While I believe that property shares currently offer better value than direct investment in Hong Kong residential property, there are fundamental differences between the two asset classes including (but not limited to):
1. None of the HK listed property companies are devoted to residential real estate held for rental income - their real estate is predominanty commercial, office and industrial and properties held for development;
2. It's easier to gear against directly owned property than to margin finance shares (especially the risk of a margin call);
3. Liquidity is greater for shares;
4. Transaction costs are lower for shares;
5. Tax treatment is different;
6. It's easier to diversify an investment in shares than an investment in real estate.
Others?
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Cyclical pattern:
Developer shares will often lead actual property prices by 6-12 months. We saw that pattern :
+ In the US in 2006/2006
+ In the UK in 2006/2007
The downturn in property shares gave an early warning of a downturn in Property prices
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1
(From the HK Property shares thread - thanks for the tip off here):
Posted by white kiwi trash (14 hrs ago):
"oh dear, oh dear, HSI down to 17,700. You don't think this could have a adverse effect on the property market, do you ? *nervously wipes sweat from brows*"
== ==
Haha.
Well the Bears are starting to sound triumphant again.
The last time that happened we had a good BUYING OPPORTUNITY in HK Property shares within a few days.
Keep a look out - We may have the same again very soon.
(I made a quick 10% or so last time - and like that "easy money")
2
"Investors Short HK Property Stocks on China Slowdown Fears"
Great. Shorts will create more demand on the way back up.
I'm still awaiting my support level, so I want to see prices a bit lower.
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INSIDERS BIG BUYERS of property stocks - says Robert Halili
In 2011, a whopping 44 co's recorded 11,015 purchases worth HK$19.3 billion - Sectors with the heaviest price support were property, industrials, consumer goods, and retail.
Directors of property stock led the way, with 7,485 transactions worth HK$14.1 billion, featuring three big co's:
+ Henderson Land (HK-12),
+ Cheung Kong (HK-01) ,
+ Sun Hung Kai Properties (HK-16)
Only 86 of the 444 co's showed a prices increase from the level of director buys. 295 co's showed a decrease. Yet that can be explained by a fall in the Hang Seng index over the course of the year. HSI closed 2010 at 23,035.45, and ended 2011 at 18,434.39, down 20.0%.
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HK Property shares looking good. No sellers in the secondary market thanks to effects of special stamp duty so if you want a property in HK you can either buy a new one or rent.
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Latest chart:
http://img198.imageshack.us/img198/7185/hkprp.png
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Henderson, Cheung Kong, SHKP and Hysan do. So does Great Eagle (my outside punt). I would avoid New World and the other ones as they tend to issue shares when the price rises quickly. Really, really hate New World.
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Lloyd
How much more upside do you see in the large property companies you mention? They've had a good run recently and I'm not sure how compelling the value story is now?
They still look better value than residential retail (which is generally the alternative investment choice).
FWIW, I recently added some shares in HKR International to my portfolio.
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I'm not qualified as an investment advisor. However, I basically invest only in blue chips. I look at the following: a) understanding what the company does b) dividends and c) price-to-book. Henderson Land is now trading at a price-to-book of 0.57 (ie for $1 of value, you are paying 57 cents). As for upside, long-term the sky is the limit. I think people in HK and China need good quality housing. I would consider selling after making 100%.
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(As posted on the Main thread - and for the record here):
Astrology / Astro-cycles
I will use anything that has the potential to consistently improve my trading results - as Lunar cycles do. However, I only trade "in harmony with them" when my other indicators also line up.
If you want a longer term Astro indicator, there's an astro line-up of planets in Q2-2012 that is similar to what we saw in 1929. If it works, there could be a steep slide in the market from June thru mid-July. I am posting it here, so you can look back and marvel, or look back and tease me in late July.
Personally, I will only trade on it if other indicators line up. Various short term indicators suggest a peak very near here in the US market - and possibly in the Hang Seng around 21,000. But I do note that in HK, the builder stocks are very strong today, and that is providing a contrary indicator - so short at 21,000 with caution and an eye on the Developers.
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I sold all my SHKP shares within a few weeks after buying them near last year's lows. (Actually, I have now sold ALL my property developer shares.)
HK16 Sold off Friday, on very heavy volume on Friday: 96.50 : -14.60 / -13.14%
On very heavy volume, over 120 million shares.
Chart: http://img96.imageshack.us/img96/9012/shkp.png
I think it has enough momentum to fall to the $80-90 range this week.
Ideal support levels to bounce off would be the 530wk.MA near $89, or the Low of 2011 at $85.45.
