Is it possible to call the Peak ?



Posted by OffThePeak 3 yrs ago
The HK property market could be peaking right here and now:
As I have said before:
2015-2017: Or 2016 +/- One Year
To be followed by a 3-5 year correction

CHART (added 22 Dec. 2015 in edit):
. . .
Centaline Leading Index--- :
WeekEnd: -CCLI- : -CMMI- : ParkAv: C'ribC : TaikSh. :
08/30/15 : 146.78 : 148.27 : 13,273 : 7,577 : 14,923 :
2014-yrE : 132.45 : 133.50 : 12,582 : 6,141 : 13,301 :

Change : +10.8% : +11.1%: +5.49%:+23.4%:+12.2% :

(If not In September, within a few weeks, and most probably before year end.)
Here's some chart evidence that this peak may be likely:
The HK Property stock index has shown already shown a deep correction since the Peak, four months ago.

+ The Peak was -- : 37,737.99 (early June 2015)
+ Closed Friday at : 28,324.25 - 9,413.74 / -24.9% below the peak !

HS Property index* ... HSP : 15-years : 5-years :

The correction is already deep, but the uptrend channel is not broken (yet).

A break of the uptrend may precede a 10% or deeper correction in the Centaline Index. My best quess is we will see a drop of at least 30-40% over the next 3-5 years. This forecast is based on the 18 year property cycle.

===== =====
*HSI Property index:

Components :
Name / Symbol----- SHHK/AH : Last-- : Chg. : Turnover : P/E(x) P/B(x): Yield: Market Cap
WHARF HOLDINGS : 004.HK : 40.400 -1.050 : 208.04M 3.41 0.40 4.48% 122.45B
HENDERSON LAND : 012.HK : 46.250 -0.000 : 170.23M 9.05 0.64 2.16% 152.64B
SHK PPT-------------- : 016.HK : 94.650 -0.450 : 595.83M 7.60 0.62 3.54% 272.22B
NEW WORLD DEV-- : 017.HK : $7.510 -0.170 : 157.95M 5.48 0.41 5.59% $67.55B
SINO LAND----------- : 083.HK : 11.180 +0.180 : 064.87M 7.22 0.60 4.47% $68.02B
HANG LUNG PPT---- : 101.HK : 17.420 -0.140 : 122.42M 6.67 0.59 4.36% $78.14B
CHINA OVERSEAS-- : 688.HK : 22.150 -0.150 : 519.76M 6.53 1.36 2.48% 218.41B
LINK REIT1------------ : 823.HK : 41.050 -0.300 : 309.89M 3.47 0.80 4.45% $92.64B
CHINA RES LAND--- : : 18.280 -0.240 : 230.87M 7.25 1.10 2.71% 126.70B
CK PROPERTY2---- : : 53.950 +0.900 : 601.04M N/A- N/A- 0.00% 208.23B

HS Property Index--- : 110003 : 28,324 - 85.21 : 2.98-bn


OffThePeak 3 yrs ago
(This is not the first time I forecast a peak within this present time window.
I did it earlier this year, about six months ago):
"Let me be crystal clear on this:
My cycles work suggest a Long Cycle High in 2016 +/- a year.
So any sign of slowdown in (early) 2015 may be temporary.
2016 or late 2015 may be better timing for a top.
But the HK property market needs watching now imho...."
= Unquote =
> see:

My original forecast of a peak at this time (2015-17) goes back many, many years !
Based on the 18 year cycle (14 years up + 4 years down)
The maths are:
Last Peak, 1997 + 18 = 2015, and
Last LOW, 2003 + 14 = 2017,
and so:
2015-2017: Or 2016 +/- One Year

To be followed by a 3-5 year correction

I expected a Stock index peak to lead the peak in the Property index by 6-12 months.
In this case, June to Sept. would be a lead of just 3 months... So a Sept. high looks a bit "early", but it can happen that way.

OffThePeak 3 yrs ago
(Other are quietly climbing onto the bandwagon):

MOST POPULAR stories / SCMP : South China Morning Post
Hong Kong home prices could begin falling next year, says JP Morgan
Warning bell for the end of Hong Kong's 12-year property rally is ringing louder
10 SEP 2015
More young Hongkongers commit suicide over unaffordable housing and lack of social mobility
=== ===
Hong Kong home prices could fall by 5 per cent to 10 per cent over the next three years, according to JP Morgan, which warned of the risks of an economic slowdown in the city.
A slowdown marked by falling retail sales and a softening mainland economy would adversely affect home purchasing power and buying desire, said Cusson Leung, head of conglomerates and property research at JP Morgan.
Leung told a press briefing on Friday there were a number of factors that could affect the performance of Hong Kong property market, such as credit leverage and capital flow, while adding that he did not see any immediate risk of over-leveraging of real estate or capital outflow.

The unemployment rate is expected to rise
However, he raised concerns over a potential slowdown of the city’s economy, linked to the risk of further decline in the mainland China economy.
“Retail sales are declining and international brands are talking about network consolidation in Hong Kong,” he said. "The unemployment rate is expected to rise.”
Leung said the impact of the negative factors would become more obvious early next year. “2016 will be a more difficult year when compared with 2015. Home prices could see a decline,” he said.
A woman pushes her child past a property agency's window in Hong Kong. Photo: AFP

While saying that JP Morgan had not yet reached a house view on the degree of home price falls, he said it was possible prices could drop by 5 per cent to 10 per cent a year over the next three years, starting from next year.
Hong Kong home prices rose 13.5 per cent last year and 8 per cent in the first half of this year, according to the data from the Rating and Valuation Department.
Leung said home prices were unlikely to see a sharp plunge of 30 per cent in a year unless a crisis or really bad unexpected news hit the market.
. . .

Experts expect up to 10pc drop in home prices as global uncertainties and stock market rout dampen sentiment, ending a 12-year price surge
. . .
The warning bell signalling the end of Hong Kong's 12-year property rally is ringing louder with more experts predicting that the stock market rout and economic uncertainties at home and abroad will accelerate a price correction.

Analysts widely expect home prices could fall as much as 10 per cent this year. Hong Kong home prices have risen 9.8 per cent since January after soaring more than 360 per cent from 2003.

OffThePeak 3 yrs ago
823 - Link?

I will take a look.
I have also been looking at 87001 (the China REIT)
Hang Lung Group (10) / HL Properties (101)

OffThePeak 3 yrs ago
(They are not the only ones ramping up completions and sales)
SHKP plans to triple annual flat completions - SCMP, pg. B1
+ Will complete more than 3mn sq ft over the next three years
+ "It will be our largest number of completions since 1997" (then: 4-5mn sf)
+ For the year ended June 2016, will go to 3.8mn sf, up from 1.0mn sf
+ Early year was down, thanks to delays at Ho Man Tin, Yuen Long
+ Average for next three years: 3mn per annum
+ Could go as high as 5mn p.a., if they acquire enough land
+ During the last year, SHKP acquired six sites
JPM is expecting home price to drop by 5-10% pa over the next three years.

OffThePeak 3 yrs ago
With the HK property market now peaking out (maybe), it is interesting to review where gains were the best

We can now see...
We have seen some pretty terrific gains,
for "cheap" properties near MTR stations - since the Lows in 2003 and 2009
- in places like Fanling Centre - which are right next to MTR stops,
though far away from Central

Fanling Centre Per SF, gross : $7,727.32 / Per SF, net : $9,932.14 : up 1.10 %


Both rents and property prices have shown big gains:
The big rally from about $1500 (2003) to $8000 (2015): + 433% must be one of the biggest in Hong Kong.

An MTR link is coming from Shatin to Central, which will serve to reduce substantially the travel time to Central.

For HK as a whole, we have seen a gain from 32.16 (2003) to 146.76 (2015) - that's +356%

Some years ago, property agents with major firms, like Anne Marie Sage were telling their clients to stick to prime properties in prime locations, while I was telling people to think about buying cheaper properties with good transport links. We can now see clearly who was right.

OffThePeak 3 yrs ago
My original post said:
"My best guess is we will see a drop of at least 30-40% over the next 3-5 years."

