Traineeinvestor's diary - HK and Far East Focus

[Traineeinvestor]

Apologies, I am familiar with how options work and spent quite a bit of time looking at the documentation as part of my career. My inexperience is that, apart from the occasional structured product with an embedded option, I haven't haven't really traded them.

 

Actually, I don't think I can trade them through either HSBC or BOCHK's online platforms. I should look into this.

[drbubb]

I get it.

 

You can trade Warrants in HK.

But the strikes are almost always out-of-the-money, and I would avoid those.

 

I tend to trade only IN the money options, as a proxy for long or short positions, but with limited risk

[Traineeinvestor]

Had a tenant give notice to break the lease. Put it on the market and had a provisional agreement with a new tenant at a 3.5% increase in rental. Only 7 days vacancy between tenancies which is just enough time to repaint (needed after 5 years) and do a professional cleaning. That's about as good as it gets.

 

I suppose I could have held out for a higher rental, but a short vacancy is worth more than a marginally higher rent. For a long term investor, real estate is all about cash flow.

 

On a side note, I purchased a few moe shares in HSBC (HK:5). It's a good yield (just under 6% on purchase price) and with excess capital on the balance sheet, more share buybacks can be expected.

[drbubb]

Hi,

I have sent you a PM about an upcoming event

[Traineeinvestor]

Bank valuations of HK property up again.

 

The latest cooling measures are from the HKMA (not the HKSAR Govt directly) are directed at bank credit risk rather than the property market generally. As a general observation:

 

1. they are addressing risk that might arise if banks continue to increase exposure to property developers rather than risks that exist at this time

2. they measures will reduce competition among developers because (a) the larger HK developers have such strong balance sheets that they are unlikely to be affected by them and ( only the mid/smaller developers with higher gearing levels will be affected

3. the measures do nothing to address the flood of PRC money entering the HK market.

[Traineeinvestor]

A surprisingly well written and well balanced comparison of the HK property market in 1997 and 2017: http://www.scmp.com/business/article/2096718/hong-kongs-property-market-heading-1997-crash

 

Interesting that (among many other points), 80% of today's buyers are end users and 50% of Hong Kong home owners have paid off their mortgages. The latter is a number that really matters as it shows just how strong household balance sheets are in Hong Kong. Both points suggest very strong holding power through any downturn.

 

Three things missing from the article: (1) the supply of new properties expected to come on to the market in the next few years (2) the role of non-bank financing and (3) the way in which the cooling measures are putting upward pressure on the market by taking a lot of potential supply out of the secondary market.

[Traineeinvestor]

With equity markets, bond markets and property markets all looking somewhere between fully valued and over valued, it's getting really hard to find places to invest on the grounds of value. I'm going down to putting money into short term (up to 5 years) bonds and settling for doing a little better than inflation and bullion (specifically sliver and platinum as having more industrial support than gold) and taking a punt on them being seen as a safe harbour if/when we have another downturn. I'm also looking at moving more money out of the USD/HKD.

 

What else offers measurable value at this time?

[drbubb]

"What else offers measurable value at this time?"

 

I am making 8-10% per annum on my Gran Columbian convertible bonds, while I wait for a jump in Gold and the price of GCM.t

 

> http://www.greenenergyinvestors.com/index.php?showtopic=20537

 

This is my single largest position right now, and there's plenty of research and analysis on that thread

[Traineeinvestor]

Thanks - I am will look into this.

[drbubb]

HERE's ANOTHER high return investment opportunity that I am researching

 

Hydroponics: Investing in A-frames through Pegasus Agriculture

> http://www.greenenergyinvestors.com/index.php?showtopic=21636

 

I am presently researching it in detail / promised returns are 12% p.a. or higher

I really like the big picture story, but as I look at the details, I am finding I have a slew of questions

[Traineeinvestor]

Great run in emerging markets recently.

I have taken a small amount of money off the table recently (sold a small part of my CNOOC (HK:883).

