#1 Investment Weekly – Rebalancing exercise

I have to start this week with a disclaimer. The following text is for your reference only. If you act on anything written here you are doing so on your own head.

The style of this week’s newsletter is a bit of a departure because I’ve written it in the form of one of those office memos that people are always writing. With all the financial markets madness going on, I thought I would return to some simple portfolio management, seeing as every fund manager in town will be doing the same in the next three weeks. It’s called rebalancing, or window-dressing.

What ever you want to call it, it has an effect on equity prices in December. Usually, it’s not really noticeable, but fund managers have a great opportunity to toss out their rubbish holdings and bring in new blood ahead of the end of one of the worst years for equities on record. Expectations are so low, that fund managers can show terrible results and no-one will blink an eye. So, here is a rebalancing idea for your tired and beaten down equity portfolio.

The effect of the first of many stimulus packages from China is already being felt, with the Shanghai Composite having broken its medium term downtrend on November 14 – in heavy volume. The potential for the index to retrace back to 3,000 (+45%) in six months is high. If you can’t buy A shares, you can take advantage of this recovery by buying the A50 ChinaTracker EFT (02823.HK – HK$8.97). A level of 3,000 on the Shanghai Comp would translate in HK$13.00 for the A50 (which has a correlation with the Shanghai Comp of 0.99).

Shanghai and A50 Tracker broke medium term resistance

It is likely that China will use its massive fiscal reserves to stimulate its economy in the next 12 months. The first step in this process was delivered on November 9th. More measures are likely to be introduced in the months ahead (including further interest rate cuts). In order to expose your portfolio to the upside that PRC fiscal and monetary stimulus measures are likely to deliver (both tactically and from a strategic point of view), the portfolio should be rebalanced.

Having reviewed a list of potential stocks that could be used to rebalance, four candidates stand out as potential inclusion. The screening process involved extracting China-only exposed companies within the top 200 companies by market capitalization as at November 20 (as these companies will be large enough to take advantage of the stimulated growth of China’s economy). Sectors that were excluded: 1) financials, which are about to fund China’s spending, probably at unfavorable terms as well as suffering from rising NPLs 2) there are no real estate companies as property prices are expected to remain weak, as they continue their correction from overheated levels of 2007, 3) no export oriented companies due to weak consumption demand overseas, 4) steel companies are excluded because of declining steel prices, 5) mining companies are excluded because declining global metal prices, 5) automakers are excluded because of their weak financial conditions of their overseas partners.

Although China’s interest rates are forecast to decline sharply in coming months, the list has excluded companies with high gearing, with an emphasis placed on companies with high cash levels (falling interest rates will encourage these companies to invest surpluses in their businesses). The list of 84 companies was then reduced to 38.

Stocks that would benefit from central government stimulus packages were given priority. In the case of all the stocks in the proposed list, the recent decision to inject new capital into ailing CITIC Pacific means that there is a precedent for support by Beijing of Hong Kong-listed corporates with strategic importance to China (something that would lacking for Hong Kong companies or non-SOE mainland companies). The decision to pick stocks that are state-owned provides a degree of downside-protection. China will not make the same mistake it made with the ITICs during the Asian Financial Crisis or the repeat the recent mistakes made by the US Government.).

The following stocks/units were then chosen as being likely to benefit from fiscal and monetary stimulus measures and therefore a general improvement in the Chinese economy as well as lender of last resort protection. The picks were assigned into two categories: tactical/growth and strategic/value, with the former given a six month investment time horizon, while the strategic stocks should be held for a longer term.

