CK Portfolio — 2019Q3 Review

Summary 概要

Three months have gone since the publishing of Q2 Portfolio Review. The tightening of US-China Trade War and civil unrest in Hong Kong, the financial market has witnessed one of the worst quarters after the 2008 Financial Crisis. Goldman Sachs report estimated a capital outflow amounted to USD 3 to 4 Billion from Hong Kong to Singapore. CK’s portfolio (“CK Portfolio”) also experienced a change from profit to loss. In spite of the uncertainties, it makes no sense to attribute the loss to these external or background factors. By investing in a few specific stocks rather than index funds, CK is indeed bearing more Beta risk (Unsystematic Risk) than indexing. If the excessive risk exposed fails to generate better returns, the investment decision is irrational in nature, if not speculation or gambling. This review is going to assess the decisions made, whether right or wrong and end by discussing possible improvements to the investment strategy. As usual, capability, stability, and sustainability will be the focuses of this quarter review. 

距離上一次於《投資組合訐估》和各位讀者見面，已經有三個月。不知道各位在第三季度投資表現如何，不妨留言討論。中美貿易戰升溫，加上本地政治局勢，皆為投資市場蒙上陰影。恒生指數經歷自2008年金融海嘯以後其中一個最差的季度。8月份，著名投資銀行高盛發表報告，估計期內本港有約40億美元資金淨流出。CK組合亦由盈轉虧，但事件亦令CK反省要對風險進行更有效的管理，始終不確定性長期存在。CK認識一些朋友，他們偏好完全抹去非系統性風險的指數基金，專注研究、挑選具長期成長潛力的行業、市場。目前，CK仍然堅持以個股作為CK組合的主要資產，這個決定帶來的額外風險，到時是否能夠產生更高回報？今期的專欄，將依舊以可行性、穩定性及持續性三個面向進行討論。

Overview 總覽

Figure 1 (Source: Ticker)

Before we closed the discussion in July, it was mentioned to the open an Interactive Broker trading account within Q3. The account was successfully opened, however, the firm denied making any margin facilities available to CK due to the size of the Portfolio and CK’s monthly income. An attempt was unsuccessful even though the detailed reasoning for the denial was illogical. We will come back to the usage of this account in the later paragraph. 

上一篇專欄CK曾提及會於第三季度開設盈透證券（“IB”）交易帳戶。帳戶成功開立，但因為CK組合投資額及CK月入的關係，IB拒絕向CK提供融資以致期權交易服務。但既然戶口已經準備就緒，CK將於稍後分享目前的計劃。

In Q3, as you’re well aware, the composition of the CK Portfolio generally remained unchanged as it did in Q2 Review. CK is not in favour of doing hundreds of thousands of transactions every day. In contrast, he is a firm believer in the “Buy and Hold” philosophy advocated by Warren Buffett and Jack Bogle. As far as you may recollect, the Dollar Cost Averaging strategy (“DCA”) is chosen to implement the above philosophy. This pretty much tells why CK did not increase his investment or release some of his stocks when prices plunged. Does it mean CK will never place a short-loss order? Not really, hereafter we are going to discuss the standards.

從圖1可見，CK組合的構成與第二季度結束時並沒有太大變化。基於成長環境的因素，CK對每天交易千百次的操作模式，一直抱有懷疑。反之，CK的投資理念沒有神奇的魔法，就是分階段、定時購入資產，等待其價值展現時刻來臨。但是，上述的策略不代表CK組合缺乏管理風險、止蝕的機制，在緊接著可行性、穩定性的部分，我們都將探討其運作。

Capability 可行性

As discussed, Capability is the ability of CK Portfolio to meet specific returns. By specific returns, it in fact targets to generate a double-digit return and stable passive income in the long term, i.e. 3 to 5 years’ time. In Q3, a cash return equivalent to HKD 902.35 was received. However, a decrease of cash return is foreseeable in the upcoming two quarters since CKI Holdings (“CKI”) and HKT-SS (“HKT”) only distribute dividends twice a year.  

