2013 Dow vs HSI, CRE, Crying wolf Crying foul

Crying wolf, Crying Foul

In hong kong, we heard from our HKMA head mr yam or mr chan in 2008/2009 that we should think twice before buying an apt, now we still hear the same from mr chan. Both had been crying wolf for so many years that layman does not know whether they should continue to abide by their advice.

Those who did not heed his warnings already reaped major benefits from big ben’s QE and would not mind hearing some noise from him. But those who heed his warnings are crying foul since without some physical assets in hand, your cash is losing their value while your living costs have gone skyrocketed plus the cash in the bank has no yield which is the major headache for many people.

This is why you should never heed officials’ advice without giving some serious thoughts behind it since officials are like stock brokers - it is always time to buy stocks while for officials it is always time to be cautious, at their angle only.

Commercial Real Estate

Here in hk, we might be coming to a wall for CRE although the BSD and SSD in the residential market is driving investors to invest in CRE and car parks, but recent vacancy in CRE which could be spotted in busy districts like CWB, TST and MK and drop in demand from mainland tourists is a forewarning that difficult times are ahead for CRE owners or landlords. A recent visit to a realty broker for only half an hour, there are already two landlords one residential who wants to sell his apt [even under SSD period] and one commercial who wants to sell two units. In such a short period of time, you can say it is coincidence that two are coming in to sell their properties or the market has turned the corner if not for a long while at least for the short term. In a slow market, if certain landlords have cash flow problems and would want to sell into the market with limited buyers, only below market prices will complete a deal. Such landmark prices can set a precedent for the market to follow and will only drive more buyers away which could set the market up for even lower prices.

However it is not all gloom and doom, my hunch is this is a short reprieve for the real estate market to relieve some pressure which is not bad. This is more like a 1994 set back which is a prelude to the final rally of 1997.

2013 Dow vs HSI

In the past, dow has outperformed hsi, would that change in 2013 – likely, why?

Dow’s chart has a rising wedge formation which points to a serious correction while hsi chart has a round bottom extending for maybe a year or more which is more solid.