Are these guys copying me, after all these weeks?
(This must be why they pay me the big bucks... not !
But I used to be paid more than 99% of the folks reading this thread, probably.
For analytical and other efforts. Ah. those were the days!
And you get if for free. Why? Maybe someone can give me a good reason to continue.)

Hong Kong home prices could tumble 30 per cent through 2017 on deteriorating economy: UBS

UBS reported that downside risks exist in Hong Kong property market, mainly driven by several macro-factors, including liquidity, job market conditions, inflation, the HKD's relative strength, and interest rate hikes. Different from past down cycles that were triggered by global economic shocks, this round of price reversals should be caused by a deteriorating local economy. Therefore, the price drops may come more gradually and over multiple years. Although the market's focus is on mortgage rate hikes, the broker believed other factors are more important to property prices.

UBS pointed out that Hong Kong property prices have surged by 340% since 2003. They may recede 25% to 30% frown now to the end of 2017.

UBS predicted that prime retail rents for local shopping malls could fall by up to 25% between now and the end of 2017 while the rapid growth in Chinese visitor spending in Hong Kong may no longer exist. The broker cut developers' target prices by 6% to 16% as there could be further downside pressure on share prices given property prices have just begun to fall.

The broker downgraded WHARF HOLDINGS (00004.HK) -1.100 (-2.506%) icon.png Short selling $70.90M; Ratio 41.729% icon.png and KERRY PPT (00683.HK) -0.700 (-3.196%) icon.png Short selling $317.55K; Ratio 1.529% icon.png from Neutral to Sell as the former focused on high-end retail properties while the latter has relatively higher Hong Kong residential exposure among its peers. HENDERSON LAND (00012.HK) -1.500 (-3.175%) icon.png Short selling $38.51M; Ratio 38.902% icon.png was downgraded from Neutral to Sell as its share price was held up in the past year as the chairman expanded its stakes for several times. However, the broker believed it is reaching the limit. NEW WORLD DEV (00017.HK) -0.380 (-4.853%) icon.png Short selling $16.14M; Ratio 12.608% icon.png was downgraded from Buy to Neutral.
(Quote is delayed for at least 15 mins.Short Selling Data as at 2015-09-29 12:25.)

Greene King 3 yrs ago

Any idea as to how land prices are doing? Developers who feel prices may be going down in the next two/three years will be reducing what they are prepared to pay for land coming up at sales or not buying at what they may perceive as high prices.

OffThePeak 3 yrs ago
thanks, Greene K.
I don't have any up-to-date data on HK Land prices, but I will watch the news reports in the Standard and elsewhere.

I think your argument makes good sense. So if the developers pull back, maybe that will be a sign that they agree with me and UBS and others that property prices are peaking,

Another thing to watch is Bank Valuations. But I do not find them very aggressive right now. I sold my own property for about 4-5% over the bank valuation, which I found irritatingly low.

OffThePeak 3 yrs ago
I think you know that I prefer HLG / HK10 and HLP/ HK101
Partly because it has corrected so far, and partly because of the big discounts to NAV

Do you know what the NAV of Link might be?

OffThePeak 3 yrs ago
HLP and HLG trade at huge discounts to NAV.
They have billions of cash, and plenty of room to go on increasing dividends.
And I like the charts. Taken together, I find them more attractive than Link,
which I will not study more fully, until I like the chart more.

OffThePeak 3 yrs ago
RENTS Face Pressure

Says article in today's SCMP (P1)... due to delivery of several major projects in Q4 and the resulting Supply pressure

+ First times since 2011 when new Supply exceeds Demand
+ 15,000 new properties to be completed in 2015, and 30,000 if one includes govt housing
+ Home prices could drop by 20% when interest rates start to rise
+ 5 -10% falls in both rents and home prices are expected in 2016

Before this pressure, rents at 50 Key Housing estates hit a record high of $33.56 psf,
but mo-on-mo growth slowed to 0.4%.

Thomas Lam of Knight Frank expects a 5% drop in rents in Q4 alone.

Greene King 3 yrs ago
I think the impact of an interest rate hike soon is overblown, I would imagine any raise will be minimal, something like 0.25 at least to begin with and unlikely to rise much in the next few years. To me there are other factors that have a bigger impact on whether to buy or not - the amount of deposit required, the expectation that prices will rise or fall in the future and certainly whether or not you feel your job is safe. I believe the secondary market will be quiet with those not needing to sell sitting and waiting. The removal of government cooling measures will also be something to consider, sooner or later these measures will be removed (after a 20% fall?) and there will be an immediate upswing in prices, its all about timing...

Greene King 3 yrs ago

I hear you about government's making money however a sharp fall in prices will see no end of estate agents laid off, complaints from those who bought late and a general depressive mood in HK in general. I think they will then cut some or all of the measures in place - after all these measures were claimed to have been put in place to stop speculation. Also a fall in prices will likely mean a fall in revenue from land sales, that is definitively something they won't want.


I note mention is made of new properties to be completed, that doesn't necessarily mean new units put on the market or even new units put on the market at lower prices (to ensure they sell). I am sure you are aware that it's not totally unknown of for some blocks in developments to be moth-balled until prices improve...

OffThePeak 3 yrs ago
"How do you calculate the NAV?? "
The company with report their NAV or Book Value periodically

CALCULATION : Relative Value (Updated: 9/29- on Low prices ):

Symbol---------- : HK-10 : HK101 :
Last Price----- : $25.80 : $17.00 :
Dividend, est.-- : $ 0.81 : $ 0.76 : - see post #14
Yield- %, est. -- : 3.14 % : 4.47 % :
Book Value/sh.: $55.90 : $29.50 :
Discount Book: -53.8% : -42.4% :

OffThePeak 3 yrs ago
" I am sure you are aware that it's not totally unknown of for some blocks in developments to be moth-balled until prices improve... "

Haha, Sure!
Like where I used to live: the Long Beach.
But that's Hang Lung, and it is pretty rare.
In fact, if developers get they idea that prices are headed lower, they may cut prices in the rush to sell - even Hang Lung might rush to sell the remaining properties they have at TLB.

I think that one reason that have been so slow to sell at TLB is that they thought the property was a gem, with a great location, and was bound to rise in value. That's what I heard from someone who was/is an assistant to the chairman, Ronny Chan.

They did this with other properties too, but were particularly slow at TLB.

I am reinvesting at least part of the money received in my sale of my unit at TLB in HLG stock. I get a slightly higher net yield, no 15% tax, and much better liquidity. I also think that HLG has the potential to raise dividends, even if rents in HK drop somewhat - they are VERY cash rich - they have something like 20X dividends covered by cash

HKLEV 3 yrs ago
Is it possible to call the Peak:
Easy: the hong kong tourism board has a visitor centre there, tel 852-25081234.

OffThePeak 3 yrs ago
FOR THE RECORD here - from the other thread:

"OTP, apart from the long-term trend,
why do you think that the price of properties will drop over the next years?"

Supply now IN THE PIPELINE is rising, and so we will see in Q4-2015 the first Quarter since 2011 when the expected increase in Supply will be more than the Expected increase in Demand There are likely to be several more quarters like that in 2016-2020

Interest rates are expected to rise any time now. And once the rise starts, it may go on for years. As you will see on the Weimar 2.0 thread, I think that commodities may have fallen as far as they are going to. A switch to rising commodity prices could underpin YEARS of rising rates

Sentiment is a key driver. Property prices have risen faster than rents, and I would say that is due to low rates and bullish sentiment. A switch to bearish sentiment on its own might take 10-20% off prices over 3-5 years.

Another 10-20% may be lost due to a deterioration in Supply/Demand fundamentals, and rising rates. Taken together, I would anticipate something like a 30-40% drop over the 3-5 years after the Peak.

OffThePeak 3 yrs ago
MORE SIGNS of a soft market in yesterday's SCMP

Rents are softening in the NT : down 10-15%,
thanks to growing supply.

There's a story of an owner in Fanling accepting a rent of $8,300 (for a lower floor flat under 400 sq ft) after failing to get the asking price of $10,000.

I think $10k is clearly too high, and maybe $9,000 or so per sf would be right for a lower floor flat, and it could be less, if in poor condition. So that's more like softness, rather than a 10%+ drop imho.