為方便意外讀到本欄目的讀者，往後CK都將簡要的重覆部分重要字眼的定義，以盡力避免誤會或歧義的出現。可行性代表CK組合創造特定回報的能力，而特定回報的界線定於3至5年內，演化成穩定創造年化10%或以上回報的投資組合，並為CK提供被動收入。目前CK組合尚未達標，不論在整體回報或產生穩定被動收入兩方面亦然。長江基建（“長建”）及香港電訊（“香電”）每次只分發兩次股息，代表CK組合現時產生的被動現金流過分集中於特定季度。

Figure 2 (Source: Ticker)

It goes without saying that the Portfolio is underperforming at the moment. As illustrated in Figure 2, it is suffering from a loss of 8% in accumulation. Although the loss has not yet been realised, it undeniably affects the profitability of the Portfolio. This would be a good example to tell the importance of diversification. 

由圖2清晰可見，CK組合現時正出現約8%浮動虧損，其表現明顯較預期遜色。當然，不少著名投資者都曾經歷短期虧損，但這不應成為未有完善分散、管理風險的藉口。始終，長期抱持僥倖的想法，只會招致更大的惡果。

There are many options available in this situation, including the purchase of additional shares, execution of the prescribed plan or stop loss. Buy-in of extra shares actually takes more Alpha Risk in pursuit of greater returns. As retail investors, there is an information gap between us, market makers and other privileged investors. The excess risk borne can hardly be rationalised. Also, this would be in contrast with the DCA which primarily aims to minimise the volatility risk.

在這個情況下，作為投資人有那些可行的選項？是要增購額在的股份（溝貨）、堅持月供計劃抑或是進行止蝕？作為一般投資者，與機構投資者最主要的分別在於資訊落錯及議價能力的差距，這兩項差距令進行主動投資的吸引力大減。另一方面，溝貨亦會令平均成本法應對市場短期波動的效果下降，故CK不傾向增加曝險水平。

How about following the existing plan or realising the loss? This is relatively more subjective in nature. CK started CK Portfolio in order to build a concrete basis for long term growth and portfolio financing. This is also the reason for CK to invest in the market leaders of utilities, telecommunication, and banking industries. The rationale is to consistently outperform the market and enlarge the returns through the employment of margin. 

既然溝貨一項被剔除，那到底CK組合應該按既定計劃繼續月供還是止損。以下的判斷對部分讀者而言可能相對主觀，各位不妨多加討論。建立CK組合的目的，是穩定地賺取較市場為高的回報，並通過財務槓桿的運用，擴大回報水平至前述水平。故此，CK在挑選公司時，都偏好公用、通訊、銀行或大型綜合領域的龍頭企業。所以在“繼續”或“止損”的議題上，CK關注的並非其短期股價的變動，而是由地緣政治、宏觀經濟、管理層的變遷，衡量企業的市場領導者地位出現變化的可能。以下是CK對目前持有3家公司的粗淺分析。

Figure 3 (Source: South China Morning Post)

As shown above, after spending years to expand its business footprint to Europe and North America, CKI and its subsidiary Power Assets have got a fairly large share of their assets (above 40%) located in Britain. The growing uncertainty of Brexit can be viewed as the main cause of the plummet of CKI stock price since the profits are undermined by currency risk. While the deadline of Brexit is approaching, Prime Minister Boris Johnson and his cabinet insist to leave EU by the end of October under any circumstance. Whether this worst-case scenario could happen will be revealed on 19 October. In general, there are concerns over the population structure and economic growth, i.e. demand in utilities and possible depreciation of Pound Sterling after Brexit. In case its capability of outperforming the market is in doubt after Brexit, CK has to look for a better alternative for the position held. 

