Invest Made Easy
INVEST IN HONG KONG EQUITIES AND STAND TO MAKE MORE THEN 30% RETURN? FIND OUT WHY....
Shane My
Publish date: Sat, 11 Apr 2015, 02:36 AM
Shane My
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Like many of us, we seek for financial security and ultimately financial freedom. This blog is intended to act as a journal of investment as I journey towards that dream. At the same time, I hope that the articles written here would also benefit many others who share the same vision as me.
A recent article from Reuters dated 8th April 2015 carrying the title "China investors aiming at arbitrage profits make Hong Kong shares soar" has certainly caught my attention in terms of creating an opportunity to invest.
The article states that the main reason for the sudden surge of interest in Hong Kong stocks by China's mutual and hedge funds was "to exploit a major pricing imbalance between the markets, the result of a mainland rally that until now showed little sign of spilling over into Hong Kong."
What it means here is that the Hong Kong equity market is currently playing catch up with the China equity market whereby:
- China-listed blue chips are now about one-third more expensive than their Hong Kong versions
- Chinese dual listed small-caps trade at a premium of 10 times the cost of the same company's shares in Hong Kong
IS THIS TRUE?
Let us reaffirm this scenario by comparing the performance of the Hang Seng Index (Hong Kong) versus the Shanghai Stock Exchange Composite Index (China) from 1st Dec 2014 till 9th April 2015.
Shanghai Stock Exchange (SSE) Composite Index
 |
| (%) Gain from 1st Dec 2014 to 9th April 2015 : +47.66% |
Hang Seng Index
 |
| (%) Gain from 1st Dec 2014 to 9th April 2015 : +15.31% |
Clearly the (%) gain of the SSE Composite Index is about 3.11 times the (%) gain of the Hang Seng Index over the same period.
If the Hang Seng Index were to play catch up, then investors whom invest into Hong Kong equity now stand to make an additional +32.35%.
IS IT SAFE FOR US TO INVEST?
Obviously for Hong Kong equity market to play catch up with China, a large amount of liquidity must come from China. By that, we are referring to continuous interest from China's mutual and hedge funds.
From what was reported in the article, there's a huge interest by China mutual and hedge funds as quoted below:
More interest due to attractive evaluation as quoted below:
If there's truth that these mutual and hedge funds from China are going to invest into Hong Kong, then this creates an opportunity for us investors to jump onto the plane before it takes off.
HOW DO WE INVEST?
There's the option of investing directly into stocks from Hong Kong through various trading facilities offered by our local bank or via international trading companies. These trading platform allows you to buy and sell stocks directly. However to do so, you need to actively manage your investment as well as spend time on researching the right stocks to invest in.
Another option is for you to invest into a mutual fund that invest directly into the Hong Kong equity market. If you are to select this option, the next question would be which fund should you invest into?
Those whom are familiar with mutual fund investing or follow my Top 10 Best Performing Funds Review would be aware that there's an abundance of mutual funds that invest into China equity market. Without a doubt that these funds have provide quite a profitable return to those whom have invested since early 2014.
Now the question is, what about investing in Hong Kong equity market? Is there a fund that invest into this market?
The answer is YES!
A FUND THAT INVEST IN HONG KONG EQUITY AND AVAILABLE FOR EVERYONE?
Out of the hundreds of mutual/unit trust funds available for Malaysian investors, I've discovered only one fund that allocates more then 90% of its fund size into Hong Kong Equity market.
Here are some key information of this fund:
Fund Size:
Approximately RM130 million
Fund Allocation:
Sector Allocation:
Performance as of 9th April 2015:
- 3 months : +15.2%
- 6 months : +37,7%
- 1 year : +43.3%
Unfortunately I'm unable to publish the name of this fund in this post to prevent any acquisition of bias towards a particular fund or fund house. However you may email me personally at shanesee03@gmail.com to find out more about this fund.