There's definitely some new supply coming in various non-prime areas, especially for the (popular) smaller flats

Greene King 3 yrs ago

However from The Standard yesterday....

Home prices, rents hit another high

Private home prices have hit another record high, according to an index compiled by the Rating and Valuation Department.

The index in August hit 305, up 0.36 percent from a month ago, and the highest level ever. It has risen 17 percent from a year ago.

Prices of flats smaller than 430 square feet saw bigger increases when compared with larger flats.

Average rents in August also hit a new high – up 0.7 percent from July.

But some analysts predict that the rising trend in prices and rents is coming to an end on expectation of an interest rate increase by the US Federal Reserve and a slowing local economy.

Swiss global financial services company, UBS, has predicted that Hong Kong property prices would fall by up to 30 percent by the end of 2017.

OffThePeak 3 yrs ago
Thanks, Greene King

You are probably aware that there is a 1-2 month delay in the numbers from that new source,
and a August or September peak would be perfectly in line with my initial post on this thread

OffThePeak 3 yrs ago
ENTER the Dragon (Bagholders) ... Is this how excess supply will come in?

Exposure over profit
To do this, the new entrants are using a competitive bidding strategy, one that often eclipses their far more price sensitive local rivals. “Mainland developers are far more aggressive,” says Joseph Tsang, JLL’s Managing Director and Head of Capital Markets in Hong Kong. “They’re pursuing exposure over profit, and using their owned subsidiaries to win bids, build high quality stock, and muscle out the traditional Hong Kong players. In their eyes, Hong Kong is a lucrative brand asset, and a valuable stepping stone to other markets outside of China.”

“Developers from mainland China are expanding aggressively overseas because of the increasingly challenging business environment back home ,” Ma confirms. “They’re picking Hong Kong because the market is hugely attractive at the moment, and fits in well as part of a wider growth strategy.”

Mainland firms have proved keen to partner with smaller Hong Kong companies, matching their financial muscle with local expertise. This has kept capital flowing into Hong Kong, and provided a welcome boost for local businesses. The competition has also ensured an uptick in quality. Tsang notes that with more competitors, “local developers are becoming sharper in design, layout, and materials.”

But in a market like Hong Kong, it is pricing that receives the most focus. How will this arrival of new developers impact the market? ”We’ve not seen any impact on pricing yet as the mainland players are still very new to market,” says Tsang. “However, I’m certain we’ll see an impact in 2016 and 2017 once units come onto the market. What that impact is remains to be seen.”

Womble68 3 yrs ago
Prices on the rise in China , the reduction in interest and bank ratios just announced will only help . A big fall in HK at same time property is increasing in value seems less plausible now ?

OffThePeak 3 yrs ago
Mixed message - New versus Old / High percentage finance vs Low

The article from Sunday's SCMP (pg.7) delivered a mixed message about property demand.

On one hand, there was a report that 95% of the properties in a new project (Eltanin Square Mile in Mongkok) sold out. These were small flats of 176-390 sf, priced at from $4.12mn to $7.29million. But demand and prices in the secondhand market were said to be weaker. What's going on here?

+ The new propeties came with up to 90% finance: 60% from the banks amd 30% from the developer. It is rare that anyone can buy a property in HK with just 10% down, so this is bound to appeal to many buyers. I reckon that most of the 30% from the developers is their profit margin; and so they are getting it later with interest, rather than taking a chance the property prices will fall

+ Secondhand prices are said to be soft, off 3-5% in the last month or so. And I would call that the "real market", away from financing gimmicks. But this degree of fall has not yet shown up (fully) in the Centaline index

+ Big agents are still predicting falls now "after a 12 years bull market", with Colliers predicting a 10% drop in 2016, and CLSA forecasting a 17% drop up to 2017.


Note for Duracelll: that explanation for a 14 year upcycle came from Fred Harrison, in his book and told to me in person. I'm not sure he really believes it himself. They rhythm is well establish, as is the 18 years peak to peak. 18 years after the 1997 peak would be this year, 2015. That's only 12 years up from the 2003 low. And I do see many signs of a possible rollover occuring now in HK prices.

Greene King 3 yrs ago
What seems to be holding back both buyers and sellers is uncertainty of how the market will perform in the future rather than worry in general over the economy/unemployment (and therefore ability to pay the mortgage) ie when should I sell/buy to maximise my profit rather than can/will I afford the payments? I also think there are so few secondary sales at the moment that one sale in one estate can really skew the going 'market' rates for homes.

OffThePeak 3 yrs ago
I agree, Greene King.

And usually the market is driven be sentiment.
Right now, the sentiment is cautious, since people have a sense that a shift in prices could come as new Supply comes out - Hence the financing "tricks" to move new projects.

It is normal for transactions to dry up before a fall. That does not guarantee a fall is coming., but this is fitting the historic pattern well

Hath 3 yrs ago
cents-index down again 4 weeks in a row I believe.... interesting to see Kowloon and HK have taken the biggest hits and not NT. Any thoughts ?

OffThePeak 3 yrs ago
Is it possible to call the Peak?
From the Original Post:
"The HK property market could be peaking right here and now:
PEAK NOW? : (If not In September, within a few weeks, and most probably before year end.)" / UNQUOTE
So far so good !
Just 3-5 years to the next major Low.

Week : CCLI : CMMI :
vsHigh: -2.69% :-3.07%
10/25: 142.98 144.05:
10/18: 144.33 145.54:
10/11: 144.61 146.10:
10/04: 146.45 148.22:
09/27: 146.01 147.61:
09/20: 146.67 148.39:
09/13: 146.92 148.61: HIGH (so far)
09/06: 146.76 148.27:

Hath 3 yrs ago
another fall kowloon takes another hit HK Island has small gains overall its at 141.76

OffThePeak 3 yrs ago
Right on Schedule? : HK Property Slide underway

Centaline index announced yesterday: CCLI: 141.76 - 0.85%

Home prices shaky after hitting a record high - SCMP, pg. A3

Official price index up 9.9pc this year though softening market will be evident next month

+ Sept's index from RVD climbed 0.22 in Sept. to a record 305.9*.
And the Rental index was up 0.28 to a record 177*, up 6.5 pc since the start of the year

+ Ricacorp's data slowed some slowing in Sept. with the average price of small flats below 430 sf, down 3.6 pc in Kowloon, and 4.1 pc in the N.T.

+ Inventory of unsold homes rose to the highest level in 15 months, at 7,176. With sales down 22.6 pc in October to 3,300 units, that's a 2.17 month surplus

+ Investment banks are now predicting falls of 30 percent up to 2017. Meanwhile a govt tender failed for the first time this past week, in Tsing Yi. Barclay's says prices are now 2.7 percent down from a mid-September peak

=== ===
*The different between the index level of 305.9 for property prices, and 177.0 for the Rent index shows the huge outperformance of property. They both started at 100.0 in 1999, and in Sept 2013, they were at 245.5 and 156.3.

Greene King 3 yrs ago
Interesting article from The Standard on 5 Nov.

Make-or-break days for agents

It would seem those owners who need to sell may have to make bigger reductions in their asking price which in turn has an impact on the market ie once the market falls it could fall further quite quickly.

latex 3 yrs ago
very interesting thread. I'm a big fan. when shit hit the fan, do you think it will drop more than >30%? 30% is very safe.

OffThePeak 3 yrs ago
"Make-or-break days for agents"

No wonder the agents are flocking to the primary market:

+ Higher commissions
+ No tricky negotiations on price
+ HK buyers like new

I do think that Agents will soon start "talking the market down" again, i order to get more sales

Yes, L.
A drop of more than 30% is feasible

Greene King 3 yrs ago

The question is why would prices fall 30%? There is an increasing supply of units coming on the market however there is still a need for more homes. The economy is doing OK and unemployment is low. Interest rates may go up slightly but for most owners this will not force them to sell and most buyers I believe will still buy. Construction costs, combined with land costs, don’t provide much room for developers to undercut secondary sales. So really the major impact upon the market is sentiment rather than being driven by economic reasons. I personally think that prices will fall slightly from September/October highs then do nothing as secondary market transactions dry up. If the Chinese economy does not pick up by end first quarter/mid 2016 then I think prices could start to fall further especially if there is a recession in which case prices could fall 30% or more otherwise I think prices won’t drop more than 10% or so.