圖3的架構圖顯示長建及其子公司電能實業目前持有的公用資產，目前英國資產佔比甚高，達4成以上。脫歐引起的不確定性，在前任首相文翠珊掛冠而去後顯著提升，新任首相約輸遜堅持脫歐必須於10月底完成，無協議脫歐的可能性提高，對長建的股價造成壓力。距離大限不過咫尺之遙，若脫歐最終向最壞情況發展，扭轉英國長期人口結構及經濟發展趨勢，CK將不得不尋求更合適的投資機會。

Figure 4

No major changes for HKT were witnessed in Q3, therefore it will not be our focus in this issue. CK looks forward to seeing its joint venture to build a virtual bank with Standard Chartered Bank and Ctrip Finance. In addition, HKT has just successfully acquired a contiguous spectrum for 15 years at a modest price of HKD 252 Million from the government. It is projected to put into service in Q2 2020, therefore we will soon be able to find out if HKT could maintain its position as the market leader in the 5G era.

與長建相比，香電的第三季度較為平淡。近期香電的兩大項目，非虛擬銀行及5G技術的投產莫屬。自年初公佈獲得首批虛擬銀行牌照後，項目的發展細節一直未有更新。反之，在10月份的競投中，香電成功以2.52億港元投得20條頻譜中干擾較少、訊號傳遞較穩定的5條。到底硬件上的優勢，是否足夠協助香電在5G時代維持市場領導者地位，答案將於2020年第二季度揭曉。在此前，CK仍會密切關注香電的最新公佈，檢視應否繼續持有其股票。

Figure 5 (Source: Financial Times)

HSBC, which its CEO John Flint stepped down after 18 months on the job, is another company having an uncertain future. Soon after Flint resigned from the position, HSBC’s top China Executive, Helen Wong, departed after 27 years. It had already got a growing list of negative headwinds, including the falling interest rate and geopolitical uncertainty. in Q1 2019, the bank made a pre-tax profit of USD 6.21 Billion. the Asian market nonetheless contributed to more than 80% of the profit. A potential new round of quantitative easing will further lower the interest rate and crimp lending revenue. Its heavy dependence on the Asia Market, indeed Hong Kong and China, may add fuel to the fire. Goldman Sachs estimated in August that the political unrest might have driven USD 4 Billion outflows from Hong Kong. Furthermore, the potential burst of China's housing bubble could drive the country to the Chinese ‘lost decades’ and threaten the profitability of the bank and its subsidiary in the long term. It will not take long for us to determine if HSBC is a wonderful business that can sustain poor management or one in reverse. Only if it is the former type of business, will it be worthy to be invested in. 

滙豐控股（“滙控”）在過去一個季度，縱使其股價波幅未如長建，但管理層的變動卻更令投資者擔心。行政總裁（“CEO”）范寧於期內離職，大中華區行政總裁黃碧娟亦緊隨其步伐離開滙控，消息指集團可能打破傳統外尋新任CEO，孰好孰壞難言明朗。下任CEO面對的，除了是內部人事關係外，更是日趨嚴峻的外部環境，包括利率再度下降，進一步濟壓商業銀行收入與資金成本之間的間距；以及地緣因素，滙控第一季度公佈的報告顯示，亞太地區（香港與中國為重）貢獻隻團8成以上利潤。本地法治水平呈現危機，令資金加速撤出本港，加上內地長年的資產泡沫，都對滙控未來的盈利能力造成打擊。一家制度良好的公司，能抵禦內部、外部的壓力，化危為機，而我們在不久的將來就會知道滙控是否其一。

Stability 穩定性

Figure 6

When talking about Stability, we are going to discuss the volatility, correlation, and Sensitivity. Volatility, which we discussed in our last issue, assesses the past performance and the inherent risk of an asset. Correlation concerns for the co-movement of two assets. Sensitivity, equally important, measures the sensitiveness of an asset’s return to the market’s return.

來到穩定性的部分，我們將會以波動率、相關性及敏感度作為衡量的標準。在本欄上一趟與讀者見面，只側重於波動率的討論，難言全面，故次今遍嘗試擴展討論範圍，希望有助各位更了解CK的投資理念。財務學上，波動率是指特定時間內，股價的變化幅度；相關性關注兩項資產價格變化的共同性；敏感度則量度市場回報對個股回報的影響。

The above calculation bases on the public data made available by Yahoo!Finance. Surprisingly, HSBC was the most volatile stocks within CK portfolio in the last 5 years. Its volatility is much harder than CKI, HKT as well as the benchmark Hang Seng Index (“HSI”). Some investors prefer to take advantage of the fluctuations of prices, CK, as mentioned, nevertheless believes that high trading levels result in poor performance. Given the close correlation between HSBC and HSI, and the high sensitivity of its share price, it can be asserted that the greater risk is well compensated.

