Wednesday, 14 November 2012

Party in HK, but ride in Sydney . . .

Hong Kong is market I've never traded on the company level. Sure I've traded HK CB's, stock indicies and options, but I've never really sat down and tried to analyze stocks as fundamental investments. Today I was reading Nial Gooding's China Invest blog and he wrote up some views on HK residential property prices.

A good read . . .
 It's a good read and made a lot of sense even if I have very little interest in investing there. Included with today's blog was a nice little property price calculator spreadsheet that reveals a lot about the current state of Asia as much as the price of a particular investment. What do I mean by that? Well part of the assumption in the region is that rates will stay low for an extended period and I guess if you're sitting there pegged to the USD and watching Bernanke print away then you're probably comfortable. Nial rightly says that this is the potential flaw in the argument. Now play with the mortgage rate and take it back to a normalized level and you can see how things can become stressed. I'm sure Nial and my other HK friends would remind me that HK is a little different because there's probably an expectation that if rates go up the economy is doing better and therefore rents go up and neutralizes some of the mortgage stress. Which leaves me thinking about the history of yield spread in HK (mortgage - rent).

I'm starting to play with the same model for Australia, because unlike HK Australian residential property yields trade very differently due to the mix of negative gearing and pension fund investing that goes on in the market. Also Australia, like HK and unlike the US is based on a floating rate mortgage, which means that rates movements have a very big effect on the market. The RBA currently is in loosening mode because the government here is tightening because of a target to get the budget back to surplus. It's a fine balancing act and my money is on it not working. The Australian government could afford to get it slightly wrong when commodity prices were rising sharply because the money was coming in so fast, but now commodities are falling the buffer is just not there.

Tomorrow I'm going to walk down to Moore Park in Sydney where companies such as Mirvac have built thousands of apartments which seem to have been popular amongst Asian investors.

HK, Singapore or Sydney?
 The area reminds me of HK or Singapore, so I figure if I go down there and check out per square foot prices I might have some real fundamental information for modeling. You see in Sydney you don't see properties quoted in psf or psm, so it's hard to get really clean data to use. I'll report back when I have more.

I managed to get out on the bike this morning. A cloudy and dull day meant I had to load up the Cannondale with my high lumen Moon Shield lights.

I know Sydney is not London, but I'm not prepared to give drivers the excuse of "I didn't see him; he didn't have any lights." The lights work great and are USB rechargeable which helps cut out the battery bills . . . just don't forget to charge up.

The latest UK and US cycling magazines are hitting the shelves right now and I have to admit that I'm starting to smile about all the winter clothes I won't be buying or wearing this year. I especially won't miss wearing my neoprene gloves, which although absolutely necessary mean you're always in danger of slipping off the brakes or shifters. Choose your gloves wisely and pay up in winter.


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