Monthly Review - September 2011

Last month I reported that August had been the single worst month for my investment (in dollar terms) ever. The losses in September were nearly three times those of August. Retirement plans are on hold, which raises the likelihood that I will need to start looking for a job when I my contract finishes early next year.

Mark to market declines in asset values, particularly equities, were massively greater than the gains from rental income and were made much worse by adverse FX movements. Even a healthy savings rate and positive cash flow from the properties were unable to make more than a token offset of the losses. My equity investments have produced negative returns this year and many positions are now below cost.

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 (on top of the large losses incurred in August). A few companies dropped by more than 50% during the month. In no case was the fall in share price accompanied by a negative company specific announcement (although in some cases there were broker downgrades). During the month I purchased shares in Tontine Wines, China VTM, Sinopec, Hang Seng Bank, CNOOC and Jiangsu Expressway;

2.my ETFs were down sharply in line with the local markets. There were no ETF purchases this month;

3. my commodities fell significantly, led by silver;

4. all of my properties are occupied (the one vacant unit will be occupied at the end of this week), the tenants are paying on time. There were some minor repair bills which needed paying;

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

6. my position in bonds remains small. No bonds were purchased this month. One of my early RMB bond purchases matured;

7. I have one open derivative position, a put written against the AUD;

8. savings were good with high income and low expenses.

My cash position decreased due to new investments. I currently hold 18.1 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 a staggering 10.70%. The year to date decrease is 3.35%%

Yanzhou Coal purchased

This afternoon I added some additional shares in Yanzhou Coal (HK:1171) to the portfolio. The company is on a trailing PE of 6.7 and a dividend yield of 4.7%. While many (most?) brokers are predicting meaningful growth in earnings and dividends for the current and next financial years, at current prices such assumptions are not really necessary to justify a purchase. The only negative is the relatively high debt level.

I paid HKD14.78 for he additional shares.

Off topic: a literary binge

Nothing to do with personal finance, but I've spent the last several weeks on something of a literary reading binge. This was, in part, inspired by glancing at a (obviously subjective) list of the greatest novels of all time and, in part, by a desire to read something a bit different from my usual fare (mostly non-fiction with a lesser amount of popular fiction).

Books read:

1. Tender is the Night - F Scott Fitzgerald

2. The Great Gatsby - F Scott Fitzgerald (previously read at school)

3. Jane Eyre - Charlotte Bronte

4. The Trial - Franz Kafka

5. Portrait of the Artist as a Young Man - James Joyce

6. The Picture of Dorian Grey - Oscar Wilde

I'm currently on Joseph Conrad's Heart of Darkness.

I actually enjoyed reading all of these (with the exception of Jane Eyre which I found rather dull and marred by a plot line that required a most unlikely coincidence to "work"). The Trial was rather disturbing and it's easy to find parallels with daily life. However, Tender is the Night was the most thought provoking - I was left thinking to myself "I don't want to be Dick Diver".

I haven't quite found the courage to take on one of the door stopper long novels like Ulysses or War and Peace.