The feeling that I am sitting on too much cash and the sight of markets which are 50% below their recent highs finally proved too much for me and I made a modest investment into a Taiwan ETF (stock code 2837). My purchase price was HK$4.83.
Why Taiwan? The investment was largely based on fundamentals - it is one of the cheapest of the better regulated Asian markets - and the expectation that continued improvements in relations with Beijing will result in tangible economic benefits and improved sentiment/investor confidence.
Incidentally, the range of ETFs listed in Hong Kong has been growing. In addition to ETFs for Hong Kong, PRC, India, Nasdaq, Russia and commodities we now have ETFs for Taiwan and Japan. (There are a few others, but they generally do not have sufficient trading volume even for a small investor like me.) This is good news as it will reduce the need to look to high cost managed funds for equity investments.
Wednesday, November 05, 2008
Saturday, November 01, 2008
Bank valuations lowered (again)
The latest on-line mortagee valuations available on HSBC's website have been reduced again. This is the second reduction in the last two months. For the properties we own, the drawdown from the peak valuations set in the first quarter of this year ranges from 19% to about 6%. As a generalisation, the more expensive properties have shown the biggest percentage declines and the smallest properties the lowest percentage declines in value. Recent sales data from Centaline suggests that the HSBC valuations are reasonably close to market values.
I have no intention of buying another property this year as (i) I think that the market has potential to fall further and (ii) my wife and I are each facing a period of job uncertainty and we wish to keep a cash buffer against the possibility of unemployment. I will hold off. However, when I do start buying again, I may well look outside Hong Kong to markets in the UK, Australia or New Zealand where falls in the value of property and falls in the currencies combine to make a more attractive investment proposition. Of course, investing overseas has its own issues, but if the return is there, it may well be worth it. As an added factor, at the rate the JPY is appreciating in response to the unwind of the carry trade, using a JPY mortgage to purchase a property in one of the markets hit hard by the credit crisis offers the prospect of making money on the mortgage as well.
I have no intention of buying another property this year as (i) I think that the market has potential to fall further and (ii) my wife and I are each facing a period of job uncertainty and we wish to keep a cash buffer against the possibility of unemployment. I will hold off. However, when I do start buying again, I may well look outside Hong Kong to markets in the UK, Australia or New Zealand where falls in the value of property and falls in the currencies combine to make a more attractive investment proposition. Of course, investing overseas has its own issues, but if the return is there, it may well be worth it. As an added factor, at the rate the JPY is appreciating in response to the unwind of the carry trade, using a JPY mortgage to purchase a property in one of the markets hit hard by the credit crisis offers the prospect of making money on the mortgage as well.
Monthly Review - October 2008
October was the fifth successive month in which my investments declined in value. It was also the worst of the five months in terms of investment losses. In financial terms, my investments declined sharply (again), the currency moved against me (again) and my income fell (again).
In effect the rise of emerging markets, the rise in Hong Kong property prices, the rise of commodities and the fall of the USD which had combined to work so strongly in my favour for four years have all gone sharply into reverse and the trends seem to be accelerating.
Here are the details:
1. my actively managed funds all lost money. I am now holding losses on all of them. I currently have investments in actively managed funds investing in Thailand, Taiwan, Eastern Small Companies, European Small Companies and Vietnam. In a demonstration of the high beta nature of emerging markets and the leverage of the currency factor, some of my funds are down about 50% in HKD/USD terms;
2. my equity ETFs all lost money. I currently have exposure to Hong Kong and India;
3. my residual equity portfolio lost money local currency terms and lost more money due to adverse exchange rate movements;
4. my commodity investments lost money. Fortunately, I only have positions in nickel and lean hogs left and these are very small (even smaller now that they have declined so far);
5. all my properties are all fully rented and the tenants are paying the rent on time. I have both a positive cash flow and a surplus of income over expenses (which represents an increase in net worth);
6. currency movements were adverse as the USD strengthened and compounded the loss on my investments this month.
No investments were made in October.
My income once again declined during the month and is expected to decline further over the next few months. My expectation is that my income will decline by at least 20% from its peak.
My spending was moderate. The resulting savings did not even come close to matching the losses on my investments. For the month, my net worth decreased by 6.34%. The year to date decrease is 4.6%.
In effect the rise of emerging markets, the rise in Hong Kong property prices, the rise of commodities and the fall of the USD which had combined to work so strongly in my favour for four years have all gone sharply into reverse and the trends seem to be accelerating.
Here are the details:
1. my actively managed funds all lost money. I am now holding losses on all of them. I currently have investments in actively managed funds investing in Thailand, Taiwan, Eastern Small Companies, European Small Companies and Vietnam. In a demonstration of the high beta nature of emerging markets and the leverage of the currency factor, some of my funds are down about 50% in HKD/USD terms;
2. my equity ETFs all lost money. I currently have exposure to Hong Kong and India;
3. my residual equity portfolio lost money local currency terms and lost more money due to adverse exchange rate movements;
4. my commodity investments lost money. Fortunately, I only have positions in nickel and lean hogs left and these are very small (even smaller now that they have declined so far);
5. all my properties are all fully rented and the tenants are paying the rent on time. I have both a positive cash flow and a surplus of income over expenses (which represents an increase in net worth);
6. currency movements were adverse as the USD strengthened and compounded the loss on my investments this month.
No investments were made in October.
My income once again declined during the month and is expected to decline further over the next few months. My expectation is that my income will decline by at least 20% from its peak.
My spending was moderate. The resulting savings did not even come close to matching the losses on my investments. For the month, my net worth decreased by 6.34%. The year to date decrease is 4.6%.
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