I will consider buying next week.
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Whoops. Today's Sunday.
I mean I will consider buying this week, perhaps as soon as Monday
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SHKP (HK16) traded down as low as $92.35 this week.
Today's SCMP reports that Bill Fung swooped in and bought 100,000 shares at HK$93.50, spending almost $10 million. Some dismissed this as a smart buy, with one fund manager saying: "Close friends (of the Kwoks) might buy the stock to show their support."
A fund manager at Phillip Capital (Li Kwok-suen) believes that "the scandal might knock it down another $30 before it finds support."
Meantime, SHKP closed on Friday at $95.95, giving Bill Fung a paper profit.
Another unidentified fund manager said he thought the stock would trade lower on Tuesday "when the Kwoks and Hui report back to the anti-graft body."
I am inclined to stick with the targets that I identified above, and if they get tested on much lower volume than this past week, I may do some buying.
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I haven't bought yet - since SHKP has stayed above $90
HK12 - Chart:
http://img705.imageshack.us/img705/2241/hk165yrs.png
But it may slide to expected support in the high $80s soon.
HK12: $90.10 / Change: -2.50 / Percent Change: -2.70%
Open: 91.00 / High: 91.25 / Low: 90.00
Volume: 5,896,080
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Is this a good buy in the $80s? If you think about their stock price, what has really changed on the landscape since they were in the $120s? Obvious corruption that has been called out and may amount to nothing has caused a ~30% drop in price?
What is standard PE for HK property companies? It's about ~5 or so right now. What's their price to book?
I'm just not too convinced on their stock seeing as nothing fundamentally changing could cause such a drastic decrease in the stock value.
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I agree. They are still getting rent from IFC etc.
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@elsdon - the PEs for the property companies do not mean all that much as they include asset revaluations/devaluations which can swing the results wildly from year to year. I much prefer to look at NAV discount, the quality of the underlying assets, leverage and their track record of creating shareholder value.
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traineeinvestor,
What's your take on HKG:0016?
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Not sure about SHK (HK:16).
Henderson (HK:12) dropped below $40 today and I thought that looked attractive and purchased a few. Not sure if this was a good idea or not?
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Henderson at a price-t0-book ration of 0.51 looks like a no brainer for a value investor.
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lol. Loyd, you've been holding Henderson for a while.. How has its performance been during the time that you've held?
I agree the price to book has been attractive for some time, but when speaking to Hong Kong people about it.. They simply will never buy it, for whatever reason..
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HK16 closed below $89 today, but I did not buy yet - given the overall state of the markets. I am now inclined to wait for $85 or lower, or a better market tone.
I am starting to buy some Gold and Gold etfs instead
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Google finance also has dividend payouts in their timelines I believe.. If you expand out the timescale, you'll see little D's on the timelines. Last one looks to be just before March 2012?
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SHKP (HK16) has hit my "old" target - It closed Friday at $87.15
I am not buying it yet.
Instead, I have been buying Gold-linked shares, like HK2840 and HK3081. I have paid an average of less than HK$40, for the HK3081 shares. If Gold rallies from here, I expect to do well
Friday's Closes were:
HK2840 : $1,190 / 7.75 x 10.31 = $1,583
HK3081 : $39.40
GLD---- : $154.55 x 10.31 = $1,593
I have also been buying Physical Gold, coins and Tael bars.
For HK stocks, those who know how to read charts, may agree that HK stocks are headed lower, after reviewing this chart:
http://img26.imageshack.us/img26/2183/hsi.png
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So walkup is actually a property bug?
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(Here's an interesting idea):
Posted by hkxxxpat
LGMV has it right, I think. A PE of 10 on HK shares beats a PE of 20-30 on direct invest property (don't forget HK property tax, stamp duty, agent's fee, empty flat costs, calls from tenants at midnight, people tossing fridges/TV/lite ciggies out of top floors - do people still toss TVs?).
Better yet, LINK REIT has a PE of 7.4 and div yield of 4.1% (PE of 7.4 means 13.5 yield!). Then with all that spare few hundred hours you visit each shopping centre and car park they own and check on your investments. You are then really invested in HK property with a nice annual income of HK$164k, no tax return either. Just what I would do. But most people will not be deterred by the facts.
=== ===
Interesting, no doubt.
Here's a chart for Link : http://tinyurl.com/Link-823
For Henderson Land : http://tinyurl.com/HendLd-12
And here's a comparison : http://tinyurl.com/HendLd-v-Link
The question that needs to be asked is:
Why did Link outperform Henderson Land (HK12) to such a great extent?