圖6以雅虎財經提供的公開數據為基礎，即2014年9月至2019年9月上述4項資產的每月經調整收市價計算。頗令CK意外的是，滙控是過去5年波動率最高的資產。波動率高的股票，對部分擅於借助波幅賺取回報的投資者以言是有利因素，但與CK組合的投資策略卻背道而馳。上述計算同時顯示，滙控與恒生指數（“恒指”）高度相關，及對市場變化非常敏感，故投資滙控所承受的非市場風險得到有效補償。

Both CKI and HKT have similar features, they are negatively correlated and similarly sensitive to HSI. In addition, it is interesting to find that the two stocks in fact negatively correlated to each other during the last five years. If this phenomenon continues, it will bring better stability to the Portfolio.

長建與香電則展現相近的特性，兩者與恒指的相關性皆不高，甚至與指數的回報水平呈現負關係，有效減輕市場對組合回報帶來的影響。另一方面，因應兩家公司的行業背景，故其相關度甚低。此為分散風險、保持CK組合的穩定回報創造有利條件。

To summarise, CK targets to build a portfolio composed of less correlated, stable stocks and stocks which are capable of outperforming the benchmark in the bull market. And next issue, we will discuss the reasonableness of existing allocations of CK Portfolio and how could it be improved.

長遠而言，CK組合會逐漸擴大資產基礎，購入更多相關性低的公司，並調整組合的構成，尋找與市場的最合適相關性，達致穩定跑贏市場的目標。

Sustainability 持續性

As discussed, Sustainability determines whether a portfolio can grow organically. In other word, are the returns generated enough to pay out a passive income and reinvest to maintain the purchasing power? Passive income is defined as money earned regularly with little or no effort being paid. Reinvestment is simple, it means using the dividends to purchase more shares. The issue is how many should be bought?

最後是有關持續性的部分，組合是否能滿足投資人的未來現金需求，並持續成長，說白話就是計算數字回報、回報水平和組合的資產淨值三者之間的關係。組合產生的回報，是否足夠支付被動收入及滿足再投資的需要？

It may be worthwhile to illustrate the concept of sustainability through an example. Assume Howard invested HKD 300,000 at the beginning of 2019. Supposedly he wants to diversify his monthly financial burden by HKD 2,000 passive income. In total, cash distribution of HKD 24,000, equal to 8% per annum, is required. 

為更有效詮釋此概念，CK製作了以下的簡單例子（見圖7）。假設賀維在2019年之始建立了一個價值30萬港元的組合，並期望能產生每月平均2,000元的被動收入。簡單運算，即每年僅被動收入部分就需要24,000元，以組合價值計算已等同年化8%回報。

Figure 7

However, this is not the end of the story since Howard needs to maintain the purchasing power through reinvestment, i.e. outweigh the inflation. If Hong Kong has a 2% inflation in 2019, a 2% reinvestment or portfolio growth in value is the lowest level by theory. To present in the figure, an accumulated investment amounts to HKD 306,000 (2% increase), is required by the end of the year.

但故事尚未結束，通脹時刻都正想侵蝕我們的購買力，所以賀維需要額外回報進行再投資，抵銷其影響。為方便計算，在此再假設2019年香港的通脹水平為2%，則賀維的組合年底需要2%的名義增長，其實質價值才能維持不變。

Therefore, together a minimum return of 10% (8%+2%) shall be generated per annum in the above example. In case Howard looks for real growth after the cash distribution, the portfolio has to attain an even higher return. 

兩個數字相加，可得出要滿足賀維的要求，2019年他的組合需要10%的總回報。若他希望自己的組合出現實質成長，總回報水平則需要進一步提升。

Going back to CK Portfolio, the unrealised negative return and a limited amount of capital under management will find it hard to grow by itself. Therefore, it has to be concluded that CK Portfolio is not sustainable currently.

