Yesterday the HSI lost more than 1100 points again and totally wiped out the 1096 points surge in last Friday. In fact speculation on re-bounce in a down trend market is a very risky business like the attempt to catch a falling knife. So far the HSI has fallen 25.6% and 35.2% from the latest peak or the historic peak respectively. The biggest trigger of the plunge is out of question the outbreak of the global pandemic. As it is event driven so no one can tell where the bottom will be until the global infection rate and most of all, the death toll, are stabilized. However, it is pretty sure that a lower level is yet to come.
As what I put in my post Correction or crash?(3) that if the HSI breaks the last foothold of 19400 level then it is very likely the Wave C is on its way. Anything below 19400 means a more than 42% plummet from the historic peak. Not all stocks, in fact most of them not, are synchronized with the HSI on the magnitude of plummet. Again the history is a good reference. The valley of 10676 in 2008 October is the departure of the past uptrend. The prior peak of this valley is 31958 in 2007 October. The valley was a 66.6% fall from its peak. However, many stocks have suffered more, or much more, loss than was the then HSI lowest point. For example, SHK property(0016) was -72%, HSBC(0005) was -78%, Galaxy(0027) was -90%, Great Wall Motor(2333) was even -97% meaning its lowest point was only 3% of its peak! A nearly total loss!
A casual glance on most of the optionable stocks revealed a current fall of a roughly average of 40% from their 52 weeks peak now. If the HSI is going to fall further then very likely some of the individual stocks are going to be suffered a further loss from their 52 weeks peak. The record from the crash in 2008 showed the randomly chosen 60 optionable stocks have suffered an average 80% loss from their peaks. If there will be a crash and if the magnitude is same as the last one, one can reasonably expect there will be another 40% fall from their peaks for most of the stocks. This can explain why catching a falling knife now is a very risky business.
Despite the fall in stock prices in 2008 was scary but in last year some of the big cap stocks have re-bounced and even surpassed their previous peak in 2007 like CLP(0002), Hang Seng(0011), Henderson Land(0012), MTR(0066). These big cap stocks tally what Buffet's saying that in long run buy and hold on good quality stocks could be a good strategy. Having said, interestingly there are also some big cap stocks failed to return to their peaks in 2007 even amid the HSI historic peak in last year like SHK(0016), China Life(2628), PetroChina(0857) and China Mobile(0941) etc. Surprisingly these underdogs are also, or at least once, regarded as star stocks.
It seems choosing the right stocks is still the key point in terms of Buffet's buy and hold strategy but it is easier said than done. A Monday morning quarterback is of course always right. Without a crystal ball, one can only rely on the historic trend of the stocks for clue. In my post stock picking make easy I raised the idea of picking stocks with a long upward trend, say, 15 years in the hope the trend can continue even after a crash.
Apart from a track record of upward trend, if a stock is giving out a steady growing dividend payout every year in the past 10 years. If there will not be a big change in its fundamentals then it is likely that it will keep paying a promising dividend in the years to come. Naturally nobody likes to see his/her portfolio's value is cut by half or even by 80% but when a crash happened then this is the life that investor has to live with when he/she does not has a crystal ball to cash the portfolio before the crash.
While the fall in stock prices in a crash is substantive but one can choose to change the mentality to perceive it in another way. Perhaps people can imagine they are the owners of the businesses which they have stock holdings. I believe Li Ka Shing is not bothered at all even the stock prices of his companies fell in any of the past crashes because he knows his companies are still making money for him, disregard the stock price level. So as long as the portfolio of their stocks are with a solid business model that can survive this crash then people can just leave them alone and just wait to let them to climb to, hopefully, an even higher peak after this drought.
Rather than focusing on the fluctuation of the stock prices in their portfolio, perhaps one should spend more time on scrutinizing the business model of their stock holdings instead. If your stock holding displayed an upward trend in the past 15-20 years, giving you an annual 5%+ dividend and a growth on the absolute dividend amount over the years, and most of all, it shows a track record that it could make an even higher peak than that before this crash, then does it upset you?
2020年3月23日 星期一
2020年3月18日 星期三
Correction or crash?(3)
Right after my second post with the same title Correction or crash?(2) in Mar 12, the stock markets allover the world experienced a horrible Friday in the following day and days of whipsaw fluctuation. The HSI even saw the 22500 level when it hit the day lowest point.
As mentioned in the second post, three technical analysis suggest a very likely southward development for the HSI. The three technical analysis, ranging from short to long term, are the Head and Shoulder formation, supportive line formed after resisting two attempts and the possible Wave C according to Elliot Wave Theory.
