The HSI has lost over 6% within the month, with the heavy protest going on investors continued to dump hong kong stocks today. They are probably thinking "Sell first, think later!"
Well if you are a short term trader, yeah I think its probably wise to had cash out on first light and just wait for things to settle down before deciding whether or not to make another trade.
But if you like reading my blog, you're probably a value investor too... and well, while others flee the scene we are here to investigate and search for value!
While the STI is trading at close to 14 times earnings, the HSI is currently only trading at 11 times!
Lets take a look at 2800HK, a cash based HSI ETF traded on the HK exchange
For more details please go to
A brief history on 2800HK...
In 1997 we had the Asia financial crisis, most indices fell over 50% and the HK government made a bold move by using its reserves to purchase blue chips from the open market, stocks were cheap and this also helped to prop up the weak market.
A few years later the government had to exit its investments, well they couldn't sell these blue chips in the open market fearing another crash so instead they bundled them into a really huge ETF and sold the shares to the public! What a brilliant move! So that's how 2800HK was born.
Two things that I like about 2800HK is that it has plenty of daily liquidity and secondly its expense ratio is really low, only 0.10%! If you plan to hold a fund for long term, having a low cost structure will greatly benefit your long term returns.
It currently has a dividend yield of close to 3% which is pretty decent, plus a solid 5 year track record of growing dividend payouts.
2009 - 54 cents
2010 - 58 cents
2011 - 63 cents
2012 - 66 cents
2013 - 73 cents
2014 - probably something around 75 cents (my own estimate)
If you read my previous post on the STI, I said that I usually pay around 12 times earnings or less for it. As for the HSI, I definitely wouldn't pay the same kinda valuations because of the currency risk and it being a foreign share. I think overall a value investor could strongly consider a purchase at 10 times earning or less, that's probably a big enough cushion (margin of safety). However going in at the current 11 times is also pretty fine, especially if you have the extra bullets to fire if it comes down even further.
Lastly China will begin its golden holiday period tomorrow (Oct 1st to 7th), while Hong Kong's holiday is weds/thurs (Oct 1st/2nd). My expectation is that the protest should stretch out at least till this friday as citizens are free from work and highly motivated to follow the momentum onto the streets. Friday would be the big turning point, if the government doesn't give in to the citizen's requests then we could probably see the protest dragging throughout the long weekend.
Let us never forget that government is ourselves and not an alien power over us. The ultimate rulers of our democracy are not a President and senators and congressmen and government officials, but the voters of this country.
- Franklin D. Roosevelt
- Franklin D. Roosevelt