China Communications Construction (1800.HK – HK$6.75) – Market cap HK$30b, 14x PER, 1.7% yield. Beta: 1.25. The company has a dominant position in the PRC port infrastructure construction and design market. New business penetration into railway construction is timely as the government increases infrastructure spending. Raw material price declines should support margins. Net profit growth of 20% a year is expected. Price target is HK$9.40 (+57%). China Railway Construction (1186.HK – HK$10.48) – HK$22b, 27x, 0.8% Beta: 1.35. The principal activities of the Group are construction operations, survey design and consultancy operations, manufacturing operations and other businesses, including real estate development and the provision of logistics services that relate to the Group’s main business. The Group also engages in capital investment operations in Build-Transfer, Build-Own-Operate and Build-Operate-Transfer projects. CRCC should become one of the largest beneficiaries of surging government investment in the railway market (with reports of investment of Rmb2 trillion – 33% higher than the government’s planned Rmb1.5 trillion, which was announced in the 11th five-year plan over 2006-2010). Based on the new government investment plan, CRCC’s revenue from the domestic railway construction market may reach over Rmb717 billion from 2H08 to 2011, 90% higher than current estimates of Rmb378 billion. The estimate is based on 1) railway projects are under construction an average of 3.5 years, 2) CRCC maintains its leading position in the railway construction market with a 43% share, 3) construction investment accounts for 83% of the Rmb2,000 billion investment. The company has a net cash position, but has forex exposure (Yen, US$, A$). Raw material price declines will support margins. Price target HK$16.10 (+61%). Strategic picks included: Beijing Enterprises (392.HK – HK$26.40) – HK$32b, 15x, 2.5% Beta: 1.06. Beijing Enterprises is a public utilities and infrastructure owner (gas, water, roads) mostly around Beijing. Revenues are expected to grow 20% a year as the city continues to grow. It has low debt levels for a growing utilities company (gearing 8-9%). Company has bought back 2 million shares this year at an average price of HK$24.67. Price target HK$35.50 (+48%). Shanghai Electric (2727.HK – HK$2.50) – HK$7.4b, 10x, 3.0% Beta: 1.30. The principal activities of the Group are the design, manufacture, sale and servicing of products and services in the power equipment, electromechanical equipment, transportation equipment and environmental systems industries. China’s equipment makers have three years of orders and full capacity utilization, with expected higher demand from infrastructure stimulus packages. SE has RMB10 billion in cash, and no forex exposure. Price target HK$3.18. (+59%).

Purchases of these stocks/units will be conducted over a period of three months, so as enable an ability to adjust the average price achieved, as well as provide an opportunity to capture expected volatility – especially over the year-end, when window dressing is expected to be heightened.

Based on the beta of each stock and the assumption regarding the A50 ChinaTracker’s potential performance in the next six months, the expected return of the portfolio using various target levels for the A50 Chinatracker would be as follows, with an optimum capital gain 56% of the sum invested forecast.

Sensitivity of returns based on various A50Tracker levels

Individual stocks would generate returns shown below, based on the historic beta of each stock and the expected return of the A50 Tracker.

Expected returns for individual stocks

The portfolio would produce dividend of 2.8% in 12 months, which would be more than sufficient to cover the cost of holding the positions.

The average recommendation strength of the portfolio is 4 on rating of 1 to 5 (five being a strong buy). All the stocks are widely covered by analysts, with analysts from Morgan Stanley and Goldman Sachs recommending the four stocks. In fact, Morgan Stanley’s regional strategist has included both 1800.HK and 392.HK in his model Asia portfolio.

I have to admit I’m quite impressed with the logic behind the recommendations and the returns look really attractive. However, there are two issues that are crucial to the whole strategy: first China’s Shanghai Composite needs to continue to decouple from the rest of the world. Even though China’s A share investors are remote from the rest of the world, it must be hard not to look at the Dow or Hang Seng and wonder if Shanghai should follow. Second, H shares are listed in Hong Kong. If the company has a dual listing in Shanghai, then there are pressures between the two shares. The premium in Shanghai can widen, but it is not an infinite piece of elastic. Finally, I am aware that local retail punters have been piling into the A50 Tracker recently (as well as Callable Bull Bear Contracts), after giving up trading covered warrants. They could exit A50 as quickly as they piled in. That explains the disclaimer at the beginning.

#1 Investment Weekly – It’s a trap!

If you’re looking for a simple description of last week’s action, I can think of nothing more eloquent as those famous words spoken by Admiral Akbar as his fleet arrived at the forest moon of Endor, only to discover that the Empire was lying in wait: “It’s a trap”.

The skepticism that greeted China’s latest stimulus package was palpable. For the shorts, it was manner from heaven and another opportunity to stock up. There is a general consensus that global markets will need to form a double bottom as part of the current cleansing process, so any rallies are seen as ideal opportunities to add to short positions (where allowed, and if you can borrow the stock).