Having said, it is still too early to conclude a crash is definitely on its way and there is still hope despite the recent plunge, 22.7% low of the latest peak, looks really in bad shape. The main reason lies on the hypothesis that despite of the divergence between the DJI and HSI since 2018 but in most of the time the two indexes are synchronized in direction. The recent whipsaw in the U.S. market is mainly profit-taking driven and partly event triggered by the global pandemic that sparkle the worry of worldwide recession if the pandemic persists for a long time, say a year or even longer.
The conspiracy in the U.S. market is that Trump will do everything he can to restore the three major indexes in the U.S. back to a relatively high level for the sake of his second term of presidency. The performance of the stock markets was used by Trump as the score of his office of presidency. There is about half year to go prior to the election, as long as the pandemic can be contained and compounded with the global monetary and fiscal stimulation measures that floods the financial world with excessive liquidity, the U.S. market could be saved, perhaps. The liquidity spillage over the Hong Kong bourse might save the HSI as well.
There are several footholds to gauge the possible development of the HSI. As the Index has already dipped below the first foothold of the supportive line formed after the two attempts in 2018 October and 2019 August at 24800 then the next foothold is the target of the head and shoulder formation which is around 23000 where the HSI is nagging in these past two days. A further drop below this level could mean the test of the last foothold of being a correction at the 61.8% adjustment of the total rise from the valley in 2008 till the historic peak in 2018 which is around 19400.
As long as the HSI can stay above the 19400 level, despite it is a huge fall from the historic peak but it will still be a correction because it will rise again and theoretically there should be an even higher record in the future. However, if this last foothold is lost then a true crash is really unavoidable as it is quite evidential that Wave C is really on its way. Judging from the record in HSI except the first ever crash in 1974 that the Index has dropped from 1774 to 150, the following 10 crashes since then ranged from -48% to -103% of the total hike with the average around -80% as elaborated in my first post Correction or crash?.
Will the HSI be back to or even fall below the 10676 in 2008? Let's wait and see!
As mentioned in the second post, three technical analysis suggest a very likely southward development for the HSI. The three technical analysis, ranging from short to long term, are the Head and Shoulder formation, supportive line formed after resisting two attempts and the possible Wave C according to Elliot Wave Theory.
Having said, it is still too early to conclude a crash is definitely on its way and there is still hope despite the recent plunge, 22.7% low of the latest peak, looks really in bad shape. The main reason lies on the hypothesis that despite of the divergence between the DJI and HSI since 2018 but in most of the time the two indexes are synchronized in direction. The recent whipsaw in the U.S. market is mainly profit-taking driven and partly event triggered by the global pandemic that sparkle the worry of worldwide recession if the pandemic persists for a long time, say a year or even longer.
The conspiracy in the U.S. market is that Trump will do everything he can to restore the three major indexes in the U.S. back to a relatively high level for the sake of his second term of presidency. The performance of the stock markets was used by Trump as the score of his office of presidency. There is about half year to go prior to the election, as long as the pandemic can be contained and compounded with the global monetary and fiscal stimulation measures that floods the financial world with excessive liquidity, the U.S. market could be saved, perhaps. The liquidity spillage over the Hong Kong bourse might save the HSI as well.
There are several footholds to gauge the possible development of the HSI. As the Index has already dipped below the first foothold of the supportive line formed after the two attempts in 2018 October and 2019 August at 24800 then the next foothold is the target of the head and shoulder formation which is around 23000 where the HSI is nagging in these past two days. A further drop below this level could mean the test of the last foothold of being a correction at the 61.8% adjustment of the total rise from the valley in 2008 till the historic peak in 2018 which is around 19400.
As long as the HSI can stay above the 19400 level, despite it is a huge fall from the historic peak but it will still be a correction because it will rise again and theoretically there should be an even higher record in the future. However, if this last foothold is lost then a true crash is really unavoidable as it is quite evidential that Wave C is really on its way. Judging from the record in HSI except the first ever crash in 1974 that the Index has dropped from 1774 to 150, the following 10 crashes since then ranged from -48% to -103% of the total hike with the average around -80% as elaborated in my first post Correction or crash?.
Will the HSI be back to or even fall below the 10676 in 2008? Let's wait and see!
2020年3月14日 星期六
Did we go too far?
As many other countries, apart from the epicenter China, were infected with the novel coronavirus, the WHO finally admitted that it is a global pandemic and truly it is that despite not every nation in the world but all continents with human habitat have become infected areas now. Interestingly it seems China not only "exported" the disease but also the way of the public health handling. Many countries now mimic the sealing up of districts or even cities with outbreak. Some like Italy and Spain even went to next level to seal up the whole country and imposed residential quarantine in the whole nation. It seems Herd Behaviour is in play again now, and as usual.