WARNING AND REMINDER
I am sharing this post as a notification/information to investors that there could exist an opportunity for one to invest into Hong Kong equities.
In addition, I've also shared that we could invest passively into Hong Kong equities through a specific mutual fund in Malaysia. However there are some key risks that you might experience when investing into mutual funds such as:
- There is no guarantee of profit. In fact there is a possibility that you might suffer losses if the market crashes.
- Your capital is not protected by PIDM
- The fund manager fails to select performing stocks or the stocks selected by the fund manager does not perform well.
Therefore when making an investment that possesses such risk, one should allocate only a portion of your saving into if (if you intend to invest). Diversify your investment into different sectors and markets to safeguard your investment and to prevent total loss of your savings. To know more about diversifying your unit trust portfolio, you may read this article.
That is all for now! Cheers and Happy Investing!
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Discussions
Be the first to like this. Showing 25 of 25 comments
Really hate all these bullshit post. Want to share but don't want to share. Don't want to share then don't post. Just another annoying gimmick like those website that promise some hot tips but force you to subscribe first.
Well here are some free tips. Below are the discount of big 5 Chinese banks H-share listed in HK compared to their mainland A-share counterpart on 7/12/14 when I first started studying Chinese banks and the latest number based on Friday's closing price.
7/12/14
ICBC - 5.6%
ABC - 9.2%
BOC - 12.6%
CCB - 16.4%
BANKCOMM - 13%
10/4/15
ICBC - 1.6%
ABC - 15.5%
BOC - 13.4%
CCB - 14.1%
BANKCOMM - 14.6%
As you can see, the huge surge in price over the past 2-3 days has narrowed the gap considerably. Compared to 4 months ago, only ABC, BOC and Bankcomm have wider discount. ABC appears to have the widest discount.
The discount will probably never be eliminated entirely. The better, safer strategy is to bet that the discount will normalise to the same quantum in the past. For ABC, if the discount normalise from 15.5% to 9.2%, you can hope a 6.3% gain.
I don't need to be emailed, and I don't need to be thanked. All the best to those who are trying out HKEX. One final word of advice, be acutely aware of the forex spread imposed by your broker. That's usually the most expensive portion in your transaction cost of your overseas venture.
2015-04-11 09:01
our malaysian stocks rarely can move up 30% within a day...
HK and china everyday got limit up counters... call warrants there can up 800% in 1 day
Even if malaysia stocks limit up... sure kena UMA.. sigh..
2015-04-11 11:06
Calvin's admonition,
I made a mistake many years ago when Greater China Fund was in bull run. Everywhere in Singapore you can see posters & billboards advertising how high The Market will rise further in the China Growth Story.
It was wrong to buy near peak when EVERYONE WAS BULLISH. After investing the Mutual Fund started to go down. I lost some when I realized the folly. But I also paid a high fee when buying and also selling the Fund.
My advise is.
1) Don't buy euphoria. You pay a premium for being bullish at the wrong time.
2) Invest only in WHAT YOU KNOW PERSONALLY. It is your hard earned money.
3) UK Now in Bull Run. Japan also in Bull Run. Both breaking into all time high.
And Russian Rubble is The Best Performing Currency in the World this year (Last year the Ruble was the Worst Hit!)
And Malaysia was the Worst Performing Stock Market in East & South-East Asia Last Year. KLSE down 8% while China up 45% & others up 20% to 30%. And Ringgit also crashed badly.
SO EXPECT MALAYSIA TO ALSO GO INTO A POWERFUL BULL RUN.
4) SO STAY INVESTED IN MALAYSIAN SHARES. IN JUNE 10th MALAYSIA WILL UNLEASH MASSIVE PROJECTS FOR 11TH MALAYSIAN 5 YEAR PLAN (2016 to 2021). LOTS OF OPPORTUNITIES TO BUY SHARES THAT WILL GET AWARDS FOR ETP(ECONOMIC TRANSFORMATION PROJECTS} BEFORE VISION 2020. DO YOUR OWN DUE DILIGENCE & INVEST CAREFULLY.