Hath 3 yrs ago
I think hk market is very much based on sentiment and loads of flats here are bought for capital appreciation not rental returns once the returns either stagnate or show signs of falling people prefer to get out I know loads of ppl who own multiple (10+) flats and I agree the end users won't look to sell but the ones with multiple units will look to place there money in better performing assets.

OffThePeak 3 yrs ago
Here's a fact of life in markets: They are driven by sentiment.

In a bull market, buying sentiment can feed on itself.
And it can also happen in a Bear market, where lower prices help to drive the idea that prices will fall further, and cause buyers to pull back

Now here's yet another factor that the SCMP mentioned in an article today:
Banks are CUTTING THEIR VALUATIONS - the article said by 5% to 30%.
This is another factor that may help drive prices lower, since Buyers will only be able to finance up to 60% (or whatever) of the Bank's Valuation, not 60% of the actual purchase price.

traineeinvestor 3 yrs ago
I don't know where the article got the 5-30% decrease in valuations from. HSBC lowered its valuation on my home by 2.2% from it's peak.

Agree that lower valuations make it harder for people to come up with a deposit but they will also act as an additional disincentive to some owners selling.

Also, if the market starts to slide by a meaningful amount the government may remove some of the cooling measures in an effort to stabilise the market.

Greene King 3 yrs ago

I agree sentiment is important but surely to drop 30% there must be economic rationale behind such sentiment. Since possible market peaks around September very little has changed economically - rate raise may be more likely however I believe the impact will be nominal and already allowed for (they have been due to rise for months). The increasing developer supply has also be discussed for months. And if anything the economy has improved if you look at China share prices.
I still believe that if land sale prices do not fall by a large amount and/or unemployment starts to rise any fall will be limited.

OffThePeak 3 yrs ago
CYCLICAL FORECASTING - has worked well in property markets
But many do not think that way

Greene King,

I do not forecast the way that you were taught to forecast.
The traditional way is not very effective. Wait and see how my forecast works out.

For me, markets move in cycles and patterns, and they can be observed in historical charts. The main driver is sentiment, and the cyclical "learning process" that is going on, as sentiment changes. The traditional guys, who are less accurate, will pin the fundamental "reasons" to the market moves after they happen. To me, they are working with backwards logic, and my approach is forward looking. So don't ask me for "my" reasons, since we can all identify them later, after the fact.

Like anyone, I can speculate what the bearish factors might drive the market lower. And my starting point would be to look at the massive gap between Prices and Rents. Prices are up 205.9% to an index level of 305.9 since 1999, and Rents are up just 77% to 177. If Prices backtrack to where rents are now - and return to their historical 1999 ratio to rents, they would fall by 42.1% (177/305.9= 57.9% ) - if rents stay where they are now.

So you can ask: Why have Prices climbed so much more than Rents:
+ Interest rates have fallen to ultra-low levels, the lowest in history
+ Supply has been constrained, and only now is rising faster than demand
+ Mainland China buyers have been big buyers since the 2003 low, but less active since the cooling measures were introduced - but many still become Hong Kong ID holders and buy when they can without paying the extra tax. That's a source of extra demand, and things could happen to turn some of these mainland owners into sellers.

So any of the these three factors might change in a negative way, or all three, and these adverse changes would undermine the property bull market, and bring prices back towards their historical relationship to rents.

asenk1234 3 yrs ago
The answer given for the random question was incorrect.

Hath 3 yrs ago
Doesn't that further proof that people were chasing capital gains over rental yields and has always been the case with hk. Once those big gains dry up property is no longer a great asset to hold (stocks might get average returns but property is material asset over a virtual one and is a lot more stable for me like many hkers capital appreciation has been the driving force over annual returns

Greene King 3 yrs ago

Here is another interesting way to look at property prices;

Quoting from the link below:
Alfred Lau, a property analyst from Bocom International predicted the potential fall in prices from looking at real estate prices relative to property stocks. Lau said that Hong Kong home prices are now the highest compared to property developer stocks in almost two decades.

OffThePeak 3 yrs ago
Good find!
That's more or less what I am saying too.
"Hong Kong home prices are now the highest compared to property developer stocks in almost two decades"

In my idea of the typical cycle, Property Shares peak first: maybe 6-12 months ahead of the actual property prices.

And then they lead property prices lower. To me, that's the message of that article.

latex 3 yrs ago
its not a matter of when...

we get to read same message everywhere....

cnbc - Why Hong Kong's property bubble looks set to deflate

scmp- hk property sales slump 19 month low

china daily - Hong Kong's property sales drop 18% in October
(Xinhua) Updated: 2015-11-04 07:56

scmp - hk home sales slump weakening take up

Greene King 3 yrs ago
Perhaps we need another subject namely 'Is it possible to call the low?'

The 'experts' in the MSM have been predicting falls of up to 30% for the last few years (just do a search for 'Hong Kong property to fall' or similar). The clever thing is not predicting a rise or fall but getting the timing and the depth right. It does now seem however that the last bull run peaked September/October, so what now?

-when will be the low?
-how deep will it go?
-will we have a dead cat bounce?
-when (if?) will the government relax SSD and other measures imposed to reduce speculation?

Here are my predictions:
-prices will fall 10% below peaks by early 2016 then stabilize
-if there is bad economic news prices will fall a further 10%-15% by mid 2016 and there will be lots of outcry from estate agents etc and the government will loosen some measures resulting in a uptick of 10% which may or may not hold (the dead cat bounce)

If there is a new SARS type illness or some military issue in the South China Sea then prices could fall much more than 20-30%. Ditto if the government reduces land sale prices (as developers can cut their prices).

But then what do I know?

Greene King 3 yrs ago
The CC Index from yesterday is 141.13, down from the peak in September of 146.92, a 4% fall. The last four numbers have been below 143 and it looks like for now at least sentiment has turned bearish. I wonder if rents will fall in the near term - in theory rents should follow prices however if people are holding off buying will they therefore need to rent? Also the index is based on secondary market sales perhaps new sales have risen?

日期 Date 中原城市領先指數 CCL
2015/11/09 - 2015/11/15 141.13
2015/11/02 - 2015/11/08 142.14
2015/10/26 - 2015/11/01 141.76
2015/10/19 - 2015/10/25 142.98
2015/10/12 - 2015/10/18 144.33
2015/10/05 - 2015/10/11 144.61
2015/09/28 - 2015/10/04 146.45
2015/09/21 - 2015/09/27 146.01
2015/09/14 - 2015/09/20 146.67
2015/09/07 - 2015/09/13 146.92
2015/08/31 - 2015/09/06 146.76
2015/08/24 - 2015/08/30 146.78
2015/08/17 - 2015/08/23 145.45

OffThePeak 3 yrs ago
Prices raced ahead of Rents for years, and in a correction they may come back into closer alignment - ie notional yields may rise back towards historical levels. That is especially likely if interest rates rise

OffThePeak 3 yrs ago
Might the end of "Smurfing" and the closure of the Underground bank have an impact of HK's property market?

It might be harder for mainlanders to get money to HK

Here's the story:

China said it cracked the nation’s biggest “underground bank,” which handled 410 billion yuan ($64 billion) of illegal foreign-exchange transactions, as the authorities try to combat corruption and rein in capital outflows that have hit records this year.

More than 370 people have been arrested or face lawsuits or other punishment in the case centered in eastern Zhejiang province, the official People’s Daily reported on Friday, citing police officials. The case brought the total for underground banking and money-laundering activities to 800 billion yuan since April, the newspaper said.

The probe began in September last year and the police took almost a year to sort through more than 1.3 million suspicious transactions, the state-run Xinhua News Agency reported separately. The authorities froze more than 3,000 bank accounts, Xinhua said.


