In a Hong Kong Economic Journal article, fund manager Alex Wong gives an example of how to gain from trading shares of Sun Hung Kai Properties Ltd. (00016.HK) by “selling low” and “buying high”.
When the local property and stock markets were in the doldrums at the beginning of the year, Wong decided SHK Properties was expensive at the then share price of HK$93 (US$11.90).
But recently, with the low interest rate environment set to last for a long while and home sales resurging, Wong has pegged SHK Properties a good buy even though the shares have already reached HK$110.
Wong was indeed selling low and buying high but he was able to profit from both transactions.
Indeed, amid gloomy sentiment at the start of the year, SHK sank below HK$80 in February.
Then as the property market began to recover, SHK kept rising. Shares were last quoted at HK$119.
A company’s value isn’t absolute; it changes over time and investors need to be flexible, Wong writes.
“When low interest rates persist, people buy properties like crazy. Of course, the value of property companies would be higher.”
By the same logic, with the influx of mainland money into the local stock market and the steadily rising trading volume, Hong Kong Exchanges and Clearing Ltd. (00388.HK) is becoming an interesting counter for a quick trade, even though it has gained quite a bit already.
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