Turnaround of the Hong Kong Stock Market

Stock market behavior is as unpredictable as your girlfriend’s emotions, in the end, the stock market is driven by nothing but human emotions.

With the onset of the year, the whole world seemed like it was the beginning of the end. The markets were tanking, and my drawdown reached a staggering 10%. The Hang Seng Index was at its cheapest valuations since 2008, the Hang Seng Chinese Enterprises Index was undoubtedly even worse.

Not remarkably, the world did not end. The central banks pumped even more money in to the economy, our interest rates are ever lower. The reluctance for the world to withdraw from this life support is unprecedented. The flood of money into the economy is causing a massive polarization of assets. The perceived valuable assets are bid up to sky high valuations, while the less valuable assets are left in the dust. The rich gets richer, the poor gets poorer. Just as quickly, when an asset loses its shine, the markets could not dump it fast enough. This constant reshuffling of hot money in and out of different assets creates a rather unhealthy game of speculation. Market participants rarely want to hold onto anything for respectable periods of time.

As a self proclaimed value investor, we should just ignore the frenzy of the markets and behave like a sane person. Hold tight onto what is good, and create greater wealth for all of our investors.

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