Wednesday, August 31, 2011

Monthly Review - August 2011

August was not only another bad month for investments, in dollar terms it was the worst month I have experienced ever. Mark to market declines in asset values, particularly equities, were massively greater than the gains from rental income and were made worse by adverse FX movements. Even a healthy savings rate and positive cash flow from the properties were unable to offset the losses. My equity investments have produced negative returns this year (but are still ahead of cost overall).

Here are the details:

1. my Hong Kong equity portfolio declined sharply either in line with the market or due to industry or company specific factors. Some of my largest holdings (HWL, CCB, Hua Han, Yanzhou) recorded particularly large losses. There were few gainers. During the month I purchased shares in VODone, Tontine Wines, Sinopec, Sinopec, CNOOC, GDI and Varitronix; ETFs were down sharply in line with the local markets. There were no ETF purchases this month;

3. my commodities rose marginally, led by a gain in silver;

4. all of my properties are occupied, the tenants are paying on time. Two of my Hong Kong properties require minor repairs and one aircon unit needs replacing. I will have a single brief vacancy in late September/early October and will have to do the usual touch up and cleaning. One overseas property requires work on its roof. The collective bills are not significant but will temporarily dent cash flow in October;

5. currency movements were very slightly negative, as the NZD and AUD fell against the HKD/USD;

6. my position in bonds remains small. No bonds were purchased this month;

7. there are no open derivative positions;

8. savings were moderate with high income and high expenses. My major expenses were for a short summer holiday and the annual premium for the medical insurance.

My cash position decreased due to new investments. I currently hold 21.4 months of expenses in HKD cash or equivalents (compared to 26 months at the end of February).

For the month, my net worth fell by 3.23%. The year to date increase is now only 8.25%


Tim said...

On your properties - how do you ensure rent is paid on time? - do you directly deal with your tenants or do you have a managing agent, and if so, what do you pay them?

traineeinvestor said...

Thanks for dropping by.

For Hong Kong, I have all tenants on auto-pay and, with the exception of one long standing tenant, it's a term of the lease. I started doing this after I experienced continual late payments from one tenant in particular and the number of late payments has fallen significantly since then.

I have an agent who deals with repairs etc and will chase for late payments when needed but does not do the day to day collections.