Good rain knows the best time to fall

I’d like to begin by wishing you and your loved ones all the best for prosperity, health, and joy in the Year of the Horse.

I had a very quiet CNY holiday in Hong Kong, and I used the down-time to re-watch the James Clavell classic, Nobel House, which I highly recommend to younger audiences unfamiliar with this extraordinary 1980s mini-series.

Nobel House was set in the pre-handover era of Hong Kong, and incorporates many nuances of the history of the tongs and the relationship between Eastern-Western cultures. I always enjoy a bit of nostalgia to have some perspective on the world.

In light of recent events, I’d like to wish all of us to have good “joss” (乔斯) in the coming year, as I think we’ll all need it to navigate these prevailing times.

Strategy for the new “Fiscal” year

As it’s early March, I am getting ready for the new year, that is, the new fiscal year which arrives on April 1st, albeit without any fireworks or dragon dances.

Although FY2526 could have been more prosperous, I am content with modest gains and having planted a lot of seeds, which I hope will bloom in the future. As for my asset allocation strategy, I have divided the research into various buckets:

and in this article, I will embellish on the rationale for these areas and factors which have influenced my strategy.

The crux of my allocation is building a portfolio of Chinese value and dividend stocks, which I have over the past two years. I am hopeful the momentum will hold, and focus on those below their 10-year previous highs.

I was also allocating into commodity & energy producers, and I’ve recently began taking positions in small and mid-cap Chinese technology companies. The Yen and 20-year long-bonds are contrarian positions.

Tactically, I will be periodically hedging with financial services and the technology high-flyers, and have recently targeted the Kospi, which has become parabolic.

That’s the plan for FY2627, although, as I’m a Libra, I reserve the right to change my mind at any time.

Reflecting on the Asia Financial Forum

I’ll begin by commenting on the winter season in Hong Kong, which often brings visitors and delegations. The Asian Financial Forum (AFF), seasonally held in January, brings returning delegates, many I’ve known over a decade.

Although the AFF may have aspired to become the Davos of Asia, it is not a world-class event by any means. It has its merits in that it attracts over 2,000 participants, and draws delegations from around the globe.

I did not sit through any presentations or luncheons this year, and thus cannot comment on the agenda. But, I did interact with a variety of guests and delegates, to get a sense for differing outlooks.

One such meeting was with a Shanghainese family office investor, whom I had met on a previous occasion. I’d characterize them as a second generation family business in the leather exports, and they manage the family’s investments.

This person is a Millennial generation, and a typical example of the younger generation of affluent Chinese: well educated, well traveled, and very cosmopolitan in their preferences. I am always interested to learn from younger audiences of their investment interests and market outlook.

One comment made me chuckle. They said that crossing the border from Hong Kong into Shenzhen felt like “traveling into the future”.

I assume that they were referring to the Mainland as new and shiny, and has more advanced in adoption of smart-city technology. Their comment also reflected a lot of pride in China’s impressive development.

We had a good discussion on investing areas, and I noted that they were focusing on various sectors such as fashion, hotels & leisure, sports & entertainment, and technology. I also noted they did not mention: global debt, mid-East tension, US recession, or other potential black swans.

My point is: the younger generation in China are very enthusiastic about the future, and for good reason. China has momentum; their innovation sector is a powerhouse. The martial arts robots performance at the Spring Festival Gala are case in point. China has confidence and they will continue to break new boundaries.

Whilst I often (as do many of my peers) fixate on where the next crisis will arise, they seem to be focused on the next opportunity. It was a reminder to me that I should spend more time traveling to Shenzhen, Chongqing, Shanghai and elsewhere to learn of next generation technologies. There are many such examples of emerging technologies.

For instance, last week I joined the rush of HK’ers to purchase an electric vehicle (EV) ahead of the cancellation of the tax incentive. I purchased an MG S6 EV and didn’t do a lot of market research to be honest; I did ask one question - does the car have LiDAR (Light and Detection Ranging). It doesn’t; but, I’ll keep an eye on this emerging technology that China’s Hesai Tech is among the market leaders.

I’m not too interested in the large-cap sector (Tencent, Alibaba), and its obvious the mid-cap and small-cap will be a volatile ride.

Nevertheless, there are currently less than 10 Chinese technology companies in the global top-100, and if I trust my Gen-Y Shanghainese friend, that’s likely to change this decade.

The Kospi has joined the AI frenzy

Looking at the latest movements in the financial markets, although the gains in Gold and Silver have taken the spotlight, it should be noted that the Korean market has had a record parabolic move. Prior to the recent correction last week, the Kospi had almost doubled since September.

A handful of large cap stocks, Doosan Corp, Mirae Assets, Hanwha Aerospace and others, have had over 5x gains in the past year.

One explanation was that South Korea’s finance ministry announcing plans to eliminate capital gains for overseas investments so as to incentivize repatriation of capital back home. Sure, this could have ignited a lot of speculative trading ahead of the tax reforms.

But, I took a deeper dive so as to understand if the market activity was widespread, or just concentrated in the Kospi index. I was surprised to see that in the past few months that over half of the volume is traded in the top 3 stocks; Samsung Electronics (005930.KS), SK hynix (000660.KS), and Hyundai Engineering (000720.KS).

These top three represent over $US11 billion of the $20 billion daily turnover. Thus, the parabolic movement in the Kospi could mostly be attributed to the 10x appreciation in SK hynix, the leader in DRAM and HBM high-performance memory chips.

