Hong Kong Property: They Are Bullish. Or Are They?13 April, 2011, 21:34. Posted by Zarathustra
Tags: Hong Kong, Lee Shau-kee, Li Ka-Shing, Real Estate
First turned bearish weeks ago, I set out to call as much as 10% drop of Hong Kong property prices by the end of 2011. Being bearish on Hong Kong property isn’t an popular view because most people are still bullish, including Li Ka-shing and the like.
Or are they?
I first pointed out that while Li Ka-shing told the press that buying real estate should be fine because inflation will be higher, Cheung Kong’s target net gearing for the year-end 2011 will be down from 4.5% to 0% according to management guidance. To raise cash, Cheung Kong (1 HK) and Hutchison Whampoa (13 HK) are both raising capital by selling off businesses. Last month, his port businesses were listed as a business trust in Singapore (Hutchison Port Holding Trust), and the IPO for the first Chinese Yuan denominated REIT outside China, the Hui Xian REIT, is now underway. Also, he is selling his residential project in Yuen Long (Uptown) at a prices way below expectation. The Executive Director of Cheung Kong, Justin Chiu, said the aim of low pricing is to help the fellow citizens to own property.
Another developer, Lee Shau-kee’s Henderson Land (12 HK), is also much less bullish than it sounded (despite the continuous shares buying from the Chairman, and, oddly enough, premature exercise of warrant which is still out of money). Known for its practice of selling properties slowly to fetch highest possible prices (such that some properties remained in its inventory for 10 years), Henderson Land has never been so active in selling its residential inventory. Besides selling residential units, the company has recently sold two properties within its investment properties portfolio. Media reported that Henderson Land has sold its investment in 9 Queen’s Road Central, a Grade A Office in Central at an average price of HK$27,800 per square foot. It has also sold a retail property in Mongkok Paradise Square for HK$100 million.