About Webb-site Total Returns
No other web site that we know of (as of July 2012) calculates total returns for HK stocks including the reinvestment of distributions such as dividends, demergers (distributions of shares) and bonus warrants. Distributions are a huge component of the overall market return. This leaves retail investors unable to know what their total investment return would have been over any period, or to fairly compare the graphs of two stocks which have different dividend yields. Journalists regularly produce tables (particularly at year-ends) comparing share price gains and losses over a period without taking account of distributions, in effect comparing apples with oranges. Information is the antidote to speculation. It requires a lot of work, but Webb-site has produced the Webb-site Total Returns to fill that gap.
We are aware that a professional terminal, which costs around US$2,000 per month, provides such a service, although we doubt that it fully adjusts for some of the more novel distributions in Hong Kong, such as bonus warrants and warrants attached to rights issues. So even if professionals and academics have access to that system, they may be relying on understated returns.
Our system covers every listed stock since 1994. Unlike many sites, Webb-site also covers stocks which have delisted, for whatever reason. On most sites, key in a stock code for a delisted stock and you will find nothing. Coverage of delisted stocks allows you to remove "survivor bias" because you can look at all the stocks you could have bought at any point in time, not just the ones which didn't go bankrupt or get privatised.
How to use it
We offer two main graphing systems: the single-stock total return (STR), and the comparative total return (CTR). In both charts, you can mouse-over to read values, click and drag to zoom in to a detailed daily range, and double-click to zoom out again.
- The STR chart shows the total return for a single stock, reinvesting all distributions, rebased to the latest daily closing price. We could have done it the other way, rebasing to the starting price, but that would result in the adjusted current price of a lot of stocks being very close to zero, with many zeroes after the decimal point due to their value destruction. In STR, to calculate the total return over any interval, you take the current price and divide by the adjusted starting price, then subtract 1. For example, if the current price is $2.00, and the adjusted price on your start date is $0.50, then your total return is simply 2.00/0.50-1=3, or 300%. For major value-destroyers with historic adjusted prices larger than 6 digits, the chart shows them in scientific notation - for example 1.80e+6 is $1,800,000.
- The CTR chart allows you to graphically compare total returns in percentage terms for up to 5 stocks, reinvesting distributions and ignoring all expenses and taxes, of course. The default is absolute returns, but if you want to know how stocks performed relative to each other, then check the box "show returns relative to Stock 1", and you will get relative returns, with Stock 1 of course becoming a flat line at 0%. The other lines will be the percentage by which you would be better or worse off by investing in that stock compared with investing in Stock 1.
- Tip: if you are looking for a market benchmark to compare with, you could enter stock code 2800, the Tracker Fund of HK, which has been listed since 12-Nov-1999. It has a very low expense ratio, around 0.2% p.a., although it does suffer withholding tax since 1-Jan-2008 at 10% on dividends from mainland companies.
- CTR allows you to pick a starting date for the comparison, or defaults to
1994-01-03 (3-Jan-1994). For multiple stocks, if the chosen date is too
early, then this will be automatically corrected to the earliest date on
which they were all listed.
- If you do not pick a date, then the page treats your stock code as current. If it cannot find a current stock, then it looks for the last delisted stock to use that code.
- If you do pick a date and enter a stock code, then it will look for the stock with that code on that date. If there was none, then it will look for the first stock listed after that date with that code.
- The base price for each stock is the adjusted closing price on the first day of the period. If a stock is still suspended throughout the first day of a period, then we take the closing price on the first day in that period after suspension, because that is the first day on which you could reasonably have bought the stock.
If the graphs load slowly, you are probably using Internet Explorer 8 or earlier, which draws the graphs very slowly (for techies, that's because IE8 doesn't natively support the HTML5 <canvas> tag). Firefox, Safari, Chrome, Opera, IE9 (or later) and its succecssor, Edge, are much faster. If you are still using Windows XP, then you cannot get IE9 (only for Windows Vista or later) so use Firefox instead.
Raw stock prices and other market data are facts, not creative works, and you cannot copyright facts, but Webb-site Total Returns, like stock market indices, are a creative work over which we sweat and for which we assert copyright. However, we encourage media to quote them freely and academics to use them in research, provided that attribution to "Webb-site.com" is given. Our goal is for Webb-site Total Returns to become the "gold standard" in the same way that students of US stock performance tend to use products from the Center for Research in Security Prices at the Booth School of Business of the University of Chicago.
If you operate a financial web site and wish to enhance your product with Webb-site Total Returns, then contact us for a confidential discussion on terms. Don't your users deserve better? Your fees would help support the running costs of Webb-site, which is not for-profit.
How we do it
- The last (non-suspended) trading day before the stock begins trading without entitlement to a distribution is known as the cum-date. The next trading day is the ex-date.
- Each event generates an adjustment factor to all prior prices for a stock. For a split, consolidation (reverse split) or bonus issue, the adjustment factor is simply the ratio of the old shares to the new shares. For example a 5:1 consolidation has an adjustment factor of 5, and a 1:5 split has an adjustment factor of 0.2. Similarly a 1 for 4 bonus issue has an adjustment factor of 4/(1+4)=0.8.