Regards,
Calvin Tan
Singapore
2015-04-11 11:45
I buy into your admonition. great advise that sounds similar to WB's famous saying.
2015-04-11 11:55
mana-mana suka cari makan sini ka, hongkong ka, india ka.... paling penting itu ilmu sudah cukup... macam itu tuhan ALLAH ada cakap mana mana ada rezeki, sangat penting ha... mahu cari ilmu, kerja dan ikhlas tau... sudah banyak wang .. kasi donation sikit ... pasti you happy and others also happy.. good luck
2015-04-11 12:17
Calvin Tan, for the most part, yes what you wrote is true. But despite the bull run over the past 2-3 months, Chinese banks are still dirt cheap. For example, BOC is only trading at PER of 6.6 with dividend yield of 4.7%. That's still near fire sale level even after a bull run of 20%. So, buying Chinese banks wouldn't exactly be a purely speculative endeavor. However, buyers should be aware that there is a lot of uncertainty on how the economic slowdown will affect the big banks as increasing number of loans go bad. The current valuation assumes that China is going to have a hard landing. Personally I am more optimistic of China's fate due to their huge reserves, so fundamentally I still think they are dirt cheap.
2015-04-11 12:27
Soojinhou,
Yes. I was told by One Very Successful Remisier from OSK Johor about Cheap China stocks last year. In fact he completely liquidated all his Malaysian shares & bought into China Blue Chips. China was up 45% last year & he did very well. He's the remisier who drove a Mercedes Benz while his boss drove a Nissan.
For now all the signs are flashing red for China and are pointing to a dramatic slowdown.
These are the fore warnings:
1) Most China Banks Have Lent Heavily to Communist Party Related State Enterprizes. The Ghost Cities of Mongolia & All Other Major Cities of China are 90% Empty. Most of these were built with borrowed money. Also major steel mills have borrowed heavily. They dump subsidized steel into world markets because they are not going to pay back loans to the China Banks.
I am afraid even with China's Huge Reserves Someday All These Banks Will Have to Face up to these toxic borrowers now swept under the carpet.
China has yet to see a Depression like US did in 1929 -1939 when 1,000 Banks collapsed including the "Bank of The United States of America".
2) In Australia, Atlas Iron has just collapsed with over 500 jobs gone. China's slowdown has caused iron ore prices to plummet by 75%. Many more Australian Iron Ore mines are expected to close shop soon. This shows a China in deceleration downward.
3) The Recent Fall of Ringgit, Rupiah, Thai Bath & Japanese Yen Have Made These Economies more competitive against China Exports. Dr. Marc Faber only give a 4% growth rate for China in spite of its Official Published rate of 7%.
4) With The Continual Unrest & Workers' Strike in China for ever increasing wages the days of cheap labour in China are now over.
5) China Premier Li Keqiang has warned that China is now slowing down.
6) Will Hong Kong Share Market continue to Rise Because of China's Flood of Money?
Well, in the Euphoria of 2nd Board (Almost all are above RM10.00 in blue chip status) before the onset of the Asian Financial Crisis in 1997/8 TTB of Icapbiz appeared on TV3 & told people to buy 2nd Board Shares only. The subsequent collapse have made many bankrupts till today. And due to over powering fear TTB has been out of the KLSE Bull Run for the last four years due to aversion by the past haunting experience of 2nd Board Euphoria.
7) I hope people will invest wisely & not chase the "hot stocks" or "hot markets" of the moment which will always end in grief.
The seeds of Boom were sown in times of despair & conversely, the seeds of despair are sown in times of euphoria & boom.
Regards,
Calvin Tan
Singapore
2015-04-11 15:28
China stock market collapsed in 2007. The year I worked in China. Now seems the bull just started to come back. Can tell you now still not many of them hesitant to go into the market despite the index creeping up. Why? my staffs and my driver still not talking about buying shares yet. If the index cross over 5,000 points all hell broke loose. Super Bull coming to China.