The answer may be that Shopping boomed in HK, Link successfully upgraded its malls, more than HK12 was able to grow its property development business. But from here, one has to wonder if Link still has more upside? Or if, instead the property developers like HK 12 etc will be the better investment.
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The Rally in the Hang Seng Index ...
http://img32.imageshack.us/img32/2183/hsi.png
... It may be rolling over now
Long Term HSI ...
http://img27.imageshack.us/img27/6205/hsi2.png
... also looks set for a Rollover.
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From the last post, HSI has dropped and then rallied again.
It is back up to just below 20,000. And I think it is a good time to consider selling / "going short"
As I like to do so with limited risk, I have been buying Put Warrants on HSI today.
I favor late Sept and late Oct expiries.
If I am wrong, I have limited risk - since I am only risking the options premium.
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The balance sheet looks pretty solid (cash about equal to borrowings) but a much smaller discount to NAV than many of the HK developers who have PRC operations. The brokers seem to be pretty negative about the stock (which may or may not be tha meaningful).
Any particular reasons for buying 410 over other property counters?
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Impact of New Stamp tax for Non-Permanent residents...
Mid-day, on day one:
Well, the Hang Seng Index is down, but not by much
21,490.80 -54.77 / -0.25%
Property stocks have taken a much bigger hit
HK:01 : 111.60 -6.20 / -5.26% : Cheung Kong
HK:10 : $45.50 -0.35 / -0.76% : Hang Lung (mostly in China)
HK:12 : $52.30 -4.60 / -8.08% : Henderson Land (big land bank)
HK:16 : 105.40 -6.40 / -5.72% : Sun Hung Kai
HK:17 : $12.00 -0.90 / -6.98% : New World Dev'l
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The Value of Land : Can One Own too much Land?
(Based on article in today's SCMP, Money Post, pg.5)
Price of HK Developers after stripping out their non-property assets
PROP. DEVELOPER----- : Price* change/ %Chg : Earns. : PER-- : BkVal. : PtoBk. : ROE
===
HK01 / Cheung Kong---- : 111.60 -6.20 / -5.26% : 24.80 : 4.50 : 155.00 : 72.0% : 16.07%
HK12 / Henderson Land : $52.30 -4.60 / -8.08% : 10.88 : 4.81 : 142.25 : 36.8% : 07.57%
HK16 / Sun Hung Kai---- : 105.40 -6.40 / -5.72% : 17.25 : 6.11 : 139.75 : 75.4% : 12.31%
HK17 / New World Dev'l. : $12.00 -0.90 / -6.98% : $3.12 : 3.85 : $28.66 : 41.9% : 10.97%
==============
I have adjusted the above figures to reflect this morning's price drop.
And in calculating Price-to-Book Value ("PtoBk", above), they subtract out from price and bok value,
the value of Non-property holdings, such as huge holdings that HK12 has in HK and China Gas,
and in HK Ferry, Miramar Hotels (which taken together are worth HK$72.6 billion.)
Other holdings of other developers:
=====
HK01 : Hutchinson Whampoa, CK Life Sciences
HK16 : SmarTone Telecommunications
HK17 : New World Development Store
According to the SCMP:
HK12 has a lower ROE because it has money tied up in "unproductive" land investments, generating a lower return. I agree with that to a point. But you also need to look at the return on Equity, taking the equity at Market Value (which I do not think they have done), and consider what sort of future returns HK12 might make on its land holdings, and not get to carried away with one or two years earnings.
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(Duplicate post, from the Main thread):
Ed, Your:
"Loyd... re Holland... he is in dreamland if he thinks the US economy is going to 'take off'
If they stop printing then interest rates rise... and the economy collapses... first of all they would have to service 17 trillion dollars of debt... and secondly housing, auto loans, student debt etc... the cost of debt will go through the roof...
Japan did not recover even after 8 or 9 rounds of QE... why would the US?"
== ==
It is possible that US rates could be pushed up by a flight from bonds, which are looking wobbly now. This would involve a big shift in market psychology, and I think it would come AFTER a drop in the Euro, which might later spread to the USD, causing people to flee bonds.
If it happens, even more money would flood into the HKD.
I think that the government was right in one respect, by imposing the BSD and a 3 year "hold" on HK property (before people could escape tax), that insured that the "hot" money coming into HK would not flood into property, which was already overvalued.
Where can it go?
It can sit in cash - but normally that is too boring for hot money. So I suppose much of it will wind up pushing into stocks, especially those will reliable dividends. And maybe some property stocks too. So once the current correction in property has run its course, property stocks may be a good place to park some capital.