- For rights issues and open offers, if the closing price on the cum-date is not less than the subscription price, then there is an adjustment factor is equal to the ratio of the theoretical ex-entitlement price (TEEP) to the closing price. The TEEP is simply the weighted average of the market price for the old shares and the subscription price for the new shares. For example, if the closing price is $4.00, and we have a rights issue of 1 share at $2.00 for every 4 shares held, then the TEEP is [(1*$2.00)+4*($4.00)]/5=$3.60, and the adjustment factor is $3.60/$4.00, or 0.9. This is equivalent to a 1 for 8 issue at $4.00 (market price) plus a bonus share for every share subscribed, making it a 1 for 9 bonus issue, with an adjustment factor of 9/(1+9)=0.9. For that reason, the adjustment factor in a rights issue is sometimes known as the bonus factor. This is the conventional way of adjusting, although in practice if the investor sells his rights in the market before the subscription deadline, then he may or may not get the theoretical price, which is the TEEP minus the subscription price.
- Splits, consolidations and bonus issues (note 2) are normally take into account in the share price graphs you will find on the web, because they are easy to account for. Adjustments for rights issues and open offers (note 3) require knowledge of the closing price on the cum-date, but these are often taken into account, although in some cases, an incorrect adjustment is made with a factor greater than 1, which implies that investors would irrationally have taken up the issue even though they could have bought shares more cheaply in the market.
- For a distribution, the adjustment factor is A=1-D/C, where D is the distribution value and C is the closing price on the cum-date. For example, if a stock closes at $2.00 on the cum-date for a dividend of $0.04, then the adjustment factor A=1-0.04/2.00, or 0.98. If the closing price on the ex-date is $1.96, then the total return for that day will be 1.96/(2.00*A)-1, or 0%, as you would expect, because the share price has dropped by the value of the distribution. Put another way, with the dividends you could buy 2 shares on the ex-date for every 98 that you own.
- A company may declare more than one distribution with the same ex-date, for example, a final dividend, a special final dividend, and a bonus warrant. We take care to calculate our adjustment factors on a compound basis, so that the product of the adjustment factors for all the distributions on the same ex-date is equal to the adjustment factor if they had been a single distribution of the same combined value. That is why in the "event details" page for an individual event, the adjustment factor may look slightly odd - for example, if the closing price is $1.00 and there is a final dividend of $0.02 and a special dividend of $0.02, then the adjustment factor for one will be 0.98 and the other will be 0.96/0.98=0.97959... , and the product of the two is 0.96. It doesn't matter which way around we process them.
- Most stocks are quoted in HKD currency, but many declare their dividends in a different currency, such as CNY or USD. If the company discloses the actual HKD payout to investors, then we use that figure, but if we are unable to find such a disclosure or none exists, then we calculate the HKD value using mid-market exchange rates on the cum-Date.
- Chinese enterprises (wherever domiciled) and companies from some other places (but not Hong Kong) are now withholding tax on dividends under PRC law. We follow convention and do not account for this, because the tax treatment of investors varies depending on where they reside; some may be able to offset the tax against their domestic tax obligations under international treaties for the avoidance of double-taxation. So we account for dividends gross.
- Reinvesting the value of each distribution in shares of the same company would give you a growing bundle of shares, the value of which tracks the total return. There is of course a timing difference: payment dates come after ex-dates, and we do not account for the cost of money in-between, so in effect there is a slight leverage effect on this "dividends reinvested" return, but that is how well-known market total-return indexes are calculated too, so we are consistent.
- For distributions such as bonus warrants and demergers of shares prior to a listing, we take their value to be the closing price on the first day on or after the cum-Date on which the distributed item is traded. For distributed new securities which are not yet listed, this of course involves an element of forward-looking, but it is better than disregarding the value of such distributions. The alternative for bonus warrants would be to use one of several theoretical option valuation models, but that may not match actual traded prices. Accordingly, there will be times when the Webb-site Total Return does not yet include the value of a distribution, because we don't yet know what it is worth.
- For rights issues or open offers, in some cases a listed warrant has been attached to the new shares. We take the value of that warrant as explained in note 10, and treat it as a discount on the subscription price before calculating the theoretical ex-rights price.
- We do not attribute any value to unlisted non-cash distributions (such as unlisted shares or warrants) unless a cash offer or alternative is being provided. Companies really shouldn't make unlisted distributions, because it amounts to a partial delisting and is usually abusive to outside shareholders.
- If a stock code changes due to a migration from GEM to the Main Board, it doesn't matter to us, because we are tracking the issue, not the stock code, so that we produce a seamless total return series.
- If a company has redomiciled by scheme of arrangement, then this involves exchanging shares in the new holding company for shares in the old company, in a fixed ratio (often 1:1). For STR purposes we treat that as a single stock (and likewise in the directorships database). If the ratio is not 1:1, then it is treated as a stock split.
- Note that if the starting date in a CTR chart is the first day of trading after an IPO, then the total return chart is based on the closing price that day, not the IPO price. If you got the shares in an IPO, you can work out your first-day gain from the closing price and combine it with the total return. To be fair you should deduct the interest you lost on the application money if you received a partial refund or applied with a margin loan - hot IPOs sometimes only allocate you a small fraction of what you applied for, but you lose interest on the whole application money. For example, if you were allocated 1% of the shares you applied for and the interest rate was 4%, then a week's interest amounts to about 400/52=7.7% of the IPO price.
We disclaim any liability for any reliance on Webb-site Total Returns and for any errors or omissions. Please report any errors that you spot.