Greene King 3 yrs ago
For the last three weeks a friend has had their place up for sale (NT West), so far only had 5 visits from potential buyers and no offers. My friend was thinking of selling back in June and had the place on the market then before deciding to delay the sale; in June they were getting 5-10 potential buyers each weekend.
My friend’s recent experience seems to reflect Hong Kong in general as mentioned in this Bloomberg article at the end of October:

Hong Kong Existing Home Transactions Headed for 20-Year Low

One amazing statistic mentioned in the article is:
‘The number of transactions in the secondary market may fall to about 2,000, the lowest level since at least 1996 when the property agent started collecting the data, Derek Chan, head of research at Ricacorp, said in an e-mailed statement Wednesday. That would be lower than the 2,200 to 2,500 monthly transactions recorded in 2003, when the city was in the grip of the severe acute respiratory syndrome, known as SARS’.

Greene King 3 yrs ago

That is what I said, cut the price even if it is 5%! They are not in a negative equity position but don’t want to cut, they talk about how ‘X’ or ‘Y’ previously sold a similar unit for the price they are asking. The agents have also been reluctant to cut the price (as their fee will be less and also with so few units selling this would drag the local market lower). I expect though that the agents will suggest my friend takes a lower offer as a lower fee for them is better than none at all.

OffThePeak 3 yrs ago
This story just demonstrates how much easier it is to sell property in a rising market, rather than in a falling market.

In a rising market, you can sit with your price, and eventually the buyers will come to you. In a falling market, you need to make your price look cheap, since almost all buyers will be expecting a bargain.

The number of viewings they are getting now is not so bad, but I do not think they are likely to get a sale unless they cut the price. Maybe they should hint that they are open for some negotiation, and see if they can get any offers.

A price cut of 3-5% is a good way to start. Cutting by 10-20% against no bid would look like desperation, and may actually scare away potential buyers, who would wonder if there is some hidden problem.

"The agents have also been reluctant to cut the price (as their fee will be less..."
This is not credible to me. A halfway intelligent agent would prefer 95% of a commission from a quick ad easy sale, to 100% after many long weeks and months of negotiations

Ed 3 yrs ago
UBS is calling a peak...

The Swiss bank UBS - an even bigger player with $2 trillion under management - has issued its own gentle warning on bonds as the US Federal Reserve prepares to kick off the first global tightening cycle since 2004. UBS expects five rate rises by the end of next year, 60 points more than futures contracts, and enough to rattle debt markets still priced for an Ice Age.

Mark Haefele, the bank's investment guru, said his clients are growing wary of bonds but do not know where to park their money instead.

The UBS bubble index of global property is already flashing multiple alerts, with Hong Kong off the charts and London now so expensive that it takes a skilled worker 14 years to buy a broom cupboard of 60 square metres.

Greene King 3 yrs ago
Quoting from the above:

'London now so expensive that it takes a skilled worker 14 years to buy a broom cupboard of 60 square metres'.

Maybe a broom cupboard in London, 60 sq m in HK is unfortunately a family size home....

Greene King 3 yrs ago
On the SCMP web today:

SHK & CKPH have started a price war in Yuen Long.

Also mentioned was the estimated land premium for 9th phase at Lohas Park is 10% lower than the 8th phase.

And finally Centaline said they expect secondary home sales this month will drop to 1300 – 1500, a 30 year low. Now that is big news! Compare to 2200 -2500 a month during SARS.

And all this without planes getting shot down in the Mid East ....

Greene King 3 yrs ago
The way I see it is that the Paris attacks and the bombing of the Russian plane did occur a few days ago and there was minimal impact, if any, on the stock exchange or housing market here. The Russian plane downed by Turkey only just took place so would not have had any impact yet (and may also have no impact) however this must surely depend upon how Russia responds and whether there is a chain reaction.

Hath 3 yrs ago
centaindex down to 140.27 or a 4.52% fall since peak (146.92) in 10 weeks.....

OffThePeak 3 yrs ago
In late 2008, we had more than 20 consecutive weeks where the falls
averaged about 1% a week.

That type of slide is not happening (yet( in HK

jenlin1127 3 yrs ago
Dear OffthePeak, my company is interested in talking more in depth with you about the possibilities for writing for us some opinion pieces. Please contact me at +85298050585 or so that I can give you more backgruond details?

Many thanks and I look forward to hearing back from you.

OffThePeak 3 yrs ago
I just saw that... I have written accurate analysis and even a successful book in the past.
There's not much money in the writing. There's more in successful investing.
But I will see what they have in mind.


Week : CCLI : CMMI :
===== Leading: MassMkt
PEAK-: 146.92: 148.61: (09/13/2015)
Change -4.83%: -4.74%:
11/29 : 139.82: 141.57: (11/29/2015)
>Centaline's Indices:

Hong Kong's Property market is now almost 5% off its mid-Sept. peak

OffThePeak 3 yrs ago
And so it begins...

Weekly drops in Hong Kong of over 1% !

That's what we saw in the "bad old days" of late 2008

Week : CCLI : CMMI :
===== Leading: MassMkt
PEAK: 146.92 148.61:(09/13)
Chg-: -5.93% : -5.72% :- since the peak
12/06: 138.22 140.11:
Chg-: -1.14% : -1.03% :- latest week

Where's the Bubble biggest?

Hong Kong property Will bubble finally burst in 2016?
Nikkei Asian Review-3 hours ago
HONG KONG -- A slump in home sales on the eve of a U.S. Fed rate hike ... Home mortgage rates will rise due to the Hong Kong dollar's peg ...
The official home price index in October fell for the first time in 19 months. Transactions fell in the second half of the year to their lowest level in recent years, after the Chinese stock market rout in summer.

The secondary home market has almost dried up as buyers have adopted a wait-and-see attitude. Developers are offering attractive mortgage discounts as a last-ditch effort to shed inventories and lure homebuyers into the primary market.

Despite some signs of vulnerability, a dominant view is that retail residential prices will remain resilient in 2016, then fall more sharply in the next few years.

Property consultancy Jones Lang LaSalle expects home prices next year to slide 0-5%, which largely aligns with DTZ/Cushman & Wakefield's forecast of a mild drop of 5-8%.

Less optimistic is UBS, which expects home prices to tumble more than 25% in the next two years. Knight Frank echoes the view, adding that the housing market is entering a three-year downward cycle. They expect the cumulative fall in prices to reach 30% by 2018, with an initial fall of 5-10% next year.

> more:

They aren't bearish enough IMHO.
I think we could see 15% +/- 3% down from the top, before a good bounce

OffThePeak 3 yrs ago
Here is ONE of several possible scenarios that would fit my Cycllcal concept.

I have simply tacked the price action from 1997 to 2001 onto the prior peak.
These are HKD per SF (Gross) prices in Taikoo Shing:

The Drop is 33% from about $15,000 psf to $10,000 psf.

Remember: Just One of several possible scenarios.
The drop in the first 12-18 months (if that's how long it lasts) may not be so steep.
And the following rally might be different

I will plan to revise this scenario, or add another one to it, when I have sufficient info to do so.

OffThePeak 3 yrs ago
As China falls.... HK's Property share index (HPI) tests support

ShComp : 3,125.00 -236.84 : - 7.04% > L of Yr: 2,850.7
HK - HSI : 20,363.8 -617.00 : - 2.94% > L of Yr: 20,324
HK - HPI : 28,237.3 -479.00 : - 1.67% >

CN : ShComp ... 10-years :

HK's HPI ... HK Property Developers Index


OffThePeak 3 yrs ago
Weak Rents, Falling Prices - reports the SCMP

Economic Woes take toll on Leasing
"Rents at blue chip estates are falling faster than prices"
Rents are down 16% at Taikoo Shing, and are also weak at other estates as middle class families cut their rental budgets in anticipation of a weaker economy. Recent news of pay and hiring freezes at banks and brokerage firms are adding to the deteriorating sentiment

Yuen Long to see biggest growth in new flat supply
Eleven new projects - comprising a total of nearly 4,200 flats are due to be launched in coming months. The secondary market is nearly dead as agents focus on new properties - which are more lucrative for them

OffThePeak 3 yrs ago
Yuen Long - this is only the start

SHKP released the first batch of 108 units at Twin Regency in Yuen Long at an average of HK$11,360 per sf, about 15 per cent lower than Cheung Kong Property's Yucci Square. After a discount of 11%, prices are HKD10,138 psf. And the cheapest flat costs $9,372 psf - that's 299 sf at $2.8 million

Greene King 3 yrs ago
Yes the first flats at Yuccie were priced at $13,580 sq ft back in November.