There is a word of wisdom saying that one's tonic could be the poison of other. Sealing up the entire city or even a nation could do more harm than good when without a thorough examination on the long term effect but just brainlessly and blindly follow what China did on the blockage in the Hubei province where the Wuhan City is as well as the outcome. So far it seems China has contained the outbreak within the Hubei province by sealing up and imposing residential quarantine over the 59.2 millions of population. The success is indeed a Pyrrhic victory and it was the last resort of the lesser evil option when the patients are way much more than the capacity of the local medical system. Most of all, this measure would not has become effective without a powerful central government, or in other name, a totalitarian administration. This is exactly what the democratic nations are lack of.
The effectiveness of the Hubei blockage also lies on the China context that she is a vast country with 13+ billions of population. The powerful central government can coordinate its resources other than the Hubei province effectively and efficiently to implement whatever measure deemed to be necessary to deal with the outbreak in a relatively small fraction of the whole nation. Sealing up an entire province with 59.2 millions of population could be a detrimental hit on its economy but it is still not up to an arm or leg to the whole nation. Without such background the sheep nations who brainlessly follow what China did could just put themselves into an economical impasse. Residential quarantine means no productivity at all for the entire nation or the related district, without the effective and efficient support from an outside source, their economy could quickly be suffocated. Revenue lost during the sealing up is gone forever like barber shops, cinemas, restaurants, gyms, amusement parks and transportation of all sorts...etc and even after the outbreak the future consumption just cannot compensate the already lost revenue so recession in those countries or districts is literally something for sure.
As what I put in my post Is A Trade Worthwhile that we should examine the probability as well as the payout whenever we decide to bet or invest. The same theory holds true when facing a risk that consideration should be put on how likely and what the damage will be. This novel coronavirus is said to be highly infectious so if there is no enough protective gears for everybody then the probability of contracting the disease is very high. This is exactly the case allover the world but the key point lies on the extent of the damage even if infected. The mortality rate, according to the WHO and the factual statistic from most of the infected countries also show that it is around 3-4% as a whole. This mortality rate is based on death toll against the confirmed infection but it is quite sure that the actual infection rate must be much higher than what it is known because many countries are just in shortage of the testing capability to verify all the vectors, especially for those asymptomatic. The disease could be less fatal than it appears to be, definitely far less than a common flu.
We must admit that we are living in an imperfect world that we cannot have the cake and eat it too. The experience for those areas with earlier outbreak could be a good reference to the late comers. China is the epicentre and Hong Kong is indeed very much synchronized on the infection. Despite there is no statutory citywide residential quarantine here in Hong Kong yet some businesses have virtually nearly come to a halt like the tourism, hospitality, dining and most retailing except grocery. So the impact on those nationwide and citywide sealed up is unavoidably comprehensive and even bigger than that on Hong Kong. Some medical experts already hinted that this virus is not going to subside soon or even probably to be with us for good. In that case, is the world really sustainable with the current mode of counter measures?
Did we go too far in light of the economic damage vs the public health crisis?
There is a word of wisdom saying that one's tonic could be the poison of other. Sealing up the entire city or even a nation could do more harm than good when without a thorough examination on the long term effect but just brainlessly and blindly follow what China did on the blockage in the Hubei province where the Wuhan City is as well as the outcome. So far it seems China has contained the outbreak within the Hubei province by sealing up and imposing residential quarantine over the 59.2 millions of population. The success is indeed a Pyrrhic victory and it was the last resort of the lesser evil option when the patients are way much more than the capacity of the local medical system. Most of all, this measure would not has become effective without a powerful central government, or in other name, a totalitarian administration. This is exactly what the democratic nations are lack of.
The effectiveness of the Hubei blockage also lies on the China context that she is a vast country with 13+ billions of population. The powerful central government can coordinate its resources other than the Hubei province effectively and efficiently to implement whatever measure deemed to be necessary to deal with the outbreak in a relatively small fraction of the whole nation. Sealing up an entire province with 59.2 millions of population could be a detrimental hit on its economy but it is still not up to an arm or leg to the whole nation. Without such background the sheep nations who brainlessly follow what China did could just put themselves into an economical impasse. Residential quarantine means no productivity at all for the entire nation or the related district, without the effective and efficient support from an outside source, their economy could quickly be suffocated. Revenue lost during the sealing up is gone forever like barber shops, cinemas, restaurants, gyms, amusement parks and transportation of all sorts...etc and even after the outbreak the future consumption just cannot compensate the already lost revenue so recession in those countries or districts is literally something for sure.
