due to ultra low-interest rate and ample of liquidity looking for better returns than 0%, Dividend Yield offered by most of the REITs suddenly looks very attractive. If you bought it a few years back and keep it for regular income like me, why panic to sell it unless fundamentally changed.




Even with recent adjustment in China Retail and Hospitality REITs, I am still having around 46% of REITs in my portfolio. As we know that STI is considered as "income market" with much higher yield as compared to other Asia Pacific stocks market. I am using my income generated from SGX to invest in other growth markets like HKEX, of course with much risky and higher volatility.




HKG/CHN Market









Same like STI, Hang Seng Index ( HSI ) seems resilient and need to drop by another -9% to reach -0.5SD level. But if you look at HSCE ( Hang Seng China Enterprise ) Index, it has corrected by almost -32% since the “trade war” tussle erupted between with US & China in 2018. Valuation of some of China SOE (State Own Enterprise) appear quite attractive if you are intending to hold it for a few years and have confidence that the HKG/CHN market may recover and reverting to mean eventually.


Although I have increased my holding of HKG/CHN stocks to almost 30%, this is more on diverting some funds from SG stocks and not using my war-chest at this moment. Also, the quarterly dividend of close to $40-50 K will act as a bullet to buy more or keep as a war chest, depending on how things unfold eventually. Since some of the REITs or companies started to announce their result from mid-Jan onward, I am expecting to get around $48K of dividend income in 1st Qtr 2020.


Conclusion

At this point of time, some choose to take profit and some deem this as good opportunities to add more stocks into their portfolio. At the end of the day, depending on your risk profile and stage of wealth accumulation / decumulation, one will need to plan your investment strategy that suits your cash flow requirement in short and mid-term.
As I blog before ( here ), “ volatility “ is not RISK, actual RISK is not knowing what we are buying or investing in and subsequently loss of capital permanently.

Have a plan and invest for the long term, even if you are using “buy the dips” strategy, you should expect the market to continue “ dip and dropping “ to some extent is normal for the market to plunge by another 20-30 % from current level in “full-blown “ of crisis. Another important issue is to have a “diversified “ portfolio and ensure that you use your war-chest in tranche or using “position sizing” strategy to avoid using up all your “war-chest” too soon and too fast.

Happy “hunting “ for "undervalue-stocks" during this Coronavirus Crisis but make sure that your “health” being taken care of with utmost precaution during this extraordinary and exceptional coronavirus pandemic.


Cheers, and Take Care !!


STE





Chart of the Day :

image credit to outsiderclub.com





Comments

  1. Loved reading your piece. I have initiated my buys in the hongkong market fof the first time buying the banks that have been battered heavily. This is my first exposure to HK and I will add more if the market dips further but at strict target prices. It was interesting to see you adding the British oil majors RDSB and BP as well as Aviva! I have held the former for a few years and am considering adding more now with both correcting significantly
    As regards the SG market, I have just started nibbling at comfort Delgro but will preserve my very modest war chest for the banks if they correct further
    Keep going and motivating us sir!!

    ReplyDelete
    Replies
    1. Hi garudadri,
      Yes, oil majors will still have tough time going forward as oil demand is weak and price will keep dropping , is good to just nimble a bit and buy slowly. As for Comfort Delgro, yah, it looks interesting as it is moving close to -1SD a level not seen since 2011, I am also thinking to add more this mini-transportation conglomerate. Happy hunting ... cheers !! :D

      Delete
  2. Hi STE,
    On the Standard Deviations, to start the data collection 1990 or from 2010 could show very difficult angles and SD levels.
    From your experience, how far back in history should one take the data to plot the Standard Deviations ? Thank you

    ReplyDelete
    Replies
    1. Hi PPPP,
      Thanks for the comments , yes , the range or period of data set may produce different set of SD data , but normally I will choose the longest data set in order to shown the much longer trend with multiple economic and market cycle. Hope this explain..
      Cheers !! :D

      Delete

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