I would imagine developers are however hoping that the special measures will be removed soon so they don't need to cut prices. I still see no government action until CCI is 120 though however I am more bearish than before and even then I still see little appetite in the market to jump in and buy given the current economy.

OffThePeak 3 yrs ago
It doesn't hurt to LOOK.
I may look. But I certainly wont buy, with 10 more new projects on the way.
But looking now may help to understand the real bargains that may come later.
For the same reason, I had a look at Yucci Square, and discovered it was built next to a Red Light area

Greene King 3 yrs ago
I was in Yuen Long and had a look around. The Yuccie is in a convenient location for the trains. The Park Vista looks very grand and is in a more green area but is quite a bit out of town.
Yuen Long also has the Yuen Long South development zone planned with another development zone near Tin Shui Wai. If these all go ahead (likely but when?) there will be tens of thousands of new homes.

OffThePeak 3 yrs ago
For those who thought HK Property would always be Prime, a blue chip Safe Haven...
take a look at this article from today's SCMP:

New foreign real estate investors may turn their attention away from Hong Kong to other developed markets such as Singapore in a bid to remove uncertainties that include political influence from China, says UBS Asset Management

That’s a major reversal of a few years ago, when Hong Kong and Singapore were both classed as safe havens Asian, which helped them to attract investment from abroad, according to William Hughes, global head of real estate research and strategy at UBS Asset Management.

“Now, Hong Kong is a bit different than Singapore,” he said.

China’s rising political influence in Hong Kong has eroded the city’s independent, he said.

One consequence is heightened uncertainly, which means the city’s property market would become more domestic driven as foreign investors pull out.

[Policemen rest following pro-democracy protests in Hong Kong on September 29, 2014. Photo: AFP]

“This is the separation in Hong Kong and Singapore recently. Singapore has a high level of foreign investment and Hong Kong is becoming more towards domestic investment,” he said.

Before the downturn is over, probably in the 2019-2020 window, the confidence in HK may be further shaken.
BTW, I reckon that Singapore is still in a cyclical downtrend

Greene King 3 yrs ago
Property overall has fallen around 15% from the peak. And this basically as a result of sentiment ie the economy has not really changed since the peak. The economy however is likely to deteriorate over the next two years which is likely to impact the property market. the bottom of the cycle will most likely depend upon when the economy improves, my feeling is around 2019, But who knows? The world could be in for a massive depression which will change things.

OTP your thoughts?

OffThePeak 3 yrs ago
"OTP, what do you think the bottom price for properties will be like? In some areas, the property prices have already dropped by 25-30% (or close of that). I think once you wrote that you expect property prices to drop by 30% (from Sept. 2015 prices) within 3-4 years. "

To be honest, I think the TIMING and the Market Sentiment matter more than the price drop.

It seems way too early for a low now. Having said that, I would not rule out a really strong bounce at some point. But if we saw that from here, I would expect lower lows later, like about 2019-2020

The overall set-up just doesn't seem right for a major Low. There's more stress coming in the global economy IMHO, and people's confidence remains too strong. A true low of this type - a low in the 18 year cycle - would normally be associated with people hating the market, being very fed up, and thinking that it may still be many years before a recovery. People are not thinking like that.

I use the generally indices, like the CCLI to judge the extent of the drop, and I think it is down about 15% now, not 20%+

OffThePeak 3 yrs ago
Bank tips 40pc home price dive
May 10, 2016

Deutsche Bank predicts local home prices will drop by 40 percent in the next three years, with half of that decline taking place this year.

It said in a report that the selling rate and the number of transactions in the local home market are significantly lower than the bank's estimates. Currently, the average selling rate of new mass-market flats is 40 percent within the first month of the project being launched. That for luxury apartments is 19 percent .

During bleak periods in the past 20 years, the average selling rate for new mass market flats stood between 41 and 67 percent, and that for new luxury flats between 30 and 74 percent .

Deutsche Bank said the recent performance of the home market was the worst for the past 20 years. Prices in the home market started to go down in September last year, and transactions have yet to recover so the bank believes it will take awhile for prices to reach the bottom.

Deutsche Bank said transactions have to increase by 2.93 times per month in order for the home market to digest that amount of new supplies coming in.

Also, prices will have to drop at a faster pace in order for the number of transactions to reach that level, the bank said.

The government predicts the potential private housing supply in the coming three to four years could reach a total of 92,000 flats, or 23,000 per year.
> more:

OffThePeak 3 yrs ago

(a comment on a thread about the Philippines):

"I believe that the investment return numbers will have to look pretty good before investing in Philippines. I do not believe that 8-9% gross yields would be good enough. For example, certain cities in the US property market are realizing much higher yields with less risk"

My own experience is this:

+ Hong Kong property prices are down 12% since the sale of my flat closed in Sept. 2016

+ The Philippines condos I have purchased, are up: 10%, 5%, and 5% (approx.) since purchase

+ Two houses in Philadelphia are generating 11%+ pre-tax returns, which showing approx. capital gains of 30% and 10% (per Zillow valuations)

In hindsight "getting out of Dodge" (Hong Kong property) was a smart move*. And I am looking at Makati, Philippines as a place to have a similar standard of living as Hong Kong, but at a much lower cost. The biggest surprise so far has been the rapid gains in Philly. I want to buy more there, and prices have moved up so fast, I am being cautious now.
=== ===

*Did you see the articles on HONG KONG on pg. A5 of yesterday's SCMP?

+ City's GDP growth at slowest in 5 years
GDP grew at just a 0.8% rate in Q1-2016, and the official forecast of 1.5 percent looks like "an uphill task". Visitor arrivals in March were down more than 10% year-on-year

+ Harvard professor, Niall Ferguson, sees HK as being stuck between two poor choices:
: Economic suicide, by trying to go independent (as falling on its face), or
: Playing Beijing's game, which would mean the abandonment of historical freedoms

Do people reading this, still truly believe that HK will always been seen as "the safe choice"? The risks are increasing imho, and the 2-3% net yields, and ongoing capital losses in HK, do not look "safe" at all to me. But i realize that if you buy into conventional thinking, you may be comfortable brushing aside the realities that I keep pointing out.

Why do you think conventional thinkers perform so poorly? They cannot foresee "out of the box" risks, which my cycles help me to anticipate.

OffThePeak 3 yrs ago
On US Stocks: I am Ringing the Bell : It is Time to put your Puts in Place !

Bounce is very near key resistance
IWM / Russell-2000 etf

David Stockman predicts another economic recession
"The investor shouldn't be looking for growth, the investor should be looking for cover:"

As Stockman said earlier : David Stockman: The World Economy Has Stopped Growing And Is Headed Into A Depression
Market is ready to rollover - is trading ay 24X Trailing Earnings.
There's a huge bubble in the bond market

I am putting my money where my mouth is, and buying Puts here

Ed 3 yrs ago
Makes perfect sense.... in the old normal....

The only downside is that the central banks appear to be determined not to allow the market to fall.... by all rights the stock market should have long ago imploded... corporate earnings have dropped 5 quarters in a row.... yet the market does not capitulate.

The big fear of traders featured in The Big Short was that eventually they were going to be right... that the market would turn as they expected -- but that it would implode ... and they'd be right but not get paid....

OffThePeak 3 yrs ago
But let;s see,
I am basing this timing call on both fundamentals, and chart patterns.
They don't always work, but sometimes they provide a brilliant way to see thru the smoke

Ed 3 yrs ago
Hong Kong Home Prices Have Much Further to Fall Before Controls Are Eased

Memo to Hong Kong developers calling for the government to ease property curbs amid a slump in home prices: Don’t hold your breath.

