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Thoughts about Investing in China Market

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Thoughts about Investing in China Market

I have recently ventured for a leisure trip to Shen Zhen and Guangzhou. Considering that a significant part of my portfolio is exposed to China market (Raffles Medical, OCBC, Tencent, HKEX), a trip to China has been on my bucket list for both professional and personal reasons. The reputation of ShenZhen as the silicon valley of the east indeed lives up to its name. I am very impressed by the contrasting differences in the retail landscape in China as compared to Singapore, as well as the potential of the China Market.




Myth 1 : Any company exposed to China is bound to make it rich.
If you manage to sell even a dollar to everyone in China, you will instantly be a millionaire.

Reality : The retail landscape of China is insanely competitive. A scuttlebutt analysis at Fraser Suites Guangzhou exhibited a stark contrast with Singapore retail landscape, whereby even popular locations can have vacant stores. With Alibaba and JinDong (JD.com), most consum…

Catching a falling knife

It is easy to convince yourself in a boom market, that in the long run, everything will work out well.  When the stock market is bathed in a sea of red, it is an opportunity to buy, a prelude to prosperity. When the bear approaches and swipes the stock price off 20%, eager investors will swoop in to buy. However, as the bear did a second swipe and takes off another 20%, you start to wonder if you have did sufficient due diligence and bought at an overvalued price. The bear's fury swipes can be one instance, two instance, five instances and perhaps even more. This is the 2nd grizzly bear market I am in and buyers remorse is indeed incredibly difficult to stomach.I have made a deliberate decision 4-5 months ago, to stay in cash as the markets' height are unsustainable. When I intiated a minimal position in tencent (one lot) to monitor for updates, I was not prepared for the volatility of Hong Kong market. The resistance line had barely just formed and it did another 2 subsequent…

One industry. Two strategies.

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 One industry. Two strategies. The technology industry is a different monster compared to traditional boring companies in my existing portfolio. The more I read about Tencent and the technology industry in general, the more it seems to digress from traditional value principles. Instead of hoping to succeed in a monopoly position in a state of no change, technology industries seek to expand and capture market share aggressively and create fundamental changes to stay ahead of the pack. Even the strategies it adopt are vastly different from the traditional companies I am holding. Here is a break down of the competitive strategies in the china scene (BAT) between Alibaba and Tencent 
1) Underlying monetization strategy Alibaba - online mall REIT. Able to raise the rental of internet storefronts. High dependent on MAU and continual visitor inflow to be viable. Or else, vendors can uproot and shift to competitors.'
Tencent - focus on platform as revenue generator. Subscription fee requ…

Making Sense of TenCent

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Company : Tencent Holdings, 700.HK

1) Thesis / Decision to buy :Hong Kong market and the technology / gaming sector has been heavily battered, and presents a margin of safety.  Ten-cent has suffered 20% decline in its stock price due to the tightened scrutiny on the addiction of video gaming on the residents (Moat of the product line is too strong to the point of requiring government intervention)  . I believe these headwinds are temporary as the government is not totally shutting down the industry, and is merely putting a hold on the monetization pipeline of the soon to be released games. Its short time revenue is affected but should not damage its fundamentals.

Ten-cent is not in a dire debt position and has considerable free cash flow. A delay in the next 2 quarters while the government undergoes restructuring, should not affect the superior economics of its  premium gaming  franchise. In addition, it has a powerful super-app in the form of We-chat, which is dominant and enjoying …