Tuesday, August 01, 2017

Financial Review - July, 2017

July was another good month for the portfolio with small gains across the board and favourable FX movements producing a 3.93 percent increase in net assets.

For the year, the portfolio is up 14.00 percent. The adjusted change from when I retired in September 2013 is a 21.14 percent increase. Hong Kong liquidity stands at 28.5 months of estimated outgoings, well down on January's 38.6 months due to new investments + a transfer to New Zealand but ahead of last month's due to high levels of dividends being received.

Here are the details:

1. my Hong Kong equities increased. I purchased some additional shares in GDI (HK:270);

2. my AU/NZ equities rose slightly. I purchased some additional shares in Colonial Motor Company (NZX: CMO);

3.my equity ETFs were up slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver was stable;

5. all tenants are paying on time and all properties are let;

6. the AUD and NZD were up against the HKD/USD. I made a small additional transfer to New Zealand;

7. my position in bonds remains small. I declined some offers as the spread between yield and cost of funds was too thin.

8. expenses were moderate as we took a short family holiday to Da Nang;

My HK cash position rose slightly during the month due to high level of dividends. I currently hold 28.5 months of expenses in HKD cash or equivalents (down from 38.6 months on 1 January).

I have revamped my spreadsheets to capture all debt (previously some accounts were entered on a net basis). Total household gearing ((debt+accruals)/assets) is 9.06% of total assets. Property prices are as at 1 January, 2017, so this overstates the gearing ratio.

I would like to make some additional investments but am struggling to find good value in the markets I follow. With expectations of further rises in interest rates muted, I remain tempted by the carry trade and would do one or two more should the right offers be available.

Friday, June 30, 2017

Financial Review - June, 2017

June was another good month for the portfolio with small gains across the board producing a 2.07 percent increase in net assets.

For the year, the portfolio is up 10.10%. The adjusted change from when I retired in September 2013 is a 17.12% increase. Hong Kong liquidity stands at 28.0 months of estimated outgoings, well down on January's 38.6 months due to new investments + a transfer to New Zealand but ahead of last month's after I sold some investments.

Here are the details:

1. my Hong Kong equities increased. I sold my shares in COSCO Ports (HK:1199) and a very small position in China New Economy Fund (HK:80). I reinvested some of the proceeds in Kowloon Development (HK:34) which offers a higher yield (around 7% on cost) and a significant discount to NAV which may or may not improve once legal uncertainty over a property development project in Macau is resolved. While I booked a profit on COSCO Ports, the company has been a serial underperformer which has failed to meet expectations either in terms of growth or dividend levels. The Fund was ditched at a small loss after it appeared in David Webb's list of "50 stocks not to own". This is a lesson in not doing sufficient due diligence - at the time I invested, NAV was above HK$0.80 and the shares were trading ago around HK$0.24. I did check the values of the listed shares in the fund's portfolio to ensure that their values had not fallen significantly but I did not look into the merits of those shares individually. As it turns out a significant number of the Fund's investments were also on the list and plunged spectacularly wiping out a significant amount of investor value;

2. my AU/NZ equities rose slightly. I purchased additional shares in Automative Holdings (ASX: AHG), believing the market had over-reacted to a slowdown in Australian car sales + potential changes to the way car's are finance in Australia. My expected yield on purchase price is above 6%;

3.my equity ETFs were up slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver fell;

5. all tenants are paying on time and all properties are let;

6. the AUD and NZD were up against the HKD/USD;

7. my position in bonds remains small but improved this month when I purchased some 1 year notes issued by part of the Hainan Airlines group using a margin facility - this is a carry trade.

8. expenses were low with no travelling and no other non-regular domestic bills incurred;

My HK cash position rose during the month due to sales of HK equities mentioned above. I currently hold 28.0 months of expenses in HKD cash or equivalents (down from 38.6 months on 1 January).

I have revamped my spreadsheets to capture all debt (previously some accounts were entered on a net basis). Total household gearing ((debt+accruals)/assets) is 9.28% of total assets. Property prices are as at 1 January, 2017, so this overstates the gearing ratio.

I would like to make some additional investments but am struggling to find good value in the markets I follow. With expectations of further rises in interest rates muted, I was tempted by the carry trade, and purchased the Hainan Airlines notes using a margin facility.

Monday, June 05, 2017

Financial Review - May, 2017

May was another good month for the portfolio with small gains across the board producing a 2.02 percent increase in net assets for the second month in a row.

For the year, the portfolio is up 8.08%. The adjusted change from when I retired in September 2013 is a 14.92% increase. Hong Kong liquidity stands at 25.4 months of estimated outgoings, well down on January's 38.6 months due to new investments + a transfer to New Zealand. 

