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To: hdl who wrote (182273)	7/23/2002 4:14:30 AM
From: TobagoJack	Respond to of 436258

Hi hdl, I am noticing that so far, in my neighborhood, the indices are not dropping in as a dire way as back in the US, unlike last year. Perhaps the following attitude is taking hold ... possibly a mistake: columns.scmp.com Sunday, July 7, 2002 'Anywhere but America' sentiment helps local bourse K.L. LAW What was the best thing about the first half of the year for investors? The end. It has not been a nice six months. The Dow, the S&P and the Nasdaq all fell again, on top of poor performances in both 2000 and last year. The past six months have rubbed more salt into an already deep wound as United States markets have fallen back to 1998 levels. Hong Kong has been spared the ugliest bits of the fall, with the tight leash that usually binds us to the US bourse loosening in the past few months. There are several reasons for this. Given the "pro-China" view which prevails with fund managers these days, Hong Kong has been benefiting because of the Chinese flavour of our bourse. In addition, positive views about Hong Kong's economic turnaround prospects, recently aided by the fall in the US dollar, have also encouraged investors - leading to a relative outperformance for our bourse. Lastly, an "anywhere but America" investment mentality has also helped money flow into Hong Kong. While these factors have helped the local bourse survive, it has still been pretty ugly out there, especially for local blue chips. In the month ahead we have another Li family listing, CK Life Sciences International. This is pretty much a new type of share for Hong Kong as biotech is not something normally associated with the Hong Kong bourse. Much has already been written about the listing, with some commentators calling it a repeat of the Tom.com issue back in the Internet mania days. While the counter will be oversubscribed and the share will trade at higher than subscription price, this is not a counter I can recommend except for a trading play. As for the firm's prospects, the company is a gamble, at best. Filing patents for products is no guarantee of commercial success and it is hard to see how earnings are going to be generated here for years. Many readers and investors in general have been wondering if they should be invested in markets at all given their poor performance. If we all had crystal balls that worked, we could all be market timers and know when to get in and when to jump out. But without that magic crystal ball, we need to remain invested to some degree. The logic for this approach is borne out by data for the US markets that demonstrates that nearly 80 per cent of a 10 per cent to 12 per cent annual return from shares comes from being invested on the first three or four days of an extended move up. The net effect of this is that if you stay invested you can receive the effects of long-term compounding. It is very difficult to time the market and miss the bad days and be in on the good days. That kind of chopping and changing is bound to fail and end up costing investors far too much in trading commissions. One reader asked me if I was taking too much risk by having almost all China shares in my portfolio. Fair comment. In fact, as I have constructed the portfolio in the past months, I have tried hard to find other local shares to buy but have not found opportunities which seem to offer either the growth potential of locally listed China shares or the defensive properties that these counters enjoy in today's market climate. If pushed to suggest local shares, I would recommend Oriental Press with its steady earnings growth and healthy 8 per cent dividend. For conservative investors, CLP, with its nearly 7 per cent yield, is a safe but boring option. Hang Seng Bank is probably a relatively safe buy in the low HK$80 range as its dividend supports the share price. Other readers have asked about US shares and if it is possible to nibble on these counters. Caution is needed here but I do think there is some value to be found in the big blue chips such as General Motors, Procter & Gamble, Gillette, Home Depot and General Electric. For a long-term buyer, these shares will be positive contributors to a portfolio. In Europe, safety can be found in a counter such as BASF, the chemical giant, which is risk adverse and will not pull a "Worldcon". I am not making any changes to my portfolio for the coming month. kllaw@scmp.com