What I was particularly amazed about was the amount of short selling of the infrastructure stocks that will be beneficiaries of the China pump-priming exercise. Most of these commodity and infrastructure stocks were bid up heavily, while the amount of short selling of these shares jumped to 10-15% of their turnover last Monday. As the announcement was made on Sunday, I wonder how the short sellers were able to borrow so much stock so quickly (particularly as there is an up-tick rule in force). I can imagine the phone calls from prop desks in Hong Kong and London to (related) asset managers asking to borrow stock of building materials company, CNBM (3323.HK). According to exchange records, the stock is owned by seven fund managers (JP, Mirae, Schroders, Baillie, Atlantis, Morgan and T. Rowe) who own a total of 505 million H shares. That’s equal to 56% of all H shares. Yet, somehow, on Monday, 122 million shares were traded (13% of total shares) of which 4.8 million (4% of all trades) were short sellers. Prior to Monday, shorting of the stock had been very small.

Another bear trap arrived in the form of an interest rate cut in Hong Kong last week. HSBC (the world’s smuggest and most hated bank – refused capital from the UK government and has underperformed HS index by 19% since October 8th) succumbed to the pressure and passed a US interest rate cut on to its Hong Kong customers (its UK customers are still waiting). Local Hong Kong banks followed suit, briefly lifting interest rate sensitive stocks. This was followed by the snapping sound of the bear trap. HSBC could pass on the interest rate relief because the HKMA has been automatically pushing liquidity into the HK$ money markets by keeping its obligation to keep the HK$ within a band of HK$7.85/US$1 (the weak side of the peg) and HK$7.75/US$1. Currently, the peg is on the strong side of the range (how different is that to 1998, when speculators were trying to break the peg on the downside?). As with late-2003 and through 2004, the HKMA’s actions have lowered Hibor to almost zero (overnight is 0.1%). This is heartening for borrowers of Hong Kong dollars that use Hibor as their benchmark, but depositors are left with virtually nothing for their cash. For the HKMA, an interesting development has started up again – banks are paying it for its paper! The last auction of 3 month EFBs was seven times oversubscribed and produced an average tender of -0.1% (in other words, banks were willing to pay the HKMA interest, rather than the other way around). Why? Because of the same issues that are affecting the global banking system, banks do not trust each other. Every time an economist, rating agency, analyst or Treasury official says that there is a deep recession coming, buckle up for the ride, expect more banks to go under, bankers are looking at their counterparty risks and saying: no way, I’m not lending to this bank or that bank – I’d rather pay the HKMA and park my surplus funds with it, rather than lose it all. However, there is another issue. When a bank calculates its capital adequacy ratio, lending money (assets) to a bank is given a 20% risk weighting, but buying government paper is given a zero weighting. This is a big disincentive to lend to other banks – particularly as CARs are under pressure from mark-to-market losses. Also, interbank loans do not qualify as collateral at the central bank’s discount window, while government paper does.

A final explanation for remarkable fact that banks are willing to pay interest to the HKMA for its paper could be due to a lack of understanding of the system. Ignorance and temptation are now being added (together with greed and fear) to the list of human emotions/passions that have fuelled the current turmoil in the world’s financial markets. It has to be pointed out that a lot of the top and senior managers that were running the world’s leading Anglo-Saxon commercial banks during the 2004/06-period are still running the same banks now (Green, Ackermann, Lewis, Dimon etc). And just as the increased level of sophistication of the world’s financial systems baffled these senior managers then, so it is swooping over their heads now. Treasury Secretary Paulson is a good example. As CEO of Goldmans in 2006, he reportedly received US$16 million in wages (less than the US$37 million in 2005). Much of that compensation was derived from sales of the now toxic investments put together and sold by his subordinates. Did he know what his sales teams were selling? Did he foresee that they would turn noxious? No. This is the point. Bank senior management did know what was going on, while the recipients did not know what they were buying. I am sure the Treasurer of ICBC (Asia) is good at his job. But when interest rates were trending to zero in 2004 and barely much better in 2006, he would have been under some pressure to look for higher yielding assets. CDOs, SIVs and bonds issued by Icelandic banks must have looked like the most fantastic dessert trolley in the history of gastronomy. There is no way he could not resist the temptation. The fact that he has had to write-off HK$600 million in Icelandic bond investments is both tragic and symptomatic, of the greed, ignorance, temptation and now fear that is gripping the world’s financial markets. If you are getting tired of hearing this, then maybe that’s a good thing.

As compensation, here are two small pointers that suggest there are signs of fatigue in Hong Kong’s equity market. This could give Admiral Akbar hope that the evil Empire (led by those bad shorts a.k.a. the Darth Vaders of Wall Street) can soon be defeated.