Here are the details:

1. my Hong Kong equities increased. I purchased a small position in Honma Golf (HK:6858);

2. my AU/NZ equities fell slightly. No transactions this month;

3.my equity ETFs were up slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver rose;

5. all tenants are paying on time and all properties are let. I secured I slight increase in rent on leasing one property to a new tenant;

6. the AUD and NZD were down slightly against the HKD/USD;

7. my position in bonds remains small;

8. expenses were moderate after replacing an aircon unit in our home and taking a short trip to New Zealand;

My HK cash position fell during the month due to expenses and new investments. I currently hold 25.4 months of expenses in HKD cash or equivalents (down from 38.6 months on 1 January).

I have revamped my spreadsheets to capture all debt (previously some accounts were entered on a net basis). Total household liabilities (debt+accruals) is 8.79% of total assets. Property prices are as at 1 January, 2017, so this overstates the gearing ratio.
I would like to make some additional investments but am struggling to find good value in the markets I follow. With expectations of further rises in interest rates muted, I am starting to get tempted by the carry trade, although the rise in funding costs currently makes this less attractive than it was a few months ago.

Wednesday, May 03, 2017

Financial Review - April, 2017

April was another good month for the portfolio with small gains across the board producing a 0.99 percent increase in net assets for the second month in a row.

For the year, the portfolio is up 6.14%. The adjusted change from when I retired in September 2013 is an 12.79% increase. Hong Kong liquidity stands at 27.5 months of estimated outgoings, well down on January's 38.6 months due to new investments + a transfer to New Zealand. 

Here are the details:

1. my Hong Kong equities increased. I have taken the dividend reinvestment option on my shares in NWD (HK:17), NWS (HK:659) and Huaxian Reit (HK:87001) and invested the proceeds of redemption of a small RMB bond in more Huaxian Reit units on the belief that being paid a yield of over 8% instead of 3% is adequate compensation for the risks of choosing a Reit over a bond;

2. my AU/NZ equities appreciated slightly. I purchased shares in two small companies, Augusta Properties (NZX: AUG) which offers a net yield of over 5% and Marsden Maritime Holdings (NZX: MMH) which only offers a net yield of around 3.2% but has a good track record of growing its distributions and a favourable macro environment;

3.my equity ETFs were up very slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver fell;

5. all tenants are paying on time and both vacancies have been filled. One tenant has given notice to vacate at the beginning of June;

6. the AUD and NZD were down slightly against the HKD/USD. I transferred some money from HK to NZ to pay for the new investments mentioned in #2 above which accounts for most of the fall in my HK liquidity;

7. my position in bonds remains small;

8. expenses were moderate with a pre-paid air ticket for visiting my daughter in boarding school later in the year paid for.

My HK cash position fell during the month due to the transfer of funds to New Zealand. I currently hold 27.5 months of expenses in HKD cash or equivalents (down from 30.6 months).

I would like to make some additional investments but am struggling to find good value in the markets I follow. With expectations of further rises in interest rates muted, I am starting to get tempted by the carry trade.

Friday, March 31, 2017

Financial Review – March 2017

March was another good month for the portfolio with small gains across the board producing a 0.99 percent increase in net assets.

For the year, the portfolio is up 5.18%. The adjusted change from when I retired in September 2013 is an 11.74% increase. Hong Kong liquidity stands at 30.6 months of estimated outgoings, well down on January's 38.6 months due to new investments. 

Here are the details:

1. my Hong Kong equities increased. I made a very small speculative investment in a microchip stock but otherwise there were no changes to the Hong Kong equity portfolio this month;

2. my AU/NZ equities appreciated slightly. There were no changes to the AU/NZ equities this month;

3.my equity ETFs were up very slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver fell;

5. all tenants are paying on time and both vacancies have been filled. I rolled over a lease to an existing tenant for an unchanged rental;

6. the AUD was more or less flat and the NZD down slightly against the HKD/USD;

7. my position in bonds remains small;

8. expenses were at the low end of expectations with no travel costs or other large items to pay.

My HK cash position fell during the month due to the prepayment of some invoices and the timing of deposits repaid and received on the rental portfolio. I currently hold 30.6 months of expenses in HKD cash or equivalents.

I would like to make some additional investments but am struggling to find good value in the markets I follow.

Wednesday, March 01, 2017

February was another good month for the portfolio with small gains across the board producing a 1.69 percent increase in net assets.

For the year, the portfolio is up 4.22%. The adjusted change from when I retired in September 2013 is an 10.69% increase. Hong Kong liquidity stands at 32.5 months of estimated outgoings, well down on last month's 38.6 months due to new investments. 