Prior to the recent correction, SK hynix had caught-up and over-taken Nvidia’s recent gains. (albeit its market cap remains less than ten percent)

Anyway, I highlight this characteristic because Sk hynix will now start to dominate the movement of the Korean market as a whole, and thus Korea will now be strongly influenced by the global AI sentiments. I expect that large daily movements (over 5 percent) in the Kospi will likely become common this year.

Although I have a positive outlook on Korea, and I’m heading there next week for the Seoul marathon, I wouldn’t buy the Kospi as I remain bearish on the AI and datacenter mania.

As we learned in Squid Game .. “good rain knows the best time to fall” and I fear that soon will be the best time for AI.

Thoughts on the New World Order

In other notable developments, Prime Minister Mark Carney’s speech at Davos gained widespread attention, and it was good to hear he was forthcoming on acknowledging a “New World Order”.

Although a somewhat ambiguous reference, the NWO, in my view, is a recognition of the fiscal situation of the U.S. government. After 70 years of being the consumer and policeman of the world, the U.S is struggling to finance their existing debt, military and entitlements. Tariffs, territorial disputes, manufacturing re-shoring and so on are all part of the transition and re-negotiation of trade relationships. This is what Rabobank economist, Michael Every, has more eloquently described as Neo-Mercantilism.

Anyway, I was excited about Carney’s speech as he suggested the prospect of Canada diversifying its trading relationships. But, I was equally excited about this prospect in 2012, when BC’s Premier Christy Clark gave a presentation at the Four Seasons in Hong Kong on the potential for Canada to become the “Saudi Arabia” of natural gas.

Alas, it was over a decade until June 2025 that LNG Canada, in Kitimat BC, shipped its first cargo of Liquefied Natural Gas (LNG) to Asia. A historic moment indeed.

Nevertheless, I am hopeful Carney will align interests in Canada, and open up new markets for our resources, as well as, new partnerships with smaller economies. With respect to the oil sector, I actually think Carney will achieve new terms with the U.S., and that Canada will benefit as the U.S. pivots to become a major player in energy exports.

I don’t see what other products the U.S. could bring to international markets that would make a material change in their balance of trade. Arkansas Rice? I’ve never once seen a U.S. trade association participating at a Shanghai Food Expo or elsewhere in Asia.

Anyway, since last year, I’ve been attracted to the Canadian energy producers and they have been gaining strong momentum. I had been hoping for a correction in the energy sector to add to the portfolio, but with recent events in the mid-East that seems unlikely.

But, I still see value in the sector and the natural gas ETF (UNL) is among my favorite. There is a strong case for Canada and the U.S. to strongly expand their LNG exports to Europe and Asia over the next decade, particularly if this is the beginning of a long-term instability in the mid-East.

Over a longer horizon, there should be greater adoption of natural gas and the price gap between North American and international markets will narrow.

Tough environment for baked pork chop rice

Otherwise, looking around the globe over the past 12-months, most markets have had very exceptional returns. In my memory, I cannot recall seeing all major markets in double digits.

With such lofty markets, it’s always a useful exercise to ask “which assets are currently distressed (or unloved)?”. My list includes: Toronto Condos; Chinese Property Developers; News Media; Food & Beverage; and Long-Duration Bonds. I’m sure there are others.

On bonds, I had been purchasing 10-year corporate bonds over the past couple years, whenever there was a rally in yield above or near 5 percent. Although I’m aware of all the negative risk with bonds in an inflationary environment, I’m happy to lock-in 5 percent and hope for the best.

On a more speculative trade, I started building a position in the long-term bond ETF. I am cognizant of notable economists’ warnings for a prolonged high inflationary environment; yet, I’m more inclined that we reached the ceiling in the 30-Y US-T already, and we’ll see lower rates.

But, in terms of unloved, there is one asset that tops the list: Hong Kong restaurants. Apparently, there were over 1,700 restaurants that closed in 2025 which included long-standing franchises such as Taipan Bakery, King Parrot, and others.

I have many good friends in the F&B sector, and I’ve seen them age considerably these last few years. I cannot imagine the stress they’ve been under trying to deal with Covid, and then followed-by a huge inflationary period (as well as difficult landlords).

So, when will the bottom arrive? At some stage, I would think the more institutional franchises would adjust to the market conditions; and that brings my attention to the best baked port cutlet in town. It’s been a very tough grind for Cafe de Coral (0341.HK), which is now trading at around 15 percent of its all-time highs.

I think a deep dive into these unloved assets is timely. Yes, it remains a tough environment for F&B, and I’d likely wait for 0341.HK to cross its 200-day average before speculating it has seen it’s bottom.

Alas, for the F&B sector, something’s gotta give because HK’ers certainly haven’t started cooking more frequently.

The King of Yau Tsim Mong

Lastly, changing topics, I just wanted to mention another milestone in that I became the 1st person to run all 239 streets in Yau Tsim Mong District. That includes various wetmarket alleys and freeway interchanges.

There are 6 Districts in Kowloon and a total of 1031 streets; I’ve completed roughly 55% of Kowloon, and aim to complete 100% by the end of fiscal year FY2627.

Ok, it’s not climbing Everest, but we all gotta have a few silly hobbies to keep our spirits up.

And, as Ian Dunross, the Taipan of the Noble House, once said, “tomorrow will take care of tomorrow’s problems”.

Till tomorrow.