Investment Strategies 01 (Nov 08 - May 10)

[LenaHuat]

Hi Aspellian
Welcome. Now I'll give my 1 cent's worth about the SSE and HSI.

I love Covey's 7 Habits, especially "Start with the end in mind".

The Chinese cherished ambition is to replace HongKong with Shanghai. Inevitably, SSE will lead and direct HSI at some point in time. The time arrived last year. The global financial crisis has placed China's economic power into 2nd position. The SSE capitalization has exceeded HSI.

Look at the weightage of the HSI (as of Feb 2010 as extracted from HSI's press release) :-
HSBC - 15%
CCB - 6.77%
ICBC - 6.22%
ChinaLife - 5.11%
BOC - 4.32%

ChinaMobile - 9.09%
CNOOC - 4.35%
PetroChina - 2.98%
China Shenhua - 2.26%
Sinopec - 2.06%

Hutchinson - 2.32%
ChungKong - 2.6%
SHK PPT - 3.17%

Tencent - 2.98%
HKEx - 2.74%

HSBC commands such a heavy weightage. If one does not punt on HSBC, it takes the following diversified tickers to replace it:-
PingAnn - 1.75%
HangSeng Bank - 1.66%
BOC HK - 1.24%

CLP Hldngs - 1.89%
HK/China Gas - 1.32%
HK Electric - 1.18%

Li Fung - 1.85%
Swire Pacific - 1.34%
Espirit - 1.32%
Wharf Holdings - 1.08%

China Overseas - 1.19%
Henderson Land - 1.09%
HangLung - 1.09%

Just ask yourself : How many of these tickers are HK-centric? How many tickers' growth depend on China? How many depend on US/Europe?

Would you agree with me that HSI without HSBC is more of a China play?
If so, SSE will logically lead HSI henceforth.

I think HSI is worried about this afternoon's land auctions.

[Aspellian]

Hi Lena-jie,

Interesting post. you put it across very nicely and logically.

May I ask a question:

In a way, US markets do lead global equities (strong correlations). Do you think SSE/HSI will lead global equities? If so, do you think it will be in the near future eg. 5years? or 20 years later?

I remembered when I first started working a few years, news of Lenova bought over IBM ThinkPad biz. I have strong feeling then that this will be the start of China acquisitions of global brands in future. The recent crisis has weakened many US brands, and soon many European companies. With each crisis (esp now cycles shorter), there are more opportunities for Chinese companies to buy over the "world".

probably in 20-30 years time (barring political unstability in China), Chinese will be leading or sharing power with US. Of cos there is India, but somehow I feel the leaders there are not that strong. Russia is another sleeping giant. probably that's why the term BRIC! haha!

[winston]

TOL:-

I think that I've been spending a bit too much of my time, trying to understand the Macro picture and not enough time on digging out Investable ideas.

Maybe it's because events are now so interconnected eg. Dubai, Greece, Subprime etc, stuff that are half the world away but can hit your portfolio if you are not aware of it.

But who really cares whether the US and Japan will go bankrupt in 20 years, or whether Gold will be US$5000 in 10 years, or whether the massive loans in China will become NPLs in 4 years or whether the Euro would be on par with the USD ?

I need investable ideas that I can make money off within a reasonable time-frame, whether I'm Scalping, Swing Trading or Position Trading.

[Aspellian]

True true - but having macro picture is equally important as almost all companies in this world will be affected by macro economic environment.

[winston]

TOL:-

My current allocation is 15% Equities; Gold 5%; Short 1%

If this is a continuation of the bull run, then I'm too underweight equities.

However, the number of distribution days over the past few weeks is frightening.

Intuitively, I think that this is a 10% correction rather than a 25% correction. In addition, I dont think we will see a 80% correction for a while.

It may be time to deploy more of the Cash as there's a lot of money on the side-lines and I need to be slightly ahead of the crowd.

[Aspellian]

TOL:
Based on 20/20 hindsight, I missed out on the big 10% drop stocks and Gold Play.
In future, if i see a fundamentally strong stock with great catalyst that drops 10% a day and at key support level, it is alright to hold on for a while longer.

Currencies turmoil - people turn to Gold. I have been seeing Gold stocks rally in the correction, i should have bought Gold play then instead of HOPING to buy at a lower price (like stocks). there's different thinking required for different investment instruments.

I am still observing and looking at stocks to see which one will be the horse/s that are eagerly wanting to cheong out into the racetracks.

Growth stocks that are hammered but with business growing,
- analysts chipping in merrily
- bucking correction trend, probably selldown on low volume and cheong up on certain up days within correction mode (just like a wild horse difficult to be reined in)
- breaking out of new highs (especially multi-year highs) - showing that the business has turnaround and improved tremendously even beyond the peak business cycles of 2006/2007
- turnaround stories, new contracts won, better prospects, new markets, new products etc.

[lithium]

TOL:-

My current allocation is 15% Equities; Gold 5%; Short 1%

If this is a continuation of the bull run, then I'm too underweight equities.

However, the number of distribution days over the past few weeks is frightening.

Intuitively, I think that this is a 10% correction rather than a 25% correction. In addition, I dont think we will see a 80% correction for a while.

It may be time to deploy more of the Cash as there's a lot of money on the side-lines and I need to be slightly ahead of the crowd.

Winston, what is the 1% short for?

[winston]

Ha Ha .... I have a S&P Inverse ETF which I got greedy and did not sell.

[lithium]

I had that experience too. When you make a very tiny position which you don't really care. YOU WILL NOT CARE FOR IT.

So I take position with minimum 10% of my fund nowadays.

[winston]

Agree. George Soros has a habit of asking his managers to take a "real position" if they are convinced of their idea.

If people dont have a significant position, they tend to get sloppy with their trade. Hence, I've been forcing myself to bet bigger if I'm betting or dont bet at all .