Ola, avid investors. We’re one week away from the opening of the new Hong Kong-Shenzhen stock connect, and we’re all wondering: “Is it worth the effort to invest in the Shenzhen stock market?
And if you know me well, you know that I’m not interested in investing for an average return, but only if I see a REAL investment opportunity. To put it in a numerical return, I expect my investment in the Shenzhen market to return a 20% by end year (yep, it’s only one month) and run for a 60% ROI by March 2017.
I feel you, my friend, in your mind is flashing “SPECULATOR”, and I understand that isn’t for everyone but for me, it’s the safest way to invest my money. Please, give me two minutes of your time so I can explain, it might change the way how you invest forever.
First, what is it so important to make money investing in the stock market? Here, few factors:
- Volatility; It might sound a “fancy” word but volatility is a high movement of a security compared to the index
- Demand; The more, the better. A lot of demand lift the price up.
- Risk/Rewards; Essential to calculate if it’s worth to take a beat. I only invest if I say a reward about six times higher of the risk. Example: I might lose 5% but there is a potential to make 40%.
- Costs; Transaction costs and exchange rates can kill my appetite for investment.
Yes, all of that. There is more, but let’s keep to the basic.
The Shenzen stock connect is flashing for me because I expect a lot of volatility and demand by international investors, plus the local speculators that will make this the Shenzen index go ballistic.
And fun fact: two years ago the new Shanghai Stock Connect opened for business on 17 November 2014, and double in value by June 2015 before collapsing. That was a 100% ROI in 7 months. No bad, right?
To me, with the opening of Shenzhen stock connect feels like a repetition of Shangai Stock Connect. However, this time around, there are few differences:
- The Yaun isn’t stable at all but losing value – FAST.
- The U.S is expected to increase interest rate aggressively, so making the Hong Kong Dollar stronger VS the Yuan.
This might create an opposite effect of the last stock connect launch. This time around, we might witness Chinese investor invest heavily into the Hong Kong stock market and not the same frenzy from global investors in the Shenzhen stock market.
I mean, it’s been a year that the Yaun and the Chinese economy is deteriorating, while the Chinese are trying to send money oversea. Not only that, but the Chinese government is cracking down on corruption, which is aggravating the outflow of money.
So, What Is My Strategy
Well, I don’t have a crystal ball to see the future, and I’m not going to play immediately.
First, I’m going to observe the volume of trades on both index, and if I see a strong buy, I’m going to buy in the index.
That simple, nothing too fancy.
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