Hong Kong market feels like a Falling Knife – Invest with Care
Hong Kong market continues to underperform versus Singapore and US markets. We saw a 5.8% loss in Hang Seng index last week as investors continued to be spooked by China regulatory crackdown on the large online companies and fearing that it would spread to other industries like healthcare, similar to the sudden regulatory change to education companies a few weeks ago.
While I also felt concerned, I couldn’t help but went in to pick up some HK stocks at what seemed to me were trading at “bargain price”. I do hope the market would bounce soon. The continued falling of Hang Seng index had at time made me feel like I was trying to catch a falling knife. Sigh …
Taking a more macro view, the Hang Seng index has just entered into a technical bear market, having fallen 20% from its peak in Feb this year. Looking at the chart of the last 5 years, we can see that it has 3 episodes of “falling into a bear market”, falling as much as 30% before bouncing back. The current episode is still developing and it is unknown at what level it would settle before building strength to bounce back. If history can be used as reference, it would probably fall another 10%.
However, it is difficult to establish when the bottom would be reached. Hence, my approach has so far been to stay invested and make sure that I pick the right companies that can pay dividends sustainably, have a good business model and management and are resilient to unexpected market changes.
A major step towards reaching my Dividend Yield Target of 4.5%
As the companies in my portfolio had finished reporting their results and announced their interim dividends, I have also closed my book on the dividend collected this quarter. As of this week, the dividends collected and to be collected in the coming weeks is translating to about 4.0% yield. This is a major step to bring me closer to my year end target of 4.5%. Though Q4 is a typical quiet quarter for dividend, I believe the target is reachable.
This quarter dividend announcements brought many good news. We saw all the 3 local banks upping their dividend distribution after MAS lift the cap and the Reits also returning the cash they had retained back to investors as the market outlook improved. It is always nice to see more dividends declared than you expect.
And just for record and also as a possible reference for you, below is a list of Top-10 dividend contributors to me. They are mainly the Reits and Banks.
|2||OUE Comm Reit|
|7||Hong Kong Land|
|9||Keppel DC Reit|
Take a great investment week.
Take care and stay safe.