The importance of not liquidating stock positions was confirmed in recent trade activity. Hong Kong stocks had their best session this week since early October, gaining 2.4% on the back of a Morgan Stanley upgrade, record Singles’ Day sales report, positive earnings guidance, and a rumor MSCI will include US listed Chinese companies in its emerging market and Chinese indexes. The Hang Seng Index is now only down 3% year to date.
This price action is a perfect example of how stock loans can benefit investors and portfolio managers. On balance, attempting to “time” the market with sales and purchases has proven to be a losing trade. Missing out on days like Wednesday can be detrimental to market participants. This proves the point that stock loans are the best alternative liquidity solution for short term liabilities or costs…especially for those who want to remain in their investment’s upside.
The confluence of positive headlines drove equities higher as investors reassessed the composition of their portfolios to reflect less uncertainty. However, despite the data, fear still remains in the market…as “bubble-ish” data points were also digested. For example, Hong Kong’s Mass Mutual Tower was reportedly sold to Evergrande Real Estate Group Ltd. for $1.6B USD, over 20X the price the seller (Chinese Estates) paid in the 90’s, according to Bloomberg. At a Sotheby‘s auction, Hong Kong’s own real estate tycoon and billionaire Joseph Lau, reportedly bought a record setting 12 carat blue diamond and 16 carat pink diamond for $48.4M USD and $28.5M USD respectively.
Positive trends on the other hand included incredible post earnings moves from Tencent Holdings Ltd. and Semiconductor Manufacturing International, moving higher by 2.2% and 14.3%. Bulls also noted that China’s largest online retailer, Alibaba, posted massive Singles’ Day sales, just over $14B USD. For this event, shoppers drove up Alibaba sales 60% vs 2014.
Given these fundamentally conflicting signals, investors should be prepared for a variety of scenarios. Sharp rallies and quick pullback are now are given for the Hong Kong market. Accordingly, portfolio managers should not be easily shaken out of their holdings in order to meet one-off costs. In cases like this, stock for cash loans are a premier solution for sophisticated investors. While remaining invested in a particular thesis and covering a short term cost, the pledged collateral’s upside still remains while liabilities are met.