Thursday, March 01, 2018

Financial Review – February, 2018

February saw a partial reversal of January's gains with declines in my equities, bonds and commodities being compounded by declines in the AUD and NZD. Positive cash flows from investments, were not enough to offset the mark-to-market losses and the end result was a 2.75 percent decrease in net assets.

For the year, the portfolio is up 2.21 percent. The adjusted change from when I retired in September 2013 is a 29.65 percent increase. Hong Kong liquidity stands at 42.01 months of estimated outgoings, significantly increased from the start of the year's 26.68 months due to asset sales.

Here are the details:

1. my Hong Kong equities fell. I sold some of my shares in China Gas (HK:384). This has been my most profitable equity investment since I resumed buying equities in 2009. Between the partial sale proceeds and dividends, I have had my original investment back several times over and still hold about half the number of shares originally purchased. It was simply a case of having too much money in one share. I have partially reinvested the proceeds in a few more shares in HSBC and a transfer to Australia (see below);

2. my AU/NZ equities were were marginally down. With the weakening AUD, I transferred some money to Australia and purchased shares in Inghams (ASX: ING) which offers an expected yield above 5% and whose board is considering capital management options after a fabulous first half result. I have also spent some of my NZD on additional shares in NZ Refining (NZX: NZR) again, based on the very attractive yield on offer – over the next 14 months I should receive two final and one interim dividend which I expect will collectively be about 10% of the current share price with expectations of higher dividends in following years once the 2018 maintenance shut down is completed; equity ETFs were down (India, Hong Kong and China) in line with the local markets;

4. my position in silver fell slightly;

5. all tenants are paying on time and all properties are let. I had several maintenance bills this month and will have to fork out for the pointless window inspection next month (delayed by an uncooperative tenant);

6. the AUD and NZD were were down against the USD/HKD. I shifted some money to Australia in response;

7. my position in bonds remains modest. Recent interest rate increases have pushed the holding values of some of my bonds to below par - since I intend holding to maturity (other than a solitary perpetual) this is not a problem. I have a margin facility in place and my carry trade is doing its thing and generating a small amount of additional income. However, the spread between the interest earned and the interest paid has narrowed to about 2.1% and will likely narrow again as interest rates increase further;

8. expenses were high due to the completely unnecessary purchase of an antique map.

My HK cash position fell slightly during the month. I currently hold 42.01 months of expenses in HKD cash or equivalents (up from 26.68 months on 1 January). 

Total household gearing ((debt+accruals)/assets) is 8.77% of total assets. Property prices are as at 1 January, 2018 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

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