First, the gross open interest on the HS Futures contract has been steadily declining since the November contract started. In fact, among the many records being currently broken, few would have noticed that the record high daily volume for HS Index futures contracts was on October 28 at 244,461, beating the previous high of August by 17%.

Generally, the futures contract has been the most efficient way to short Hong Kong shares in recent months (because it’s cheap). There can be two explanations for the decline 1) traders see the end in sight or 2) banks are pulling margin financing. The open interest shouldn’t be lower because: HK$ financing costs have been falling and the news-flow has been significantly on the negative side in recent weeks.

The second sign of fatigue is the decline in short selling of individual stocks. The percentage of short selling to total turnover has been steadily declining in recent weeks, while the correlation with the index’s daily-points change has been decidedly negative at -0.45. Explanations for the decline in short interest range from: traders see the bottom (again) or there’s no more stock to lend.
Although I have sympathy with short sellers (they are buyers at the bottom of markets, they are great investigators etc), but they have a problem with the morality of shorting a stock and effectively attempting to drive the stock price to zero (the maximum benefit). Buyers of stock are not attempting/hoping to bankrupt a company, shorts, by implication, are. Then there’s the issue of accuracy. What if you’re wrong (short sellers get it wrong most of the time, just as long investors do) – you could drive a perfectly good company to the ground, resulting in lost jobs, and a domino effect leading to a mass panic. The markets are currently regulated in your favour, with credit rating agencies downgrading their view of a credit based on the stock’s price performance. Also, only a certain few can short sell, because you need to borrow the stock, usually in large amounts from an institutional shareholder. By doing so, that lender will be aware of your actions. This is not equitable disclosure.

There is no sign of fatigue in the world’s forex markets. In fact, the unraveling of the yen carry trade actually accelerated last week. It has been this unraveling that pressured equity prices lower last week (neither Paulson’s U-turn nor weak economic/corporate data paled in comparison), and it will continue to dominate trade this week. Expect talk of yen intervention and a talking down of the volatility of US$. In the meantime, the 20-day moving average has become something of a barrier for the index (it popped above it on November 5 and 10, only to fail to hold it), suggesting that selling pressure will occur around 13,900. The downside is the previous low of 11,000.

#1 Investment Weekly – Like a plant

I’m going to move away from the week-in week-out noise of the market and look at how plants and the markets intertwine. It’s the only way to stay sane with volatility this high.

Last week I discussed what the world of investing in Hong Kong equities will look like as the new era begins. In summary, perceived higher risks will lower future returns on Hong Kong equities relative to past performance. Here’s how the next cycle will look – flat.

HS Index joining the lows

The chart is a simplification of the downside of the HS Index since 1987 and includes a forecast to 2013. The line representing the data is derived by taking the last five bear market lows (including October 27, 2008). Subtracting their differences and dividing this by the number of months between each low to derive a points-per-month average for each cycle.

Forecasting the next bottom

As you can see, the Index has traversed three cycles that were quite long (over 60 months): while the nineties produced two quite short ones with the 1995-97 bull market being one of the shortest in HS Index history and the 1997-98 bear market the shortest ever confirmed bear market (July 1997 peak – August 1998 bear-end lasted only 13 months). The current bear market has also lasted 13 months, while the severity of the downdraft is of a similar dimension at 65% vs 71% for the 1997-98 bear phase. However, I must insist that while October represented a bear market clearance crash, the similarities with 1997-98 pretty much end there. In 1997-98, Asian excesses were the cause, this time, the bubble burst in the Anglo-Saxon economies. The financial tsunami that everyone keeps talking about is adept in that the wave has crashed on the shores of North America and Europe, and the ripples are being felt in Asia.
What is most interesting about the chart above is that the shape of the 1987-93-trend was similar to the current bear market. There are some good reasons why: 1) the 1987-93 trend was a transformation period for Hong Kong, with the first red-chips (and some early H shares) listing in Hong Kong. In the current period, the transformation had come in the form of large H shares. 2) In the late 80’s early 90s, overseas investors were beginning to understand the potential of the opening of China’s markets, and Hong Kong’s role in this opening – Deng Xiaoping had only visited Shenzhen and uttered his famous battle cry “it’s ok to be rich, bitch” in 1983. In the past trend, the importance of China as a trading partner and global player increased to such an extent that China has been pushed to the forefront of global economic debate. Hong Kong, during the current period has been seen as a proxy to the appreciating RMB (remember 2003-04?) and an increasingly beneficial offspring of China’s economic might (CEPA, through train etc).

