60% of Portfolio in China, But I Am Still Holding

 China/the Hang Seng Index has rallied. As of now, the run up has resulted in my 60% of portfolio being in China. However, I still will not sell. There are a few reasons both Macro and Micro

Hang Seng Index is Undervalued relative to Other Indexes

Forward PE wise based on bloomberg - Hang Seng is still lower than the S&P 500 and at a significant difference. If things were to be the same, we are looking at an upside for a further 90% for the Hang Seng Index and China stocks; this despite the rally

Price Earnings of My China Stocks are Low

Alibaba and Petrochina are trading at 14 times and 7 times price earnings respectively. Their peers (Amazon and Exxon) are at 40 times and 14 times price earnings. The China companies are still relatively cheap.

Dividend Yield of My China Stocks are High

Link REIT and Yangzijiang Financial are at 6.5% yield and Petrochina is at 7% yield. Their next best alternative are far apart. It will take a much higher upside for these stocks to be 4% yield before I would consider divesting- that is because that's where their peers are at. Exxon is at 3% yield.

LINK REIT is the largest REIT in Asia with the lowest leverage ratio beating any Singapore REIT. Yet local REITs are at 4% dividend yield while supposedly the best REIT with the lowest leverage ratio is at 6.5% yield. The difference in yield is too stark.

So until a further upside 60% takes place for these stocks, I am not divesting. 

Conclusion

In my view Hong Kong/China stocks are still relatively attractive for investments. Hence, it is unlikely I will divest. Sentiments has changed and China stocks are now favoured.

What makes it ironic is that even at this levels, blue chips stocks of the Hang Seng Index are at 6.5-7% yield. That is better than any Singapore or USA stocks.