I will watch the charts...
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Ed
11 yrs ago
But if there is a flight from what is perceived to be the safest asset class on the planet - US debt - does that not mean that nothing is then safe (because if the US crashes we all crash).
Does money not pile into precious metals?
That said, is there already not a massive flight from US debt? Isn't the Fed buying up something like 70% of new debt issuance?
My expectations is that the Fed will buy 100% if necessary... they will absolutely not allow interest rates to rise... because if they do the economy will be run over by a steam roller... imagine what happens to the housing market if rates go up... the consumer will wilt on the vine if rates increase by much...
As Warren Buffet said in 08 "you find out who is swimming naked when the tide goes out" - rising interest rates would expose a LOT of people who are making financial decisions under the assumption that interest rates will remain low
This a pretty good summary of the situation...
"Ever-rising interest rates are not an option. We will continue to monetize the debt from here on out. We have no other choice. Welcome to the beginning of the end."
http://communities.washingtontimes.com/neighborhood/politics-blue-collar/2012/dec/24/qe4-monetizing-debt-no-possible-exit/
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The last "two men standing" (amongst money) will be: USD and Gold.
Then just Gold.
But real assets, like property, and maybe stocks should retain some value in a wobbling economy.
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Ed
11 yrs ago
After the Gold Rush
http://www.project-syndicate.org/commentary/the-end-of-the-gold-bubble-by-nouriel-roubini
Wonder what happens to the price of gold when the EU and/or Japan economy implodes?
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(for the record)
===Old Comment===
Let's kick this off with the Mystery of the Day : What's happening with HK-12 today ??
Henderson Land is taking a very big "hit" today
$47.65 -$7.10 / -12.97%
Not sure why yet - I will investigate
=== Unquote ===
We know the reason now (Bonus Shares).
But it seems that Lee Shau Kee was a big buyer, mopping up
6.6 million shares from May 28 to June 3, worth HK$369 mn.
And also:
44.96 mn shares worth HK$2.47 Billion (!!) since results were released in the last week of March.
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So if you adjust for the bonus and the dividend (12 went ex dividend at the same time), the share price only fell about 1.7% on the day. Not really significant.
It's about 14.7% off its 52 week high which compares favourably with SHK (24.2%) and Cheung Kong (22%).
Having the chairman continue to buy is a nice confdence boost.
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Hang Seng Index (HSI) has drifted down to a support level - at 21,500 ...
http://img713.imageshack.us/img713/4241/83949562.gif
If that breaks, where next?
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HK;HSI / Hang Seng Index ...
Approaching key support near 20,000
Chart: http://img835.imageshack.us/img835/8321/7uv.png
It isn't just Bernanke who is spooking the markets.
As the WSJ put it: "The past week's spike in Chinese interbank rates...
show that the Chinese have decided to call time on one of the graetest credit expansions in history."
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OTP,
I am not a trader / hedge fund manager. Can you explain to me what is meant by support level? I am assuming that it is a level where traders assume many stop-losses / puts / calls are set, is that the case? Is there any factual data out that suggests where the support levels are, or is it just guessing / psychology?
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20,000 or so, is a level where you would expect the price slide to stop, or reverse.
If support at that level does not hold, it may then fall to the next lower support level
I identify them based on Trendlines and Moving averages
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IMPORTANT SUPPORT LEVELS:
HK-01 : Cheung Kong: $95 - to be tested soon? ...
http://img16.imageshack.us/img16/7558/dby.png
HK-16 : Sun Hung Kai Prop's: Channel broken. Next test $85 ...
http://img15.imageshack.us/img15/2637/ze.gif
HK-10 : Hang Lung Group: Support at $36 may be threatened ...
http://img811.imageshack.us/img811/4971/idu.gif
HK-12 : Henderson Land: If Channel breaks, next big support: $34 ...
http://img844.imageshack.us/img844/9840/6fv.gif
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INSIDERS Buying: between 17 to 21 June
HK-410 / Soho China : +HK$108 mn
HK-54 / Hopewell : +HK$56 mn
HK-12 / Henderson : +HK$9.1 mn = 195k shs at $46.56 : Lee, S.K.
HK-16 / SHK Properties : +HK$200 mn = 2.03mn at $98.30 : Kwok, Thomas (owns 16.1%)
HK-20 / Wheelock : +HK$3.0 mn = 74k shs at $40.40 : Woo, Peter (owns 60.2%)
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COOL Opportunity?: "Buy Developers while home prices are falling" - SCMP
Article by Tara Loader Wilkinson suggests specific HK developer shares
Nicole Wong (Prop. analyst at CLSA): "bearish on most HK real estate":
===========
+ Believes investors should postpone buying physical property: retail, office, or resi.