As far as I can tell, the next cycle theme for Hong Kong equities is not very visible. This explains why I have assumed a falling monthly average from the current bear market low to the next one. I am also assuming that the next low will be quite a long time in coming (although it will be shorter than the average of 67 months). The longevity of the next cycle may also be explained by the nature of the recovery of equities that I pointed out last week (risk aversion, demographics and the regulatory environment).

The most important issues facing Hong Kong equity investors right now are earnings, liquidity and confidence. The best way to imagine the interaction of these elements is to consider that a plant needs three ingredients to grow (sunlight, water and carbon dioxide). Sunlight (earnings) is essential for all life (markets) and is present to varying degrees all the time; water is fluid and therefore moves about and is unpredictable (even weather forecasters aren’t sure when it will rain next), while carbon dioxide is what we exhale when we breath or, in this context, talk.

I think it is safe to say that credit and interbank markets are beginning to become unstuck. So, now is the time for investors to closely watching analysts’ comments as they visit companies and report back on the impact of the previously frozen financial markets on corporate profitability. Unfortunately, this is not being done, and if it is, the analysts are not asking the right questions. As far as I can see, analysts have been busy downgrading their price targets again (see newsletter February 4th 2008 – TP downgrades everywhere), while maintaining their ratings (always a curious phenomenon). Profit changes have been minimal until a warning appears.

Local bank investments, marks to date & potential impact on profits

I find it quite curious that the raft of profit-warnings coming from Hong Kong companies almost always include some mention of investment problems, rather than an emphasis on the weak operating environment. Here are some examples: Dah Sing Bank says it has significant investment losses in 2H; CCT Telecom (telecom service provider) says its securities business has lost money; City e-solutions (a hotel software provider) says it has HK$59 million in forex and investment losses. Problems are never revealed until the company wishes to say so. Cathay Pacific’s lack of downside protection on its oil hedges suggests that members of the CITIC group have never heard of puts, collars or straddles. I find it mind-boggling that a company as financially sophisticated as Cathay Pacific could make such a basic mistake (Martin Cubon/Robert Atkinson are a experienced financial officers, one or both of whom will probably be quietly leaving Swire soon. That’s a shame really, although Cubon’s insistence on “very early in the morning” company visits won’t be missed). Perhaps Cathay/CITIC officials should watch those terrible public service announcements from the Government warning us poor citizens that the value of things can go down as well as up! As I often mention to people who want to listen: “you don’t make a loss on something you have bought until you sell it”. The mark to market façade is starting to crumble, thus putting a put under the market for now. Fortunately, the Beijing authorities are better advised than CX, and have basically put a floor under China Inc by openly bailing out CITIC Pacific. It appears lessons from Beijing’s failure to uphold loan guarantees to its collapsing ITICs of the late 1990s have been learned.

The issue of liquidation is a lot more serious and unpredictable, in my view. Although the world’s banking systems are now flush with much cheaper cash, banks are not performing their fiduciary duty to use the cash both for the good of their shareholders and the general public, which fund loans with their deposits. I can understand reluctance to lend to new customers at this time, but cutting lines bites the hand that feeds you. Hedge funds are bank customers just like you and me, and when lines are being considered for cuts, leveraged fund managers are considered on the top of any high-risk loan list. I hear hedge fund liquidation all the time when someone describes what is happening when the market tanks. The threat here is that the liquidation pressure will intensify ahead of year end.

Hopefully, someone somewhere knows this and is coming up with a way to avoid a pile up ahead of December 31. Unfortunately, with transitions going on in the White House, the markets might want to hear that New York Fed’s Tim Geitner is going to take over Treasury Secretary’s Paulson’s work, to ensure continuity. Geitner’s relative youth should be offset by his linkage with the US Central Bank (and therefore global central banks) which should put him in a prime position to react to the final set of problems facing the world’s financial markets: liquidation, accountancy (another issue looming at year-end) and window-dressing. President-elect Obama as well as incumbent Bush should be concentrating on reviving consumer confidence (and therefore the housing market) with plenty of talk with an emphasis that help is on the way from the government in the form of spending and tax breaks. In other words, as Samuel Brittan so rightly suggests: a fiscal policy financed by money creation.