Here are the details:

1. my Hong Kong equities increased. I added some additional shares in HSBC (HK:5) at HK$64.20 in February and opened a position in New World Development (HK:17) at 9.09. Trailing yields on purchase price are about 6% and 5% respectively and I expect the former to be sustainable given the share repurchase and the latter to grow slowly as new revenue streams come on line;

2. my AU/NZ equities appreciated slightly. I added a few more shares in Skellerup (HZX: SKL) to the portfolio. I am still looking for more investments in New Zealand to get a better match between income and expenses in that currency;

3.my equity ETFs were up (India, Hong Kong and China) in line with the local markets;

4. my position in silver rose;

5. all tenants are paying on time and both vacancies have been filled with one new tenant moving in last week and the other moving in this weekend;

6. both the NZD and thee AUD were more or less flat against the HKD/USD;

7. my position in bonds remains small;

8. expenses were at the low end of expectations with no travel costs or other large items to pay;

9.there were no transfers to Mrs Traineeinvestor;

10. there were no derivative transactions this month.

My HK cash position fell during the month due to the new investments in HSBC and NWD. I currently hold 32.5 months of expenses in HKD cash or equivalents.

I have spent more time thinking about total household gearing. Total liabilities (including accruals) is less than 10 percent of total assets but this is not calculated precisely because (i) one of my portfolio investments which involves the use of a margin facility is included in the balance sheet on a net basis and (ii) accruals for things like taxes and longer term expenses are included in liabilities. The 10% is a back-of-the-envelope number which I should track more closely. There is obviously plenty of capacity there to increase debt levels if I could find the right opportunity. Alternatively, if the right investments come along, I shouldn't be shy about reducing my HK liquidity number to something closer to 12 months of anticipated outgoings.

Sunday, February 05, 2017

Financial Review - January, 2017

January was a good month for the portfolio with small gains across the board producing a 2.61 percent increase in net assets.

For the year, the portfolio is up 2.61%. The adjusted change from when I retired in September 2013 is an 8.92% increase. Hong Kong liquidity stands at 38.6 months of estimated outgoings. 

Here are the details:

1. my Hong Kong equities increased. I added some additional shares in HSBC (HK:5) at HK$64.20 in January;

2. my AU/NZ equities appreciated slightly. I sold my shares in Hellaby Holding (NZX: HBY) at NZ$3.60 under a takeover offer for a nice profit (although I will miss the dividends). I purchased some additional shares in NZ Exchange (NZX: NZX) at NZ$1.06 and opened a position in Colonial Motor Company (NZX: CMO) at NZ$7.25. I am still looking for more investments in New Zealand to get a better match between income and expenses in that currency;

3.my equity ETFs were up (India, Hong Kong and China) in line with the local markets;

4. my position in silver rose;

5. all tenants are paying on time but we have one vacancy and a second tenant moving out shortly. The current vacancy is in a building is currently subject to a lengthy renovation exercise. A new tenant has agreed to starting a new lease in three weeks' time at a rent which is above the discounted rate which the previous tenant was paying but below the level the property would achieve after the building renovation has been completed - a much better outcome than having an extended vacancy. The property needs to be to be redecorated (it has been several years since it was last done). I have already secured a new tenant for the property which will become vacant shortly and will only need to do minor touch up work before the new tenant moves in. The rent is about 4% lower than the previous rent;

6. both the NZD and thee AUD rose against the HKD/USD. I purchased some NZ$ @ 5.56 HK$;

7. my position in bonds remains small;

8. expenses were very high due to starting my elder daughter in boarding school (school fees, air tickets, hotel, hire car etc) but had been fully accrued;

9.there were no transfers to Mrs Traineeinvestor;

10. there were no derivative transactions this month.

My HK cash position fell during the month due to the high expenses and the remittance of funds to New Zealand. I currently hold 38.6 months of expenses in HKD cash or equivalents.

I also had another look at total household gearing. Total liabilities (including accruals) is less than 10 percent of total assets. There is obviously plenty of capacity there to increase debt levels if I could find the right opportunity.

Tuesday, January 03, 2017

Previewing 2017

Finances:

The local Hong Kong stock market is currently offering reasonably good value based on trailing numbers but faces headwinds in the form of (i) expectations of further interest rate increases (ii) very expensive property prices (iii) stagnating rental levels (iv) a high currency and (v) the prospect of a US incited trade war once Trump takes office. Given that there are a number of large, well managed companies offering trailing dividend yields of 4-5% which I believe are likely to be sustainable, I am tempted to add to the portfolio. However, European and US markets are currently at very high levels and face all or some of the same headwinds as Hong Kong. If/when they correct (or enter a bear market), history would suggest that the Hong Kong (and other countries') market will move down.

It is also highly relevant that (i) I no longer have any employment related income, meaning that I need a certain amount of income from my investments to meet expenses and (ii) our savings need to last us for 40+ years which means that, over the longer term, I have to generate real returns at least equal to our annual cost of living.