+ Rising rates could cause prices to fall by 15 percent over next 18 months
+ Supply could increase by 40pct, from 16,000 units to 23,000 by year-end
+ "We prefer the developers themselves" (to physical property)
+ BUY rating on: HK Land, Wharf, Swire Props., Hysan Dev'l
Joyce Kwok (Prop. analyst at Credit Suisse): "maintain market weight"
==========
+ Results from developers have been "fairly healthy... despite challenges:
+ Developer share prices are "deeply discounted... could trigger repurchases."
+ Share buybacks may be a catalyst to a revaluation
+ China may allow more cities easy access to Hong Kong, cud add 1mn+ visitors
+ Those with prime shopping malls (like Wharf) could benefit
+ Retail rentals could rise by another 8%, helping Wharf and Hysan
+ TOP PICKS: Henderson Land, New World Devl, Sun Hung Kai Props
+ ALSO : Wharf, Hysan
=== ===
Personally, I think it is still too early to buy the developers,
and most of the charts look like the stocks are "rolling over"
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NOTES - Rivalry fuels fears over price cuts / SCMP article by Sandy-Li
======
Developers are being forced by competition to offer steeper price cuts
+ Fears of a sharp price correction are spooking stock punters
+ Cheung Kong (HK-1) has been singled out as one of the most resilient - up 7% this year
+ Cullinan's discounts of "almost 20 percent"* have "marked the beginning of the discounted sale of unsold units",
: says Susanna Leung at CLSA: "Home prices will come under growing pressure of downward adjustment."
+ Failure of SHKP to achieve impressive sales "could have an immediate downwards impact on property prices"
+ "Developers are testing the market and finding the floor prices"... She could not rule out a price war
+ Leung forecast home prices would fall 15 percent by year end
+ Joyce Kwock (Credit Suisse) : HK developers NAVs will fall 6-10 percent, if HK property prices fall by 20 percent;
: that sort of fall might cause stock prices to trade at a discount to NAV of 28 to 48 percent
+ Andrew Lawrence (CIMB Securities) expects property prices to fall "up to 15 percent in 2014",
: and a further 15-20 percent in 2015 - He prefers co's with a faster churn model, shorter land bank duration,
: and a smaller exposure to the HK Property market. He likes CK, HK-1
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Key Test coming for Bellwether HK property stock ?
Henderson Land / HK:12
CHART:
http://img51.imageshack.us/img51/6429/xpbq.png
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Possibly - but Mr Lee has a habit of topping up his shareholding on any dips. At least I hope so - it's one of my larger investments.
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MIND THE GAP (duplicate post - for the record here)
(1)
Developers are enjoying the Rosy Scenario
+ 430 homes were sold last weekend
+ Some 2,000 homes are about to be released
1. Monte Vest - : Tai Po ------- : 1,350 flats
2. Riva---------- : Tuen Mun----- : 778 flats
3. The Avenue- : Wanchai ------ : 179 flats
4. Double Cove : Ma On Shan-- : 176 flats
5. ChathamGate : Hung Hom--- : 031 flats
6. Long Beach - : Tai Kok Tsui-- : 020 flats
7. Dunbar Place : Ho Man Tin--- : 012 flats
Centaline says the number of NEW flat sales rose 150 per cent year on year in the last quarter to 3,880, with their value jumping 270 per cent to HK$41.2 billion.
The secondhand market has been quiet, mainly because the agents are pushing new properties so hard, thanks to the higher commissions. And buyers seem to be confused by all the discounts they see advertised, and are doing a poor job of assessing relative value.
(2)
And yet the share prices of most (not all) developers have been trending down recently. Even allowing for some margin compression (lower net prices and higher construction costs), I have some difficulty in reconciling the share price movements with the primary sales data. Perhaps the share market is pricing in heavier discounts to come?
(3)
The stock market is looking forward.
But there may be a growing gap between Bearish expectations, and stable reality - And at some point, that gap may narrow suddenly, perhaps resolving itself with share prices rising.
REMEMBER this?:
Aug 1 — "Government cooling measures to rein in Hong Kong's property market are finally taking a toll on the city's powerful developers and industry watchers forecast prices could drop by up to 15 per cent in the second half of this year."
(post #2, on the New Property, "Developer's Game - Cut Prices" thread on AX)
There was certainly no 15 per cent drop in the second half
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