Random bragging about my portfolio…
Picked up more ICBC (China A-shares yo) when it dipped a couple weeks ago. It shot thru the roof today, and they pay a 5% dividend soon. Easy money.
ICBC is a gigantic institution - my god, look at the size of it’s balance sheet. Can probably buy Goldman in an all cash tender offer
And Samsung suits!?! Can you share a URL to their suit collection? I googled it but didn’t really find anything relevant
Interesting insight, I’m basing my case on their handset outlook but I didn’t fully appreciate the culture factors at play.
I agree that patience is required but the market isn’t known for it. I was quite surprised how much surged into india beta based on little more than Modi’s election and some good noises. I can see most of that flowing back out soon and then a period of reluctance to invest.
I think it’s going to be very slow going to completely reform the bureaucracy and some of the other issues that will put investors off.
Yeah, biggest bank in the world, and cheap as chips. When people talk about the bad loans risk I just yawn, it’s way too big to fail (even the US rating agencies mention this in their write ups). Has been a no brainer for me all year.
If they have a URL it’s probably all in Korean. I go to some little tailor shop that stocks it, usually I go with the more expensive Italian fabric, but their Samsung stuff isn’t bad.
any views on Turkey? I’m tempted to pick up some exposure after the sell off.
Dunno anything about Turkey.
Certainly not an expert but I’m staying out of all developing countries till the Fed rate hike drama fully plays out. Turkish Lira seems quite vulnerable vs other currencies to such risks.
Oh, I just bought some more ICBC moments ago. Trading at 6.7X trailing, with a 5% dividend in three weeks. A-shares down this week on a flood of IPOs, margin regulation, US FED stuff. I’ll buy more if it goes lower between now and dividend. Doubt the local investors have even figured out this payout is coming, they’ll figure it out a day or two prior.
On the back of purealpha’s comments, I’ve taken a quick look at ICBC and did a little quick and dirty valuation analysis which seems to suggest ICBC may be undervalued, unless I am missing something…
I get a justified P/B of 3.7x vs the company’s current P/B of 1.5x (at time of writing).
Key assumptions:
- ROE 19.5%
- cost of equity of 15%; and
- growth of 13% (based upon the company’s retention ratio and ROE)
Can anyone think of a reason why this company is not currently trading at the price which it funamdentals suggest? What might the market be factoring in which I may have missed?
I think the cost of equity assumed is reasonable giving the company’s internally calculated cost of equity is c.13%, which it uses for the purposes of valuing cornerstone investments in other financial institutions e.g. equity investment in Standard Chartered back in 2006.
I guess the question turns upon how sustainable a ROE of c.19% is given expectations of the company’s NIM and NPLs?
This is how I decompose the ROE, using Du Pont:
- Net margin - 43.4%
- Asset Turnover - 3.21%
- Leverage - 14x
this is why ICBC is cheap. it is a part of a massive financial bubble. and the chart below shows 2011, not 2015. the chinese banks are much bigger now.
India’s back in play - thankfully I kept my long’s in Reliance Industries (oil & gas, index heavyweight). Shot up 11% after rate’s were lowered and at the back of some fundamental news and the fact that it’s the most underowned stock by funds.
I still see a 10-15% upside on this stock.
Let’s see.
Here in the UK, Tesco’s playing out quite nicely for me.
Nice work, I went thru all the Chinese bank’s financials in detail six months ago and ICBC looked solid (Pudong Development Bank was my other pick). Reading the US rating agency reports was also enlightening.
So I can tell you exactly why the large-caps (and specifically financials) are valued this way. But you need to back away from CFA-style analysis…because A-shares DO NOT trade on fundamentals.
The unsophisticated retail investors do 80% of the trading in China. These people do not read financials, and they don’t know what P/E and ROE means. Chinese investors trade based on preferences, emotion and rumor; they do not like boring stuff like banks, they like wild new tech stuff, they also do not like the stable mega-caps, they like gambling on small-caps, and they don’t seem to care much about dividends. The government has been trying to change this behavior and get them trading the A50 (50 largest), but that’s another topic.
And since China only this year opened up to foreigners the locals set the prices, so there is nobody to “correct” mispricing. It’s the wild west (in the east). The hope of the government seems to be that foreign money will make the market more efficient, but there is a long way to go.
The best report I’ve ever read on China’s stock market, some CFAs with Asian names. These guys nailed it back in mid 2014… http://www.goldmansachs.com/our-thinking/trends-in-our-business/stock-connect/report.pdf
Yawn, and wrong.
America because it is the best country with the best returns for hundred of years.
so you’re going to just disregard the recurring coincidence that pops up its head in all financial bubbles. okay got it. let me guess, because they’re state owned you think they’re risk free and that a credit crunch is impossible?
The real answer to why ICBC is valued the way it is, is in my post. Read and learn kiddo.
What do you mean by 80% of the trading in China? Trading measured in what? Where are the stats? Why would the government intervene with the secondary stock market? Wouldn’t capital inflows adjust the mispricing if it existed? Do you wonder you may have missed something on possibly the most widely covered stock in the Far East?
^ Not really sure what to tell you, please read the Goldman report first , then ask if you still have questions. Thanks.
VNM is having a good day. Another move forward; they removed the cap on foreign ownership of some companies. A lot more of this sort of thing to come.