About me:
I run a fund and have in the past been very successful (of course not perfect, but overall we have made the right "big calls" that have done us well, both on the upside as well as avoiding losses).
I am going to be posting up some stocks we are looking at, listed in Hong Kong with a China business focus, with the view that China has bottomed and represents great upside opportunity.
In particular we focus on identifying smaller stocks, that for a range of reasons we believe are undervalued with significant upside based on all known and reported financial data and fundamentals.
Why should we be buying stock in China now?
First the macro reasons. We are bullish on HK listed China stocks, including those of manufacturing and exporting companies.
We have recovery/growth in the US, we have stabilisation in Europe, with a HUGE amount of negativity "priced in", and continued growth in many emerging markets, including across Asia. People, and companies have been "saving cash", hoarding, tightening, not investing, and all these things lead to a "surplus" of inventory, and a slowdown in China. It can very quickly reverse the other way, which is what we believe is about to happen, perhaps in a few quarters from now, likely with fuel added to the rebound by stimulus from China in 2013.
There are a few other factors that make us think we are close to the perfect time to buy stocks HK stocks listed in China, based on historical data with a realistic chance of certain stocks doubling and tripling in 2013. Some of these reasons are below:
1 – End of this year is a major political change in China. Lead up to that produces uncertainty – after that will come renewed stability, growth and investment. So we plan on buying with a view to hold for at least a year, likely 2 years (2013-2014), and with a view to stock prices doubling.
2 – Buying in times of a perceived crisis creates a “crisis margin”, and selling in times of confidence creates a confidence margin. We are surely now we are more towards “crisis” (although moving towards "recovery") rather than “confidence” on the scale, so we believe now is a good time to buy, well before full confidence re-emerges.
3 – Capital inflow and outflow of Hong Kong means you will get more volatility, both on upside and downside – great for investors who buy when others are selling.
4 – US treasury yields are at record lows, and yield curve likely to lengthen – likely to be less that 1% for 10 years. This means super cheap borrowing and demand for higher yields (ie stocks). (Also it likely means the Govt in HK will impose high deposit ratios for property (ie less leverage), boosting stocks in terms of relative attractiveness to property (on the basis that leverage is harder to get for stocks than property). We believe that the relative attractiveness of stock vs property will result in a surge in funds flowing into Hong Kong listed stocks in 2013.
5 – If/when China has announces stimulus plans, expect China capital to be invested in HK, and in HK stocks potentially significantly boosting HK stocks. And remember also, there is also plenty of stimulus the US and Europe can provide if they wish.
6 – How long was last stock market decline from Lehman’s to bottom – that period may be a guide to next bottom after the “EU crisis”. (around 6 months, so buy Nov 2012). Lehman's shows how very quickly today's markets can move from highs to lows and also, likely from bears to bulls. We believe this recovery could be very quick once it starts
7 – Hang Seng, and China markets, now have some of the lowest PEs in the world – super cheap by historical standards and close to record historical lows (ie a record low “tide”). Again, to be a strong reason to believe the market is at rock bottom.
8 – Increased focus on Government taxing in EU and US will lead to money flowing to “low tax”, and “tax-haven” countries, which include HK and therefore HK listed stocks.
9 – People seeking to preserve asset and currency value will also move money from Europe to HK.
10 - Euro close to historical lows which would indicate to us a global bottom and therefore buy signal for China.
11. - Look for a bottom in China’s quarterly GDP and export declines. (Right now GPD at a historical low, and from a historical perspective seems likely to bottom out at 7%).
12 – Look for a pickup in China Foreign Direct Investment which we believe is about to occur.
I am going to be posting up some stocks we are looking at, listed in Hong Kong with a China business focus, with the view that China has bottomed and represents great upside opportunity.
In particular we focus on identifying smaller stocks, that for a range of reasons we believe are undervalued with significant upside based on all known and reported financial data and fundamentals.
Why should we be buying stock in China now?
First the macro reasons. We are bullish on HK listed China stocks, including those of manufacturing and exporting companies.
We have recovery/growth in the US, we have stabilisation in Europe, with a HUGE amount of negativity "priced in", and continued growth in many emerging markets, including across Asia. People, and companies have been "saving cash", hoarding, tightening, not investing, and all these things lead to a "surplus" of inventory, and a slowdown in China. It can very quickly reverse the other way, which is what we believe is about to happen, perhaps in a few quarters from now, likely with fuel added to the rebound by stimulus from China in 2013.
There are a few other factors that make us think we are close to the perfect time to buy stocks HK stocks listed in China, based on historical data with a realistic chance of certain stocks doubling and tripling in 2013. Some of these reasons are below:
1 – End of this year is a major political change in China. Lead up to that produces uncertainty – after that will come renewed stability, growth and investment. So we plan on buying with a view to hold for at least a year, likely 2 years (2013-2014), and with a view to stock prices doubling.
2 – Buying in times of a perceived crisis creates a “crisis margin”, and selling in times of confidence creates a confidence margin. We are surely now we are more towards “crisis” (although moving towards "recovery") rather than “confidence” on the scale, so we believe now is a good time to buy, well before full confidence re-emerges.
3 – Capital inflow and outflow of Hong Kong means you will get more volatility, both on upside and downside – great for investors who buy when others are selling.
4 – US treasury yields are at record lows, and yield curve likely to lengthen – likely to be less that 1% for 10 years. This means super cheap borrowing and demand for higher yields (ie stocks). (Also it likely means the Govt in HK will impose high deposit ratios for property (ie less leverage), boosting stocks in terms of relative attractiveness to property (on the basis that leverage is harder to get for stocks than property). We believe that the relative attractiveness of stock vs property will result in a surge in funds flowing into Hong Kong listed stocks in 2013.
5 – If/when China has announces stimulus plans, expect China capital to be invested in HK, and in HK stocks potentially significantly boosting HK stocks. And remember also, there is also plenty of stimulus the US and Europe can provide if they wish.
6 – How long was last stock market decline from Lehman’s to bottom – that period may be a guide to next bottom after the “EU crisis”. (around 6 months, so buy Nov 2012). Lehman's shows how very quickly today's markets can move from highs to lows and also, likely from bears to bulls. We believe this recovery could be very quick once it starts
7 – Hang Seng, and China markets, now have some of the lowest PEs in the world – super cheap by historical standards and close to record historical lows (ie a record low “tide”). Again, to be a strong reason to believe the market is at rock bottom.
8 – Increased focus on Government taxing in EU and US will lead to money flowing to “low tax”, and “tax-haven” countries, which include HK and therefore HK listed stocks.
9 – People seeking to preserve asset and currency value will also move money from Europe to HK.
10 - Euro close to historical lows which would indicate to us a global bottom and therefore buy signal for China.
11. - Look for a bottom in China’s quarterly GDP and export declines. (Right now GPD at a historical low, and from a historical perspective seems likely to bottom out at 7%).
12 – Look for a pickup in China Foreign Direct Investment which we believe is about to occur.
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