Buy H Shares Now!

Investing is a little like playing BlackJack. If you watched the movie, "21", about a bunch of math students who developed a system of card counting, you will understand. A group of players put minimal bets and count cards until the table is "hot". A table gets "hot" when the dealer throws out sufficient numbers of "small cards" or cards below a number, say 6 and below. The odds of the dealer drawing a "large card" subsequently increases and increases the odds of the dealer running over 21.

When the table is HOT, a signal will be given and several players on the table will throw up extremely large bets. The typical odds for a blackjack player is around 45%. But with card counting, the odds increases to > 60%. You still lose 4 out of 10 times but hey, over the long run, you make more money than you lose.

Investing is like card counting, only difference is that it's legal in investing. You can stack the odds in your favour by looking at valuation matrixes, other monetary indicators and charts.

 

This one is my favorite! “The best investment decisions are the ones that are initially the most uncomfortable because everybody will disagree with you! If everybody agrees with your decision, then you are merely part of the crowd and will NEVER buy anything cheap, nor make superior returns!”

 

1.       Look at Shanghai Composite Index. It has risen by over 20% this year and has not fallen due to the HK riots.

2.       SHCOMP used to have a much higher PE ratio than Hang Seng China Enterprise (China companies listed in HKEX). But now, the reverse is true. SHCOMP is now at 11.52x PE. Near the Jun 2014 bottom of 9.7x.  

 

 

 

Look at HSCEI, fell by 9.8% due to the riots. I’ve called many of you to buy some now.

 

 

HSCEI’s PE is now lower than SHCOMP! 7.3x PE vs historical low of 7.2x in Sep 2014! You are NOW at the historical LOW! Remember, take care of downside, the upside will take care of itself!

 

 

 

 

 

 

Div yield of HSCEI is now 4.2%. The highest was 6.6% in Dec 01. Lowest 1.13% in Sep 07. Median is 2.69%. Chinese H shares are paying halfway higher than the average div yield and higher than the Chinese govt 10y bond yield of

 

 

The rule of thumb is: buy the ETF 2828 if it’s superior to funds. Buy the funds if they are superior to ETF.

1.       Oct 2011 to now: UBS China Opp up 18.6% per year, or 66.6%.

2.       First State Regional China up 12.3% per year, or 41.6%.

3.       2828 HK up 6.3% per year, or 20%.

 

It’s obvious you should buy the funds not the ETF in this situation. The fund managers consistently add value. Request factsheets from me if you’re interested!