Also interesting to see that in spite of the flattening yield curve, corporate bond prices are softening suggesting that investors are becoming more focused on credit quality than previously.

 

[Traineeinvestor]

I took a new look at the various options for buying physical precious metals in Hong Kong since it has been a few years since I was in the market:

1. BOCHK has previously been my go to source for physical gold. They have a limited range of product (which does not bother me much since they have the 1 oz Maple Leaf which is good enough for my purposes). Unfortunately, they lost my business this time around – when I arrived they t were serving ticket #19. Forty minutes later, they were serving ticket #20. In fairness to the woman working the only counter open in the VIP section, both customers had some fairly significant stacks of paper on the counter. 

2. Hang Seng Bank was recommended by a few people (including Dr. B), but I would need to open a bank account with them which is currently a pain due to AML laws etc. I passed.

3. Kitco and LPM are the two other established precious metals dealers in Hong Kong. LPM offered tighter buy/sell spreads, simplified account opening (much easier than opening a bank account – not sure how long before the regulators intervene and mess this up), fast response time to on-line queries and no extra fees so they got my business.

For non-physical (which I prefer for silver because of the amount of storage space needed), I am sticking with BOCHK. The spreads are lower than physical with no holding costs or risk of theft. In terms of pure pricing (both transactional and holding), it is the best option I have found.  I do recognise that I am (i) taking credit risk on BOCHK and (ii) subject to risk of BOCHK changing its pricing policies).

 

[drbubb]

BOCHK should be a pretty solid credit risk, I reckon.

Hang Seng has been a good bank for me, better in HK than HSBC/

But I also need HSBC's global reach

[Traineeinvestor]

I'm working on the theory that if the bank bearing the name of the world's larges creditor nation runs into financial difficulties we have bigger problems than my small scale investments.

I understand where you are coming from on service - HSBC has always been okay for me, but not the cheapest. Ditto BOCHK (apart from recent waiting times).

 

[Traineeinvestor]

Added a little more paper silver to the portfolio + some shares in CKA (HK:1113) to the portfolio just before Christmas.

Taking a look at Sinopec (HK:386) after the big sell off following news that two executives from of its larger subsidiaries may have lost a big chunk of shareholders' money on the recent slide in oil prices. The extent of the damage is unknown, but after a quick look at the accounts I would be extremely surprised if the loss of profit + actual loss was more than 20% of the companies total profit in FY2017. That's a guess based on the size of the relevant subsidiary's profit  as a percentage of the whole group's profit.

 

 

[drbubb]

Hong Kong's Crazy Auction system.

Can this be right? Can you help me to understand?

I am having an argument with HSBC, and I think they owe me a fill since HK10 traded up to $22.00 on the opening "auction"

HK10 ... 5-day / Last; $21.65 -0.05, O: $22.00 H: $22.00 L: $21.55 / Vol. 558,000

I had an order in at $21.95 (see below), but it did not fill.

Here is a part of the message I sent them:

Transaction Type: Sell
Stock Code: 00010
Stock Name: HANG LUNG GROUP
Lot Size: 1,000 shares
Quantity: 8,000shares
Price: HKD 21.950
Order Type: Limit Price Order
Transaction Date: 24 Jan 2019
Expiry Date: 30 Jan 2019
Status: Pending Dealing

They tell me: "You are not filled, because yours (is only) a limit order, not an auction order"

I find it very bizarre that my order can be ignored for some of the trading.

Have you seen this before?

[drbubb]

Nevermind !

My order on HK10 at $21.95 just filled a day later, and I gradually raising cash as it moves higher

I will soon be looking for another place to park it.

The idea was to generate a 4% dividend, but if I can capture 3-5X that in just 3 months, I am doing some selling now

Any ideas on HK stocks that might still be cheap ?

(I will probably review the positions of my old Mensa friend, David Webb, and see what he has been buying recently)