Magic runs out of puff in dragon year
01/21/2001 South China Morning Post Page 12
(c) Copyright 2001 South China Morning Post Publishers. All Rights Reserved.
EXIT THE YEAR OF the Dragon, and boy did it drag on. A fearsome, fire-breathing monster that would set light to Exchange Square?
No, this timid dragon would have had trouble lighting a candle. We can only hope that the snake hissing in the background will be able to squeeze a bit more life into the stock market.
We began the year as usual with an imaginary stake of HK$2 million to invest in, primarily, local equities. Our portfolio rules do allow us to take advantage of the new "global trading arena" and hold equities which trade on other exchanges. However, "buying" and "selling" could only take place on Fridays at the closing prices of the day and the dividends were accrued and held in our cash account.
We have tried to keep a widow and orphan-friendly mix in our stock picks. Long shot gambles, highly geared warrants and derivatives do not belong in a portfolio which only trades once a week.
Our goal is to beat the Hang Seng Index, so a simple index tracker style would not have sufficed, nor make interesting reading. We tried to throw in enough "unusual" counters to keep things lively. So much for theory. Sadly our widows and orphans are eating plain congee this year.
We swam against the tide from day one. Remember we began in Y2K heaven with the index at 17,380 points (just off the high for the year).
Today it sits at 15,934 points, down 1446 points and over 8 per cent.
Contrast this to the previous year, the rabbit, where the index hopped up 61 per cent. Where is an Asian economic crisis when you need one?
Our initial stake lost HK$146,678, a decrease of more than 7 per cent.
Over the same period the Hang Seng Index lost more than 8 per cent (excluding dividends). While we just managed a gain over the Hang Seng Index, for the sixth year running, we only beat it by a nose and, after considering dividends from index shares, we lagged the index.
We will not be buying that mansion on the Peak just yet, given our mediocre performance over the year. However, longer term we are still very pleased with our performance.
We began running these portfolios in 1995 and if the money had been reinvested with profits/losses taken each year it would now have grown by nearly 375 per cent, compared to a 213 per cent growth in the Hang Seng Index over the same period. Despite a lacklustre year, we did have a few successes along with the inevitable duds.
Early in the year, we incorrectly thought we could outsmart the market by buying technology stocks that had earnings and thus avoid the collapse of the sector which we could see coming.
How wrong we were - forgetting the golden rule that when sentiment is bad, it is bad and the bear droppings stuck to all tech stocks, even profitable ones.
We were successful however, in choosing some solid red chips which have added nice profits to the portfolio.
In addition, our inclusion of blue chips HSBC, Hutchison Whampoa and Cheung Kong (Holdings) turned out to be portfolio positive.
The call on Cheung Kong was easy as we always like to follow company chairman Li Ka-shing. When he increased his own stake in Cheung Kong, so did we.
In contrast to some of our stock picks, our market commentary often turned out to be quite accurate.
Pluses included early calls on the turning of the interest rate cycle. We maintained a good record for predicting when United States Federal Reserve chairman Alan Greenspan would change his mind. Our negative calls on Pacific Century CyberWorks and the Internet sector early last year were also well timed.
However, we did make a bad call on the property market, thinking it would rebound strongly in the last quarter of last year. We were dead wrong as we did not take into account the ability of the government to steal away, intentionally or otherwise, prospects of a market recovery by its actions and inaction.
We must compliment readers for knowledgeable and amusing support of the column. Your e-mails were appreciated. We were glad to see that most of last year's bull-market friends managed to stick with us even in a bearish year and, yes, we agree, it could have been a whole lot worse.
A few readers' comments stand out. One astute reader suggested H shares were long overdue for a rally, and he was right. Another suggested that our love for Giordano might be overdue given the previous year's success with the counter. He, too, was right.
So, having survived the Year of the Dragon with no fire in its belly, we will be back with a new portfolio for the Year of the Snake. The column will change to a monthly but your comments, as always, will be welcome.
Until the new year dawns, Kung Hei Fat Choi and best wishes to all readers! |
