The earthquake at Jiuzhaigou Valley left me deeply disturbed. I have been there seven times, out of which three times I had stayed there for over ten days. It is truly the most beautiful place on Earth and it’s a shame if it were to be destroyed by an earthquake.
I recall that when I visited Jiuzhaigou for the first time, the place did not have an airport yet. I had to depart from Chengdu at 5 am and travel over hill and dale before finally arriving at Jiuzhaigou at 12 am.
Undervalued stocks may not always be driven up by speculation
US stocks fell after reaching a record high on 8 August 2017 and the same happened with Hong Kong stocks.
The share price of Wharf Holdings rose by 14% on a single day, which could be attributed to its plan to spin off assets for independent listing. Currently, almost all the Hong Kong real estate stocks have net asset value per share that is higher than their share prices.
That makes them undervalued, but just being undervalued does not provide enough reason for upward speculation.
There has to be some tangible action, as seen from the case of Wharf Holdings. Perhaps, other real estate developers would be encouraged to follow suit.
Share prices may fluctuate greatly during results season
There are not many real estate stocks listed in Hong Kong. Their performances are pretty uniform–when one rises, all would follow suit. On the other hand, there are many real estate stocks listed in mainland China, with varying performances.
Currently, we are amidst the results season. Companies that reported excellent results (but had not been subject to results-based speculation prior to results announcement) would see their share price soar rapidly post results announcement. They are also likely to maintain this rising trend for a period of time.
For instance, after CIFI Holdings Group Co Ltd (884.HK) announced its interim results—a substantial 1.57x increase in net profit to 2.16 billion Yuan, its share price immediately rose back up from its previous fall, and the rise was by leaps and bounds.
Resource stocks are still undergoing speculation, but their share prices are rising too quickly. Naturally, some would take profit through arbitrage, which would suppress the rising trend.
Investors would need to be accustomed to the “roller coaster ride” of stock prices, or they might be easily influenced by the arbitragers and exit too early as a result.
In a previous article, I mentioned that the Hang Seng Index was driven up by three strong stocks— Tencent Holdings Ltd (700.HK), HSBC Holdings PLC (005.HK) and AIA Group Ltd (1299.HK).
But as at 8 August 2017, there were only two left. As at 9 August 2017, only one main driving force remained. Even Tencent (the only stock that stayed strong) registered a decline at a certain point. It seems that more and more people are worried that stock prices have gotten too high.
I even received a call on the morning of 9 August 2017 from a reporter who asked me if stock prices have gotten too high and if one should hold more cash now. These questions were posed to me repeatedly, just in the hopes that I would say: “Yes, stock prices have gotten too high”.
This article was translated from Chinese to English by Chen Xushuang. Click here to read the original article.