CK希望以上的例子能夠為讀者簡化持續性的概念。現在讓我們回到CK組合本身，觀乎目前的未實現虧損，以及有限的資金水平，要做到自主持續仍需加把勁。

Conclusion 結語

To conclude this issue, both the capability and stability of CK Portfolio need to be improved. Probably in Q4, CK will start studying opportunities in the U.S. market to enhance CK Portfolio. As said in the beginning, IB refuses to provide a financing facility to CK’s account, so the cash account will likely be used to buy U.S. securities temporarily. We discussed the importance of leveraging and deleveraging towards wealth accumulation, hence CK has to find another firm that is willing to offer a reasonable margin rate to CK Portfolio. 

總括而言，CK在第四季度的首要目標先改善CK組合的可行性及穩定性。為降低地緣局勢對組合的影響，CK將運用文章開首提到的IB帳戶涉足美國證券市場。但上一篇文章我們首提及財務槓桿對組合成長的重要性，所以第四季的另一個任務是尋找願意為CK組合提供低息融資的機構。

Many friends of CK have been moving their assets as well as capitals out of Hong Kong since Q2 2019. Offshore saving accounts, securities accounts protected by SISC are common choices. The lack of confidence is the major driving force of the trend. However, please do not get me wrong, it is indeed motivated by the continuous erosions of fundamental human rights and rule of law in Hong Kong. The latter, rule of law, can only be undermined by the government and its agents intentionally violating the law. CK will elaborate on the significance of the rule of law towards economic growth. 

由第二季度開始，CK有不少朋友都提到現在或未來離開的可能。三軍不動．糧草先行，部分已經積極撤走資金。箇中關鍵在於信心，濫權、違反守則、妄顧人權等行為都對本地的信念及法治精神造成損害。就法治精神與經濟發展的關係，CK將於《經濟講堂》一欄中詳細講解。

This would mark the end of the Q3 2019 issue. I am CK and look forward to seeing you next time. Bye!

各位讀者，下次見！

Disclaimer: The author of the article (“Author”) is an SFC-licenced person. Author, his clients or his families (together the “Group”) from time to time may make changes to the above portfolio. The data, information, content and/or opinion of the article do not represent the standpoint of Capital Heights (“CH”), and CH shall not be liable for the same. The article is for reference only and is not intended to provide investment advice. It does not constitute any offer, solicitation, recommendation, comment or guarantee to the purchase, subscription or sale of any investment product or service. CH and the Group shall not be liable to any loss or damage incurred by any person caused by direct or indirect usage of the data, information, content and/or opinion of the article.

Risk Disclosure: The following risk disclosure statements cannot disclose all the risks involved. You should undertake your own research and study before you trade or invest. You should carefully consider whether trading or investment is suitable in light of your own financial position and investment objective. You are advised to seek independent financial and professional advice before you trade or invest. You should seek independent professional advice if you are uncertain of or have not understood any aspect of the following risk disclosure statements or nature and risks involved in trading or investment.

Risks of Securities Trading: The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities.

免責聲明：筆者為香港證監會持牌人士。筆者、其客戶或其家人（下稱「群體」）目前持有相關上市公司的財務權益。上述內容、資料並不代表滙思投資學會（「滙思」）的立場，我們亦不會對該等資料的準確性和完整性作出任何明示或含隱的保證。本文內容僅供參考，並不構成要約、建議或促成任何人士提呈買賣或認購任何證券。本文中之資訊、意見如有錯漏之處而令閣下蒙受損失，滙思及群體概不負責。

風險披露：本風險披露聲明不旨在披露涉及證券及下列其他交易的所有風險。你不應進行有關交易，除非你已瞭解有關的交易之性質及風險。你應尋求獨立財務顧問的意見，並根據你的經驗、目標、財務資源及其他情況，小心考慮你要進行的交易對你而言是否合適。

證券投資風險：證券價格有時可能會非常波動。證券價格可升可跌，甚至變成毫無價值。買賣證券未必一定能夠賺取利潤，反而可能會招致損失。