Friday, July 13, 2012

China Construction Bank purchased

This afternoon I added a few more shares in China Construction Bank (HK:939) to the portfolio. China's banking sector has been hit hard over recent months by concerns over the quality of their loan books, policy based initiatives which have the effect of compressing net interest margins and, in CCB's case, one specific bad loan which has received a lot of media coverage.

In the belief that these concerns are overdone, I added a few more shares to the portfolio this afternoon.

I paid HK$4.78 for the additional shares.

China Blue Chemical purchased

This afternoon I added a few more shares in China Blue Chemical (HK:3983) to the portfolio. The company has a sound balance sheet, high profit margins and is operating in a sector which is expected to benefit from policy based support.

I paid HK$4.34 for the additional shares.

RMB Soverign Bonds

This morning I put in an application for the RMB Sovereign bond issue. At 2.38% pa it offers a negative real return for the next three years (even with a full waiver of bank fees etc). Given the currency risk, you could describe it as return free risk. So why buy it?

To begin with, the amount I applied for was a token amount - the unused RMB sitting in my bank account earning a fraction of 1% and that is exactly the point. The alternatives are to leave the money sitting in the account earning less than 2.38% or to hunt for better investments. I have no shortage of cash looking for a home at the moment and that cash yields less than the 2.38% on offer, making the RMB bonds simply a better choice than leaving the money in the bank.

Now there are plenty of other issues of RMB bonds I could consider - but all of the ones which are available to me either carry material credit risk or require a minimum of RMB 1 million face value. I am tempted by the latter, but would have to buy quite a bit more RMB than I currently hold - at this time I am not completely sold on the RMB's prospects for appreciation against the HKD.

Wednesday, July 11, 2012

Hang Seng Bank purchased

Yesterday afternoon I added a few more shares in Hang Seng Bank (HK:11) to the portfolio. This completes the reinvestment of the sale proceeds from Varitronix which I sold earlier in the week. Hang Seng Bank is now one of my ten largest individual equity holdings.

I paid HK$107.00 for the additional shares.

Tuesday, July 10, 2012

Sinopec purchased

This morning I added a few more shares in Sinopec (HK:386) to the portfolio. In spite of  the policy based losses on the refining business and the threat of a cut to the dividend, the company still offers an acceptable level of value at current prices. Any improvement on the refining side would be expected to see a material re-rating.

I paid HK$6.50 for the additional shares.

Monday, July 09, 2012

China Blue Chemical purchased

I have also reinvested some of the proceeds from the sale of Varitronix into China Blue Chemical (HK:3983). So far CBC has been a volatile investment and the share price is getting close to the three year low. Given the absence of negative catalysts being announced, I am curious as to the reasons for the sell off but, in any event, have added to my loss making position.

I paid HK$4.28 for the additional shares.

Hang Seng Bank purchased

Following the sale of Varitronix (HK:710), I added a few more shares in Hang Seng Bank (HK:11) to the portfolio. Hang Seng Bank offers an attractive dividend yield of 4.8% (payable quarterly). While I do not expect a lot of growth, I view it as a reasonably low risk yield investment.

I paid HK$107 for the additional shares.

Varitronix sold

Following the profit warning that came out after the close on Friday, I sold my shares in Varitronix (HK:710) this morning for prices ranging from HK$3.10 to HK$2.83. Net of dividends and transaction costs, I realised a gain of about 16%. This may be a case of panic selling, but I have had too many recent experiences with companies not living up to expectations.

Friday, July 06, 2012

China Metal Recycling purchased

This morning I added a few more shares in China Metal Recycling (HK:773) to the portfolio. The company is still expanding and my expectation that it will continue to benefit from industry consolidation, geographic expansion and (potentially) policy initiatives remains intact. That said, I also expect there to be some margin compression as the company expands.

I paid HK$6.20 for the additional shares.

Thursday, July 05, 2012

Dividend elections

Several companies in which I invest offer shareholders a choice between receiving a dividend in cash or in new shares. For some shares the default option is to receive cash and for others the default option is to receive additional shares.

As a general practice I will take the shares if (i) the underlying shares are highly liquid and (ii) at the time the election is made the subscription price for the new shares is at least a 2-3% discount to the prevailing market price. Out of four recent elections, I took my dividend in the form of new shares for Henderson (HK:12), K Wah (HK:173) and Cosco Pacific (HK:1199) and in cash for China Metal Recycling (HK:773).

It remains slightly irritating that I am unable to participate in dividend reinvestment plans for my Australian shares. The SFC would be doing Hong Kong investors an immense favour if they exempted offerings of new shares (rights issues, dividend reinvestments) to existing shareholders of companies listed on well regulated stock exchanges - at the moment Hong Kong investors are being disadvantaged by being excluded from such offerings.