Dr Chan: Do Not Sell Your Stocks So Hastily
Hang Seng Index (1-month); Source: Bloomberg
As we enter the year 2017, we have seen the Hang Seng Index rise incredibly for six consecutive months. Many investors regret selling their quality stocks and strong stocks when the stock market was still on the rise. They had wanted to lock in profits, but ended up losing the opportunity of making more profits.
As we enter July, more are thinking that Hong Kong stocks have reached a state of fatigue and await a proper correction. Hence, they foresee a possible trend reversal and a market downturn.
We also see sudden rises and dips in the moving averages of the Hang Seng Index (HSI). Many people feel anxious, seeing HSI’s moving average rises above the HSI in one moment, then falls below it in the very next.
Do not sell your strong stocks
For the past few weeks, I had repeatedly called out to investors to not sell their strong stocks. Previously, investors’ panic had reached a peak as the game King of Glory developed by Tencent Holdings Ltd (700.HK) was criticised by China’s state media People.cn.
Many retail investors dumped their Tencent shares at a low price on the very day the game received criticism as well as the day afterwards. But, of course, these panic sellers probably still made money even if they had undersold, as Tencent’s share price had risen drastically over the past year or so.
Those who sold their Tencent shares at HK$260 could have bought the shares at HK$200, and they would naturally want to lock in profits.
Take famous sayings with a pinch of salt
There is a famous and popular saying in the Hong Kong stock market that translates to “Be damned, those who do not take profit when they have the chance to do so.” In other words, it suggests that it is simply wrong to not sell your stocks after they have risen to a high price.
But in my opinion, this saying could be very wrong.
I think it is merely something invented by people working for securities firms in order to convince you to keep selling and buying and vice versa.
Investing is not a game of Mahjong. In Mahjong, someone else will take profit if you don’t. But in investing, we have to look long-term, like Warren Buffett, who could hold his shares for decades.
In actual fact, Hong Kong’s tycoons hold their own shares for decades too. For instance, since when do you see Li Ka-shing selling the shares of CK Hutchison Holdings Ltd (001.HK)?
Similarly, since when do you see Lee Shau-kee selling the shares of Henderson Land Development Co Ltd (012.HK)? In fact, Lee Shau-kee even made Henderson Land issue bonus shares every year, and his own holdings increase year after year too.
Buffett, Li Ka-shing, and Lee Shau-kee, etc.…these are the people whom we should learn from, instead of market manipulators and big shareholders of fraud stocks, who frequently buy and sell the shares of their own companies.
On a side note, the Hang Seng has taken a trend change after its rebound over the past few trading days. Investors should no longer sit on the fence.