Declines in the residential property market have to get a lot worse before Hong Kong’s lawmakers would consider rolling back measures they introduced more than five years ago to rein in prices, according to eight analysts and economists polled by Bloomberg News. On average, they estimate that home prices, which have fallen 13 percent from a September peak, will have to plunge another 19 percent before the government intervenes.

A correction of that magnitude would be Hong Kong’s biggest since a six-year downturn that lasted until 2003 and would exceed declines during the 2008 global financial crisis. Still, officials may be willing to stomach such a historic slump because they’re more concerned with the widening wealth inequality that’s helped drive Chief Executive Leung Chun-ying’s popularity to a record low. Hong Kong ranks as the world’s least affordable housing market and Leung reiterated in May that prices remain too high.

"Any policy change has a policy risk," said Eva Lee, a UBS Group AG property analyst in Hong Kong. "If we are still in a low-interest rate environment, if they encourage investment demand, the market will get crazy."


Mac-010 3 yrs ago
OTP: How do you see gold now; bottom or further to drop before consolidation done ?.

OffThePeak 3 yrs ago
It may go a bit lower, but I have started buying again in the last few days.

I am putting back to work, the cash I extracted at higher levels.
Some of my buying has been thru Jan Calls, and so if it drops another 3-5%,
I will be ready to just buy more

OffThePeak 3 yrs ago
GOLD was up $33 per oz. Yesterday

I bought gold (in various forms) almost every day this past week.
I will pause now, to see what happens

Greene King 3 yrs ago
The HK economic forecast for the short to mid term does not look good. A major element is the expected rise in unemployment. Investment banks across the globe are hacking staff and HK is not exempt, this will hit the luxury market. HK's construction unemployment is now 5.4%. Unemployment in other sectors is also rising and some companies are making staff take pay cuts. Bottom line is as unemployment rises home prices will fall; we are now starting to see real impact upon people's lives as a result of the economic downturn. A 20% fall by this time next year from today's home prices?

OffThePeak 3 yrs ago
Decapitation? A Major turn now in place?

European Markets are getting clocked today
World Markets
Nikkei- 225 : 16,601.: - 0.40%
Hang Seng : 21,043.: - 1.20%
FTSE- 100 : 6,134.4 : - 1.57%
DAX-------- : 9,873.9 : - 2.13%


Global stock markets may have been decapitated yesterday.

Several markets gapped down, and left in place a formation at the top, that looks similar to an Island Reversal.

This may be associated partly with the realization that Brexit and the break-up of the EU is a real possibility

Ed 3 yrs ago
Here’s What Fueled the Rally in Stocks since February

A huge force that’s going to fizzle.

We have another post-Financial Crisis record on our hands!

Share buybacks by S&P 500 companies during the three-month period of February through April soared 15.1% from a year ago, to $166.3 billion, according to FactSet, the highest since Q3 2007, which had set an absolute record of $178.5 billion, just as the Financial Crisis was cracking the glossy veneer of the banks.

The tech sector, whose revenues have been getting hammered by reality, was the biggest spender at $34.4 billion.

The healthcare sector was second. When insurers and Big Pharma aren’t busy buying each other in the ongoing mega-merger oligopoly or monopoly boom, they’re buying their own shares. Buybacks over the 3-month period soared to $33.2 billion, an all-time record for the sector, blowing away its prior record of $24.5 billion.

The biggest buyback spender overall: Pfizer with $8.1 billion. It reduced its outstanding shares by 1.5% year-over-year. It was part of an existing $11-billion buyback program and a new $5-billion program that was announced to make up for debacles elsewhere, such as the collapse of its $160-billion merger with Allergan.

Just when you think the market is/should crash.... the buy backs snatch victory from the jaws of defeat!

1+1= 7.9876

Blue = yellow

Up = sideways

Apples are growing on orange trees...

This is madness.

OffThePeak 3 yrs ago
REVISITING : a post from 10 months ago (Nov. 2015):

"I am reinvesting at least part of the money received in my sale of my unit at TLB in HLG stock. I get a slightly higher net yield, no 15% tax, and much better liquidity. I also think that HLG has the potential to raise dividends, even if rents in HK drop somewhat - they are VERY cash rich - they have something like 20X dividends covered by cash"
=== ===

Homes slump 'bottoms out'
Dominique Nguy Jul 21, 2016

Morgan Stanley and Citibank believe the Hong Kong property market has bottomed out, forecasting that home prices will rise by 5-8 percent in the second half of this year due to low interest rates and the release of "suppressed demand."

A report by Morgan Stanley said as the worry of an interest rate hike lessens and the unemployment rate remains at a relatively low level, it is predicted that the "suppressed demand" for flats may help lift the home price.

The bank forecasts home prices going up by 5 percent in the second half.
. . .
Hang Seng Bank (0011) head of retail banking and wealth management Margaret Kwan Wing-han said there were only an average of 2,000 new mortgages per month in the first quarter, but there had been an average of around 6,000 per month in the second quarter.

Sure. Why not.
Property stocks bottomed some time ago, and are well off their lows.

I bought HK-10 too soon last year at $26, and then saw a 25% drop all the way down to $19.46. But HK-10 is now back above $26, and my position is in profit, with $50,000+ in dividends collected. But I am lightening up now, since I do not expect this (temporary?) rally to last, and expect lower lows in the months and years to come - given the supply that is coming.

Ed 3 yrs ago
6 quarters of declining earnings.... yet the market keeps going up ...

Money printing as an economic model... will eventually fail....

Ed 3 yrs ago
Stocks Were Already Crashing the Last Two Times this Happened. So What Gives?

The foundations have crumbled. All bets are off.

Over the last 20 years, margin debt – when investors buy stocks with borrowed money – went through three multi-year run-ups, each topped off with a spike, followed by a reversal and decline: during the final throes of the bubbles in 2000 and 2007, each followed by an epic stock market crash – and now.

That pattern of jointly soaring and then declining margin debt and stocks even occurred during the run-up and near-20% swoon in 2011.

The grand cycle began in February 2009, at the trough of the Financial Crisis, when margin debt had dropped to $200 billion. It was followed by a multi-year record-breaking run-up, topped off with a spike that culminated in an all-time peak of $507.2 billion in April 2015. Then margin debt reversed and began to decline. On cue, the stock market began to decline a month later. Margin debt zigzagged lower, and stocks did too. But in February this year, stocks suddenly bounced off sharply – without margin debt.

The New York Stock Exchange reported on Monday that margin debt declined again in June, by $3.7 billion to $447.3 billion, just a hair above where it had been in February.

This chart by Doug Short at Advisor Perspectives overlays margin debt and the S&P 500 from 1995 through the end of June. The data is expressed in today’s (“current”) dollars to eliminate the impact of inflation.

Even adjusted for inflation, margin debt and the S&P 500 hit a record high in April 2015. By the end of June 2016, the S&P 500 was again at a record high, but margin debt had dropped 12%. That divergence (red arrow) hasn’t happened for at least the past four decades:

There’s a reason for this relationship. Margin debt is the great accelerator for stock prices, on the way up and on the way down. When investors buy stocks with money they don’t have and that the broker creates for them, it drives up stock prices, and these higher prices allow investors to borrow more money against the same number of shares, which drives up share prices further. Leverage is a wonderful mechanism to create demand.

gdep 3 yrs ago
When you are showing earnings Growth rate trend, you need to show the same i.e growth rate for the stock market .. not the absolute levels of stock.

is the growth RATE in stock market exceeding the earnings growth?

Ed 3 yrs ago
This is a better visual.... I don't think this has ever happened before...

Ed 3 yrs ago
“Stock Markets Should be Down Massively,” but Investors “Hypnotized that Nothing Can Go Wrong”

Stock investors have entered a “world of uber complacency,” Jeffrey Gundlach, CEO of DoubleLine Capital in Los Angeles, explained – we assume with some bafflement.

On Friday, the S&P 500 hit another all-time high, after it was reported that the US economy grew at a painfully slow rate of 1.2% annualized in the second quarter, after a first quarter of 0.8% growth, which produced a first-half growth of 0.9% annualized, the worst in four years.