As what I put in my post Is A Trade Worthwhile that we should examine the probability as well as the payout whenever we decide to bet or invest. The same theory holds true when facing a risk that consideration should be put on how likely and what the damage will be. This novel coronavirus is said to be highly infectious so if there is no enough protective gears for everybody then the probability of contracting the disease is very high. This is exactly the case allover the world but the key point lies on the extent of the damage even if infected. The mortality rate, according to the WHO and the factual statistic from most of the infected countries also show that it is around 3-4% as a whole. This mortality rate is based on death toll against the confirmed infection but it is quite sure that the actual infection rate must be much higher than what it is known because many countries are just in shortage of the testing capability to verify all the vectors, especially for those asymptomatic. The disease could be less fatal than it appears to be, definitely far less than a common flu.
We must admit that we are living in an imperfect world that we cannot have the cake and eat it too. The experience for those areas with earlier outbreak could be a good reference to the late comers. China is the epicentre and Hong Kong is indeed very much synchronized on the infection. Despite there is no statutory citywide residential quarantine here in Hong Kong yet some businesses have virtually nearly come to a halt like the tourism, hospitality, dining and most retailing except grocery. So the impact on those nationwide and citywide sealed up is unavoidably comprehensive and even bigger than that on Hong Kong. Some medical experts already hinted that this virus is not going to subside soon or even probably to be with us for good. In that case, is the world really sustainable with the current mode of counter measures?
Did we go too far in light of the economic damage vs the public health crisis?
2020年3月12日 星期四
Correction or crash? (2)
In early October of 2018 when the HSI saw a 7100 points plunge from its historic peak of 33484 I wrote a post with the same title Correction or crash? as this one putting forward the idea that the HSI was at a critical moment. Luckily at the end of the same month, after further falling of 2000 points, the HSI found its support and saw a rally in the following six months up to the April in 2019. Therefore the plunge was proven to be a correction only. However unfortunately the peak of this rally is still lower than the historic peak. What's more, the subsequent trend in the prior eleven months from now has developed a descending channel. Today the HSI is again at another critical moment when it fell below the valley in the end October in 2018. Not only it has broken a support level of 24000 which was formed after two testings in October of 2018 and August of 2019, today's falling below of this supportive level could signal the descending channel that formed eleven months ago is very likely to continue.
Apart from the established downward corridor, the HSI also fell below the neckline of the head and shoulders formation formed from last October to this March. The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns.
The diving below supportive line, the established descending channel and the falling below of the neckline of the head and shoulders pattern all posted a southward trend to the HSI. These technical analysis revealed a pessimistic future of the HSI from a rather short time horizon though. When we take a look of the past 15 years chart. Thing is even more daunting.
By referring to my first post with the same title as mentioned earlier, you know what I am talking about. If the valley in 2009 is seen as the departure of wave 1 and the historic peak is the top of the wave 5 then this dip is lower than the previous one in 2019 which could mean this dip is indeed the wave C on the go.
I recap the last paragraph in my previous post as below.
However, if base on my view that the two debt crisis are big correction only then the departure point should be the valley after the suspension of HK stock through train followed by Lehman Brothers at 11345 in 2009 when QE began. Therefore the total hike is 22,139 points. With usual 80% adjustment it means a fall of 17,700 points so the valley of this crash, if really it is one, will be around 15700 level!
Hold tight, man!
Apart from the established downward corridor, the HSI also fell below the neckline of the head and shoulders formation formed from last October to this March. The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns.
The diving below supportive line, the established descending channel and the falling below of the neckline of the head and shoulders pattern all posted a southward trend to the HSI. These technical analysis revealed a pessimistic future of the HSI from a rather short time horizon though. When we take a look of the past 15 years chart. Thing is even more daunting.
By referring to my first post with the same title as mentioned earlier, you know what I am talking about. If the valley in 2009 is seen as the departure of wave 1 and the historic peak is the top of the wave 5 then this dip is lower than the previous one in 2019 which could mean this dip is indeed the wave C on the go.
I recap the last paragraph in my previous post as below.
However, if base on my view that the two debt crisis are big correction only then the departure point should be the valley after the suspension of HK stock through train followed by Lehman Brothers at 11345 in 2009 when QE began. Therefore the total hike is 22,139 points. With usual 80% adjustment it means a fall of 17,700 points so the valley of this crash, if really it is one, will be around 15700 level!
Hold tight, man!
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