Tips From the Hong Kong Buffett

I came across a recent interviews made with Hong Kong's Billionaire Lee Shau Kee.

A brief introductions, Lee Shau Kee is the 2nd richest man in Hong Kong (sometimes 3rd, depends on price fluctuations of the shares he is holding. For me, I wouldn't bother of the standings if I have a net worth of USD17Bil!!) and 22nd in the world ranking. He made his fortune through property and share investments. He currently controls one of the biggest property developers and conglomerates in Hong Kong, Henderson Land Development, with interests ranging from town gas, properties, hotels, internet services and etc. He has increased his net worth very significantly since 2006 after betting big on China's stock market. And hence, he was dubbed the "Hong Kong's Buffett" and "Asian Master of Stocks".

Mr Lee was recently interviewed and asked on his views about the future directions of the stock market and tips on investments. Here's the summary of what he said:

Firstly, one should pick the right country to invest. At this juncture, China offers the best opportunity and US the worst. US has too much problems to worry about, including its trade deficits and National debts which are close to USD10 trillion, the interests on such debts alone would have put a heavy burden on its economy.
(side note: the implication of such high debts? that would be another long but interesting discussions. From my point of views, debts might not necessarily mean bad things for the stock market. The national debt of America has been on the rise for the past few years, see where the Dow's heading? Breaking into new highs few times this year alone. Anyway, for the sake of this blog, I am merely translating what Mr Lee said)

Secondly, pick the right industries to invest. He personally recommended insurance, utilities and properties.

Thirdly, pick the right companies. It is recommended to pick the industry leaders, and after these leaders have risen substantially, only then one should switch to other laggards in the same industry. He continue to recommend some industry leaders like China Life (2628-HK), Ping An Insurance(2318-HK), PetroChina (0857-HK), CNOOC (0883-HK), China ShenHua(1088-HK), China Coal(1898-HK), Country Garden (2007-HK), China Oversea (0688-HK) and R&F Properties (2777-HK)
(Side Note: I haven't looked into these companies in details for some time now, the last time I checked, some of them are already very highly priced. I wouldn't be surprised if they are currently selling at 30~50 times PE.)

Fourthly, as the US start lowering its interest rates, USD devalues, dragging a few other currencies along. If one were to invest overseas, this is one factor to be considered carefully. He further pointed out that the Australian Currencies are one of the strongest currencies and offering some good interest returns.

Fifth point is a trading strategy. Buy a stock with good prospect and sell short another with bleak futures, either in another country or industry. It works something like a hedge. As an example, he recommended buying China Life and Ping An Insurance and short selling some American property stocks or Japanese Banking stocks, at the same time. The idea is, you will receive the proceeds from short selling and utilise it on buying those with good prospects. Zero capital (well, excluding some negligible transaction costs), and if you are right, you're gonna gained from both transactions. The downside risk is of course, if both of them go the opposite ways (ie. if the China stocks crashed and the US stocks prosper). However, Mr Lee himself was saying that the chances for this scenario to happen as "highly unlikely".
(side note: most if not all Malaysian trading houses do not provide much flexibility and facilities for such transactions. But such services are very common in Singapore and Hong Kong. However, personally I do not recommend short selling, unless one is very familiar with the risks involved and understand its consequences. I do agree that the global financial market is very wide-opened nowadays and is providing huge investment opportunities. In fact, that's where my personal career is heading into. More about the opportunities and potential of global investing on another blog..)

Just before the interview ended, Mr Lee predicted that the Hang Seng Index will be quiet for the month of October, however it should reach 28,000 points by year end and touch 30,000 points by the Lunar New Year (around February) next year
(side note: as of this writing, Hang Seng broke through 26,000 point. It had rebounded nicely from its 20,000+ points low when the Subprime crisis broke out. The Shanghai Index had also almost doubled since beginning of the year. Scarry eh?)
(side note for reading pleasure: Mr Lee Shau Kee had spent around HK100mil for his son's wedding in Sydney last year and all his staffs who attended the wedding received a HK10k spending money. I believe this spending pattern is something the original Buffett won't be doing even with a knife pointed at his throat.)
(HKD1 = USD0 .128560).