Short term: I have no plans to make any major changes to the portfolio, instead looking to make ongoing incremental changes/investments:

1. USD income will be applied at reducing the balance of my USD margin facility;
2. RMB income and bond maturities will be reinvested in RMB denominated bonds/equities. This is a very very small part of the portfolio and I have no plans to buy more RMB;
3. I will be investing/reinvesting my existing AUD/NZD cash balances in more ASX/NZX listed equities;
4. I am tempted to increase my exposure to the AUD/NZD but am unsure of the timing. Given that I want to increase AUD/NZD asset allocation over the longer term, it probably makes sense to make regular transfers;
5. I will add to my HK equity portfolio as and when value is identified. I have no wish to let cash levels build too high.

Long term: I wish to add to the property portfolio in both Hong Kong and New Zealand:

6. for New Zealand, I have a very specific target and will have to wait for a property in that area to come onto the market and then I will have to pay through the nose for it. This particular purchase is more about having a place to live in should we decide to spend more time there than it is about being a good investment;
7. for Hong Kong, the double stamp duty is a major disincentive to buying another property. I am hoping that when the time comes, prices will be lower and at least some of the punitive taxation measures will have been removed. Optimal timing is in early/mid-2021 when two mortgages will be paid off. If valuations, interest rates, stamps duty etc are aligned, then I will look to buy. If not, I'll invest elsewhere.

Non-Financial: just more of the same for 2017 – continue my studies, keep writing the next novel, work on my fitness (not good at the moment) and possibly clean up several years worth of unfixed photos.

Annual Review 2016

2016 was an interesting year. From a financial perspective it was neutral. We ended the year with the household net worth up 3.7%(1). Net decreases in emerging market equities and declines in the AUD/NZD v USD/HKD were more than offset by net cash flows from properties, equities, bonds and  two part time incomes and a small increase in the values of our Hong Kong properties (2).  We are 14.0% higher than on my retirement at the end of September, 2013.

Cash flow from investments was close to record highs in spite of having to do at least one renovation.

Liquidity is currently high and gearing has fallen to 7.8% of total assets (from 11.4%). Unless we take out new loans, it will continue to decline as mortgages are repaid.

Of the non-financial matters, 2016 saw me complete a very slow marathon, start another degree, finish and self-publish my first novel, start a second novel and get laid off. We did more travelling than usual and, finally, Mrs Traineeinvestor started a new full-time job late in the year.

On the whole, it was a very good year for our household.

NOTES:

(1) this differs from the 2.3% increase reported in the December, 2016 Financial Review because of (i) inclusion of Mrs Traineeinvestor's assets and (ii) inclusion of increases and decreases in the mortgagee values of Hong Kong real estate.

(2) only properties which have an HSBC online mortgagee valuation are included. Two Hong Kong properties are not listed in the on-line service and are valued at unsolicited offer prices made several years ago and which are now much less than current market values.

Financial Review - December, 2016

November saw a 2.03% dip in net assets. Almost all the decrease was attributable to the fall in emerging market stocks and the fall in the AUD/NZD against the USD/HKD. 

For the year, the portfolio is up 2.43%. The adjusted change from when I retired in September 2013 is an 6.03% increase. Liquidity stands at 39.9 months of estimated outgoings. 

Here are the details:

1. my Hong Kong equities feel. I added some additional shares Hua Xian REIT (HK:87001) and in NWS (HK:659) through the dividend reinvestment plan;

2. my AU/NZ equities appreciated slightly. I added some shares in National Australia Bank through the dividend reinvestment plan;

3.my equity ETFs were down (India, Hong Kong and China) in line with the local markets;

4. my position in silver fell;

5. all tenants are paying on time. We are at full occupancy. One building is currently subject to a lengthy renovation exercise. My tenant had agreed to tough it out in exchange for a significant discount on the rent (which is better than a lengthy vacancy) but has now given notice expiring at the end of January. The property will need redecorating before being put back on the market. A second property will become vacant at the end of February;

6. both the NZD and thee AUD fell sharply against the HKD/USD;

7. my position in bonds remains small. I purchased as small amount of RMB two year PRC sovereign bonds yielding 3.5%;

8. expenses were high (Australia is expensive) but had been fully accrued;

9.there were no transfers to Mrs Traineeinvestor;

10. there were no derivative transactions this month.

My cash position rose during the month due to the influx of year end dividends. I currently hold 39.9 months of expenses in HKD cash or equivalents.

In other news, my part time job came to an end on 31 December and interest rates on our mortgages have gone up following the US interest rate increase. I will comment more on these when I do the 2016 year end wrap up and the 2017 preview.