Monday, January 30, 2012

2011 Performance Review: Internal Check Report

As 2012 has come, it is now time to review and announce audit results about the accuracy of our predictions in 2011. The following is our second annual internal check report, which can also be considered as our own site performance review, after our first Important 2010 Internal Review.

Here are the details of our 2011 internal review results:

(1) For the Hong Kong property market, we wrote: Hong Kong property-related stocks will not be our pick in 2011. We expect an average of -5% stock price correction in 2011 for the Hong Kong property sector. Details here: Special Stamp Duty (SSD) in Hong Kong.

Review result: As you may also know, Hang Sang Index (HSI) which measures the 2011 overall Hong Kong stock market performance in 2011 tumbled by -20% YoY and was poor than we originally expected. This explained why the magnitude of stock price loss in 2011 for the Hong Kong property sector was deeper than we expected, although the direction of stock performance (downwards) did match with what we predicted. In particular, the benchmark Hang Seng Composite Industry Index (HSCI) - Properties & Construction (P&C) finished at 2238, down by -26.5% YoY in end-2011, representing an extra -6.5% correction as compared with the HSI. In addition to the governmental SSD intervention, property market was also cooled down as Hong Kong banks tightened mortgage lending to homeowners in 2011 because of the rising credit and financing costs.

(2) For the sectors of utilities, electricity and coals in the mainland China, we wrote: Stocks of utilities, electricity and coals will not be our picks in 2011 due to the governmental price controls. Details here: Ending the Loose Monetary Policy.

Review result: Owing to the governmental price controls, sectors of SSE utilities, electricity and coals all suffered losses in 2011 and could not function as safe-haven in the poorly-performed market. SSE Utilities Index (index code: 000041.SS) finished at 1638, down by -15.5% YoY in end-2011, though still outperformed the market average because the benchmark SSE Composite Index lost by -22% YoY. SSE Energy sector Component Index (index code: 000032.SS) finished at 2408, dropped by -23.5% YoY in end-2011, performed even poor than the market average.

(3) For the forex trend of Hong Kong Dollar (HKD), we wrote: HKD will consolidate towards its weaker-side slowly, at least to a level beyond 7.8 against USD. There will also be lacking of sizeable IPO giants in 2011 comparable to that in 2010. Details here: HKD Weakens while Refuge for Capitals Fades.

Review result: Our predictions were only partial true. Although the overall size of 2011 IPO listing was really smaller than that in 2010, HKD was only able to stay beyond 7.8 against USD in March, June, August and September of 2011. After September 2011, HKD became relatively stronger against USD and finished at the level around 7.77 by end-2011. The main reason was due to the credit environment was tighter in 2011 Q4 as the domestic borrowing costs in Hong Kong continued to go up during the period. The overall HKD credit environment had become tight in 2011 while the market of HKD deposits continued to sink as the growing offshore RMB (Renminbi) deposits competed heavily with HKD deposits in Hong Kong.

(4) For the property market in the mainland China, we wrote: Be caution about the investment risk for SSE Properties sector in 2011. Details here: National Eight Policy to Cool PRC Property Market.

Review result: SSE Properties sector, though went down with the whole market in 2011, did not perform as worse as most people originally predicted. SSE Properties Index (index code: 000006.SS) finished at 2749, down by -17.6% YoY in end-2011 but still outperformed the market average because the benchmark SSE Composite Index lost by an even larger magnitude of -22% YoY.

(5) We have published a number of stock (and bond) analysis reports in 2011. For the full list, please refer to: Table of our Stock (and Bond) Analysis.

Review result: This type of analysis has been a great success for us in 2011. Actually we recommended only one stock, HK iBond, to buy in the year 2011 because the IPO evaluations of the other stocks were really too high. For your reference, the HK iBond eventually raised by +7.7% from its IPO price in 2011.

(6) We have also published our 2011 targets for GDP, CPI, Trade Balance, RMB, SSE Composite Index, HSI (Hang Seng Index) etc in 2011. For the full list, please refer to: Table of our Targets released.

Review result: In order to go through all the details in depth, we will review them with you the same time when we release our corresponding targets for 2012.

(7) As a kind of site performance review, we would also like to announce our Annual Top 5 Articles in 2011, as follow:

1. 2011 China GDP Target.
2. Bond Analysis of Hong Kong iBond.
3. Stock Analysis of Hui Xian.
4. Inside Chinese LGFV debts.
5. RMB War Across the World.

(8) Finally, we would like to apologize for a typing mistake we made in our main page. In mid 2011 we checked and found our bottom section was mistakenly named as "About out site". We have then immediately corrected this typo as "About our site". To avoid any possible misleading, now this section name is already removed.

We hope that you enjoy reading this 2011 internal check and performance review report for this website.

Audited by: Independent Internal Audit (IIA) Team.

Related article(s): Internal Auditing for Site Quality Control

More Internal Review Article(s): Table of All our Internal Review Reports


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