Wednesday, December 13, 2017
 
Columnist
Martin Hennecke

Correction could be a godsend for cash-rich
 
11/08/2017
 
The long-awaited correction in high flying Hong Kong stocks finally came yesterday. As tension between the United States and North Korea increased, investors found an excuse to sell.

The Hang Seng index had climbed 5,800 points so far in 2017, so yesterday's 313 points loss was not a big deal. The index closed at 27,444 points with daily turnover of HK$121.9 billion. It might test the 20 days moving average, currently at 27,128 points. Looking at the corrections in April and July this year, the HSI briefly fell below the 50 days moving average. We should prepare for history to repeat itself. Currently, the 50 days moving average is at 26,324 points and is rising daily. In other words, we might see the index dip a further 800 to 1,000 points before finishing the correction.

Medium- to long-term investors should keep their core holdings to wait. If the cash position is high, you should feel happy to have a chance to buy quality shares soon. Taking a break in the coming two or three weeks might not be a bad idea.

If you are holding shares that were overbought over the past few weeks, you can consider selling on the rebound to raise some cash. For example, Wharf's (004) 13 percent rally after the result announcement was really too much. It fell 7 percent yesterday. Another is COSOC Ship Holding (1919). It price had gained 50 percent since early July. Taking some profit off the table should be a reasonable action.

Dr Check and/or The Standard bear no responsibility for any decision made based on this column.

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