Even “adjusted” ex-bad-items earnings of S&P 500 companies have declined on a year-over-year basis for four quarters in a row. Total business sales in the US have declined since mid-2014. Defaults of companies rated by Standard & Poor’s have jumped to the highest level since the Financial Crisis. Overall business bankruptcies are soaring. Yet, stocks march higher.

So Gundlach told Reuters in a telephone interview: “The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good.”

“The stock markets should be down massively, but investors seem to have been hypnotized that nothing can go wrong,” he said.


Ed 3 yrs ago
“You can’t save your economy by destroying your financial system.”

Yep.... when the QE spigot was opened in 2008.... that was like pointing the Titanic at an iceberg and shoveling tonnes of coal into the boiler...

And the passengers have been oblivious to the consequences of QE.... in fact just the opposite...

They have gathered at the rails cheering as the Titanic picked up speed.... cheering as the Centadata index showed that the tonnes of coal were having the effect of establishing new speed records....enjoying the wind in their hair....

And voices urging caution were ridiculed.... the Titanic is indestructible! The captain and the crew have everything under control!!!

The voices of caution --- of warning -- long ago left the Titanic... boarding sailing ships... and are now in calm waters.... observing...

Ed 3 yrs ago
And this morning we have another example of how deploying The Strategy (identify failing companies - go long - wait for them to borrow money to buy back shares and drive the share price higher) can make you a lot of money:

Macy’s Jumps 10% After Sales, Earnings Decline; Will Close 100 Full-Line Stores

Nothing says panic-buy a retail stock like the shuttering of 100 stores (14%) but that is what Macy's is doing. Having beaten expectations on the top and bottom line (and reaffirming the year's forecast), we do note that the drop from last year in earnings and revenues is drastic to say the least. Macy's continues to explore asset sales, but the closure of 100 of its 728 stores (with a loss of $1 billion in revenues) seems like an odd reaction to what CEO Terry Lundgren has blamed on "abnormal weather patterns."

During the fiscal second quarter, Macy's comparable sales fell 2 percent, aided by the closing of 41 underperforming stores. Retail Metrics had been forecasting a 4.4 percent decline in comparable sales.

Of note, today's data is marekdly lower than last year...

EPS: $0.54 in Q2 vs. $1.19 in the same period last year.
Revenue: $5.87 billion in Q2 vs. $6.10 billion in the same period last year.

"A number of factors worked in our favor in the second quarter, including a normalized weather pattern, which contributed to a sales lift in our apparel business in particular," CEO Terry Lundgren said.

"We also saw a smaller decrease in tourist spending during prime summer travel months, supported by strengthened promotional events designed to increase customer traffic and conversion."


So to summarize the winning new normal formula:

Less stores, less jobs, lower sales, lower earnings, higher stocks.

Ed 3 yrs ago
Profits Plunge, Sales Drop at Macy’s. Slashes Jobs, Closes Stores. Stock Jumps 18%

Brick-and-mortar retail sinks artfully into coma.

It’s been a tough quarter for Macy’s. Again. Sales dropped 4% to $5.87 billion in the second quarter, it reported today. It had already closed 41 “underperforming Macy’s stores” in its fiscal year 2015. So among the remaining company-owned stores, comparable sales fell 2.6%. Operating income plunged 73% to $117 million. Net income plummeted 95% to a nearly invisible $11 million, or 3 cents a share.

The first quarter, on a year-over-year basis, was even worse. So for the first half, sales dropped 5.7%, operating income 53%, and net income 82%.

“We are encouraged by the distinct improvement in our sales and earnings trend in the second quarter,” is how CEO Terry Lundgren explained the phenomenon. He even gave credit to “a normalized weather pattern” – rather than blaming the weather, as is normally the case. And tourist spending dropped again, but less than before.

Then came the music to Wall Street’s ears.

In a separate statement, Macy’s announced that it would be “reallocating investments to highest-growth-potential store and digital businesses, and capitalizing on opportunities within the company’s real estate assets.” These changes “represent an advancement in our thinking on the role of stores….”

What this corporate speak means in numbers is this: It will shutter “approximately” 100 Macy’s full-line stores, or about 15% of its current 675 full-line stores. Final decisions which stores to close haven’t been made yet, it said. Most of this will happen in early 2017.

And there’s a real estate angle, testament to the breath-taking commercial property bubble that has transpired across the US, and particularly in large urban markets. It’s going to shutter “a number of stores” and sell the locations because the “value of the real estate exceeds their value to Macy’s as a retail store.”

One of them is the Macy’s Men’s Store on Union Square in San Francisco, a fabulously expensive location. It’s a big store, with a number of floors. You don’t have to wind past perfumes, bras, stockings, and handbags to get to the escalators or the underwear section. It’s a little threadbare, but who cares. I treat shopping like I treat unpleasant jobs around the house, such as replacing tile grout in the shower. When I finally decide to do it, I make a plan, and I execute the plan as efficiently as possible. That store allows me to get in, get my business done, and get out.

But that’s not what Macy’s wants. It wants me to wander past bras and perfumes apparently. So it’s “in negotiations” to sell the property. If the deal goes through, the big men’s store will be shuttered, and merchandise will be crammed into a floor or so in “a comprehensive and compelling men’s shopping experience” at the women’s store across the street. Surely, men can find other suppliers for their stuff, like online.

Macy’s figured that out too. Online retailers are eating its lunch. Amazon is cleaning house. Millennials, the customers that Macy’s really, really needs, are shopping online. And so Macy’s will try to gravitate that way and “invest in growth sooner and more aggressively in digital and mobile.”

Given all these store closings, the already declining sales will be “somewhat smaller” still – by about another $1 billion!

But as miserable as 3 cents a share in net earnings is, Macy’s couldn’t leave it at that. So it adjusted its earnings by removing the biggest bad items, such as the costs of closing stores and axing employees – which is not a one-time item but part of its regular business model these days – and the costs of the retirement plan settlement.

Thus, it managed to pump up its adjusted fictional ex-bad-items earnings to 54 cents a share, easily blowing past analysts’ expectations of 48 cents a share. But the most positive thing must have been the layoffs and store closings coming down the pike. That always sells on Wall Street.

And Macy’s shares soared 17% today. You’d think Microsoft had made one of its wild-and-woolly buyout offers, or something. But shares are still down 45% from their peak during the glory days of mere sales stagnation in July last year.

These store closings, and those over the past few years – in total nearly 200 – show that Macy’s is trying to shift its footprint out of brick-and-mortar retail into online and mobile. They’re all trying to do it, spread over years. Brick-and-mortar retail is sinking into a coma, artfully dressed in corporate speak and “adjusted” accounting figures to cover up declining sales and plunging earnings.

It’s really tough out there. American consumers are squeezed. The shift to online has been brutal. Numerous retail chains have already taken refuge in bankruptcy. Private equity firms, which thought that retail was the best thing since sliced bread and bought out numerous retailers, are now getting burned. Read… Another Leveraged Buyout of a Retailer Bites the Dust


OffThePeak 2 yrs ago
Have I missed something?

My records show:
CCLI Peak : 146.92
CCLI now - : 133.41
Change --- : - 9.2%

I have said that the market would not go straight down, and would have some rallies.

In fact, I bet on a really myself, buying Hang Lung stock - a bit early, as it turned out. I bought over HK$1 million worth of HK10 shares, and watched the price fall further. But I have now managed to exit now with profits, including a nice dividend. So as of this week, I am back out of HK stocks again (apart from holdings of Value Gold, a etf investing in Gold).

Currently, I am OUT OF HK PROPERTY INVESTMENTS, waiting with cash, and some nice profitable investments in Philadelphia property (yielding 11% pretax BEFORE capital gains), and in Philippines condos.

As for your own HK property, I would suggest you speak more to that agent, and ask him what you can actually get if you sell your property. The CCLI Index suggests the market is still 9% below the Peak.

My experience is that agents will talk the market up or down, to try and make their job easier. If he thinks you might be a buyer, he will try to tell you how strong the market is. So perhaps he gave you his market chatter,

Once he finds out you might be a Seller, watch him change his tune. It is enlightening and fun to watch them flip-flop. Go back and tell him you might be a seller, and see if he still thinks the market is back at the Top. Let's us know what happens

< Back to main category


Login now