2015-04-11 16:35
Hopefully?
I expect KLSE to cross the 2,000 points index when Foreign Funds Rush Back Into Malaysia!
2015-04-11 16:50
Calvin Tan, thank you for the solid fact driven reply. We need more content driven comment like yours in i3. You made my day :-)
2015-04-11 18:33
Calvin! I share your optimism that bursa will soon unleash its biggest bull ever! 2015 will be it! 2015 will be remembered as the most powerful unleashing of bullish mode! We are in wave 1 of this outstanding explosive money maker! 1900 will be hit once wave 3 making a run! Wave 5 at 2000 is the holy grail for this super bull that expect to happen soon in 2015!
2015-04-11 20:36
If index do hit 2000, which CI stock if buy now can has highest upside in % term?
2015-04-11 21:31
When i assessed last year that bursa going to crash, so many gave the thumbs down! And when i assess that bull in going to take charge once breach 1850, again many doubt that bursa already peak! And when i said bursa going to breach 1900, many roll their eyes in disagreement! So when i share the optimism of Calvin that bursa going to hit 2000, all will take it as a big joke! No, you guys are missing all the explosive money maker year, many still are doubtful until the very last minute when everybody turn greedy!
2015-04-11 23:19
Yes Mr.Bull,
Abenomics caused yen crash. When yen crashed Japan exports overtook Korea and others. Then Nikkei spiked to 20,000 points. When Dragi implemented Euro Qe Uk shares also jumped to new high.
With the crash of ringgit even below the Asian Financial Crisis against Sing Dollar Malaysia is now a Very Super Competitive Economy.
The Big Mag index shows Malaysia as one of the most undervalue economy in the whole world. It is only a matter of time with Trillion $ Sloshing Around the world when Funds Finally Wake Up!
And Liquidity like water also flows to the deepest value(valley).
So Malaysia's turn to power up will come also.
The Path of money always beat its way to the greatest opportunity for the highest yield.
And Malaysia will offer the greatest value when all others have finally peaked.
2015-04-11 23:46
I think 11th Malaysia Plan when PM Najib takes all GST monies plus monies collected from cars (Rm20) at all entry points of Singapore,Thailand, Brunei and Kalimantan plus all other cash or even using reserves to Give The Most Powerful Push For Vision 2020. Plus the Repatriation of Cash from oversea investment coinciding with Huge Inflow of Foreign Funds.
The Massive Surge of Liquidity will power KLSE to cross 2,000 points finally!
2015-04-12 00:02
Closing remarks on China. Yes everything you said above is true Calvin. However, naysayers have been predicting doom for China for years now, and I admit it is finally beginning to show. But, China is still very much a command economy, unlike a free economy where government has limited control over. The leadership in China is acutely aware of the collapse of the economic system, and this has prompted them to launch 2 massive initiatives to engineering a soft landing. 1) the silk road project, and 2) AIIB. These 2 massive projects, if successful, will mitigate the slowdown back home by exporting deflationary risk from overexpansion. Will it be successful? I don't know, only time will tell. However, when Western countries line up eagerly to be the founding members of AIIB, from Australia to England, in sheer defiance of US' pressure to isolate China, I see the cup as half full rather than half empty.
2015-04-12 09:28
China will not allow it's economy to go under! They have plenty of game plan to keep economy running! The word recession or hard landing will never take place in China! I see China translate into domestic consumption phase rather than export oriented! Hence you won't see 7% growth but 11% internal growth!
2015-04-12 15:58
Western economics concentrate too much on external growth! China has wisen up and switch to internal growth to keep momentum growth! This is something Malaysia should learn!
2015-04-12 16:13
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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30% For What ? Malaysia Stock Give Even 500% Returns ...
2015-04-11 07:55