This KLLaw guy is one of the widely quoted experts in the Sunday Money of SCMP. His March 9 recommendation, after a long discussion on all the things that were 'wrong' with the market: "Given the bleak outlook, my investment theme for the month of March is stay safe. There are too many bombs out there. Keep cash, and if you cannot stay clear of Exchange Square, buy only high-yield dividend shares that look safe..."
columns.scmp.com March 9
Sunday, March 9, 2003
Best play safe in a war zone
K L LAW
Welcome once again to The Private Investor column, back for the Year of the Goat and at a time when investors face continuing domestic and international uncertainty.
In the search for the golden investment fleece, I have changed the format slightly and this year will not be running a portfolio of shares. The column is now entering its ninth year and, call it a delayed seven-year itch, but I feel that any readers who have stuck with The Private Investor for more than one of the previous eight years know what I believe in when it comes to investment.
Rest assured, the underlying investment philosophy is unchanged: it was not broke, so I have not fixed it. Whether wrestling bears or running with the bulls, I like "steady Eddy" stocks that are bought based on sound logic rather than whizz-bang long shots that could see our hard-earned cash going up in smoke when the market dives.
Unfortunately, given the choices in the Hong Kong index, this has equated to eight years of Cafe de Coral which, as many readers have pointed out, is not a very interesting diet. Nonetheless, the portfolio - run on the strictest basis and enjoying none of the freedoms a real fund manager would have - has well outperformed the Hang Seng Index every year since inception.
I, therefore, offer this past performance to our readers as evidence of my credibility and invite you to join me on the first Sunday of every month, not to create a specific share portfolio, but as I cast a non-conformist investor's eye over the local and international news and comment on how it might affect your personal investment decisions.
Hong Kong investors have two concerns - one global and one local: Iraq and the budget.
United States President George W. Bush looks as if he has no way out but to fight this war, given the massive investment he has made to date in materiel, rhetoric and face. Hence investors, doves or hawks, realistically have to think about what this war will mean to them.
Investors in all but gold and the euro have felt the chill shadow of B-52s flying over their portfolios and that brief ray of sun that shone on equities in early January has disappeared along with any hope of peace as the cruise missiles earmarked for Baghdad are fuelled.
Will we see another Gulf War scenario and, once the missiles start flying, will the markets recover? Or will things just get worse? It all depends how the war unfolds. Will Saddam Hussein and his Republican Guard roll over without a fight, will Israel get involved, will the Iraqi oilfields get torched, will allied groundforces get bogged down in a protracted demoralising land war? These are questions that Bush and Co cannot answer today and neither can I. So the best advice is to lay low until the smoke clears.
In Hong Kong we had the "budget of pain" with tax increases galore being spread around from salaries, to new car registrations to football gambling duties. One has to compliment the government for preparing the ground for these increases having hammered into the public's mind the big deficit problem over the past months.
But now that it has announced its plans, two thoughts spring to mind: first, how did we get into this mess in the first place? The government is entrusted with managing our tax money but is showing far less creative flair in spending the taxes than collecting them. After mismanaging its expenditure and our economy we are now called on to bail the government out and pay more taxes.
Second, we are not convinced this budget is the end of the road. To ensure deficit reduction, the government is expecting a wildly optimistic HK$30 billion of revenue to come in from economic growth between now and April 2007.
Dream on is my comment. These hopes will soon be dashed and the government will be back at the well again asking for more tax increases.
With each request its little remaining credibility will fade and higher taxes will dampen economic spirit and hopes. Pretty grim.
Did I start this column talking about golden fleeces? Given the bleak outlook, my investment theme for the month of March is stay safe. There are too many bombs out there. Keep cash, and if you cannot stay clear of Exchange Square, buy only high-yield dividend shares that look safe - China Light, Oriental Press and possibly Liu Chong Hing Bank. |