#35 Architecture for the masses, by the masses

Individually, Hong Kong lacks any major recognizable architectural landmarks (think of London, Paris, New York etc). Very few people from out of Hong Kong can name a single building of any stature. But, collectively, with the lights on, Hong Kong can be stunningly beautiful. In a sense, this is part of the essence of Hong Kong: individually, the people of Hong Kong are not much; but, as a collective unit, the people here have achieved many things (escaped the tryanny of communism, started anew, survived famines and great poverty, built a thriving metropolis).

One issue that stands for me about Hong Kong’s architecture is the consistency of the ugliness of building styles over the years. For instance, a common feature of industrial buildings constructed in the 1980s was the use of octagonal windows. Here’s an example. I guess there were two reasons for this design feature 1) the octagon has eight sides, and is therefore an auspicious shape for Chinese or 2) a particular architecture firm at the time had a monopoly on designing industrial/commercial buildings, and simple copied and pasted the same design over and over again. I suspect it was the latter, but I’ve no proof. The same repetition can be seen in most public housing estates (which are carbon copies of one another) and even most private housing blocks.

One major gripe for me was the introduction of the “bay window”. This cunning architectural feature started to appear quite early in Hong Kong’s private housing construction history. The Mei Foo estate was the first to incorporate these complete waste-of-space features. The developer found a loop hole (or forced it into government regulations) that allowed the developer to increase the saleable “floor space” by adding bay like features to most of the windows of a flat. I have emphasized “floor space” because in fact there is no actual increase in floor space because walking on the ledge of a bay window is difficult and dangerous, and I say “bay-like” because these tiny ledges can hardly be described as a bay (which usually conjures up visions of a sweeping shoreline vista or an exit out into a garden or terrace). No. These tiny ledges were incorporated into the design for one reason only: to make more money for the developer. Bay windows, for instance, partly explain why the floor efficiency of Hong Kong flats is so low at 70-80%. In many cases, they account for as much as 10% of the gross area of a flat. As an aside, I would point out that flats built (mainly for civil servants – the same people that allowed the developers to incorporate bay windows into their designs the first place) never have this feature in their flats. Civil servants, although they can only rent, are wise enough to know that bay windows are a space consuming feature, and offer little or no benefit to the occupant. Still, look at any residential building in Hong Kong and the windows bulge out of the structure of the building like an army of uniform shaped barnacles.

I’ll conclude by offering what I believe to be Hong Kong’s ugliest building (picture above). This building has many things wrong with it, the most obvious of which is that it’s a mishmash of different shapes. There’s not a Golden Ratio in sight. The wording on the building is way too much. It reads “Chinese University of Hong Kong Tung Wah Group of Hospitals Community College Ma Kam Chan Memorial Building” (17 words long!).

#34 Lack of sport

One could argue about whether Hong Kong is a cultural desert or a heartless/soulless place where money is the only objective. But no one can dispute that Hong Kong is a sporting vacuum. On this issue there is no doubt, that, for a sports fan, or sports enthusiast, Hong Kong offers nothing but mediocracy and dullness.

I’m not referring to the Hong Kong Sevens, or even the Cricket Sixes, or even the horseracing here, which is pretty good (although the horses are mostly nags with three legs – but they are ridden by top class athletes). Here’s my point, the athletes taking part in the Sevens, Sixes and horseracing are not from Hong Kong..

I’ve attended several sporting events in Hong Kong, including The Sevens, racing at Shatin and Happy Valley, and I’ve enjoyed the spectacle (both on and off the sporting field), but I’m not sure how much the other spectators were really deeply interested in the competition. The Sevens is a really amazing party, but the drinking quickly takes precedent over the rugby. Although the passions of racegoers in Hong Kong is intense, this enthusiasm is driven by the potential for winning money, rather than the beauty and power of a thoroughbred horse driving to the line. In a way, Hong Kong punters are pragmatists because most of the time they are watching a pack of nags.

So where does Hong Kong’s population of 5 million potential sportspeople rank in terms of sporting achievements. I think it is fair to say, pretty darn poorly. We have produced one Olympic gold medallist (San San won at windsurfing) back when it was a new sport, with very few competitors of any worth. The other medallists were imported mainland ping pong players.