Asia’s richest man dumps China assets

imgres

From Sovereign Man:

Here’s a guy you want to bet on– Li Ka-Shing.

Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor.

Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it.

Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago.

Once the deal concludes, Li will no longer have any major property investments in mainland China.

This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?

Simple. China’s credit crunch.

After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to reign in credit growth.

The shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.

Historically, growth rates of these proportions have nearly always been followed by severe financial crises. And Chinese leaders are doing their best to engineer a ‘soft landing’.

If they’re successful, the world will only see major drops in global growth, stocks, property, and commodity prices.

If they fail, the spillover could become pandemic.

This isn’t important just for Asian property tycoons like Li Ka-Shing. Even if you don’t know Guangzhou from Hangzhou from Quanzhou, there are implications for the entire world.

Here in Chile is a great example.

Chile is among the top copper producers worldwide, China among its top consumers. With a major slowdown in China, however, copper prices have dropped considerably.

Consequently, the Chilean economy has slowed. The peso is down nearly 10% against the US dollar in recent months, and the central bank is slashing rates trying to prop up growth.

There are similar situations playing out across the globe.

Like here. Read on…

22 Responses to “ “Asia’s richest man dumps China assets”

  1. migtronix says:

    Like here indeed! Bet on Ka-Shing — well with name that phonetically similar to KaChing! why wouldn’t you.

    J. mentioned Portugal some time back, agreed along with Eastern Europe (Latvia etc)

  2. Muzzer018 says:

    She’ll be right mate…..

    The pollies will hold that line as they quickly and quietly pack up and grab the lifeboats.

  3. The Patrician says:

    Guess where the $30bn is headed.

    • The Lorax says:

      The safest place in the world: Aussie real estate!

      • Charles Ponzi says:

        Not according to Garth Turner–the safest place in the world is Canadian real estate.

        Canadians have better built homes and our dollar is lower. We also have more snow and fewer bogans!

      • 3d1k says:

        Vancouver’s cheapest house – lists for $599,000 sells for $643,000

        http://www.cbc.ca/m/news/#!/content/1.2609673

        Is this Sydney’s future?

      • casewithscience says:

        Its not Canada, they recently gave their FIRB-equivalent teeth and regulated foreign buyers out of the market.

      • Pat says:

        No they didn’t. They shutdown an immigration route for wealthy people. Canada does not have any restrictions on foreigners / non residents buying property, but the tax consequence is different than a resident.

    • The Patrician says:

      Maybe Mr Li is the one making the tempting offer to Harry.

      $3bn is loose change

  4. StatSailor says:

    Pfft.

    He’s being doing this since last August and everything’s fine,

  5. saintmatthew says:

    but Australia is, of course, different

  6. Mark Out West says:

    Seems the 4 corners report was spot on.

    • Prometheus69 says:

      I’m pretty sure I saw a 4 corners report on the developing US Sub Prime crisis a couple of years before it happened.

      Brace yourself ……

  7. aj. says:

    Be interesting to see where this money is going? China property is holding up the rest of the world, when the dam breaks on this there will be no hiding places in property. Especially not in Australia.

    Think what the banks will do to kochi’s nice little mum with 20 dodgy IPs!

    • StatSailor says:

      I am sure she is as dainty a morsel as they have ever feasted upon, and they remain ravenously affectionate in anticipation.

  8. Assessing the magnitude of the Chinese housing bubble …

    China Property Curbs Seen Cracking Amid Slowdown Risks: Economy – Businessweek

    http://www.businessweek.com/news/2014-04-16/china-property-curbs-seen-cracking-amid-risks-of-deeper-slowdown#p1

    … excerpt …

    “In the capital city of Beijing, one of the four “first-tier” major cities, existing-home prices fell 3.8 percent from the March average to 31,265 yuan a square meter in the first 10 days of April, according to Bacic & 5i5j Group, the city’s second-biggest property broker.”

    How does 31,265 yuan ( $US5,002 ) per square metre relate to the average household income in Beijing ?

    Compare the sales prices per square metre with those of the affordable United States housing markets and adjust for the much lower Chinese household incomes … refer “China: Big Bubble Trouble” and the Annual Demographia Survey …

    http://www.scoop.co.nz/stories/WO1401/S00034/china-big-bubble-trouble.htm

    http://www.demographia.com/dhi.pdf

    It is critically important China’s cost per square metre are compared with those of the affordable North American markets, and adjusted appropriately for the much lower Chinese household incomes, in endeavouring to assess the magnitude of the Chinese housing bubble.

    Hugh Pavletich

    • The Beijing sale prices per square metre are a complete nonsense of course.

      If annual household incomes on average in Beijing are about $US10,000 per annum, new apartment prices should be at or less $US30,000 each.

      Say if these apartments are about 60 square metres, the costs per square metre should be at or below $US500 per square metre … roughly a tenth of what they currently are.

      So it is important for researchers to ascertain the median household incomes of the Chinese metros … get a fix on the median size of the apartments. The apartments should not exceed 3.0 times household incomes..

      As I illustrate within “China: Big Bubble Trouble” above … using Houston as a guide … apartment prices should be lower than standard detached housing. Note too within this article how they were providing housing in London pre WW2 and just outside New York post WW2 for a whisker over 2 times annual household incomes.

      It was “household income” then … single earner. Blokes were considered losers through those eras if they couldn’t financially provide for their families.

      Clearly … the Chinese housing bubble is in the stratosphere. The Mother Of All Bubbles.

      Hugh Pavletich

  9. Taiwan house prices sky high …

    Taipei housing market ‘least affordable’: report – The China Post

    http://www.chinapost.com.tw/business/asia-taiwan/2014/04/17/405499/Taipei-housing.htm

  10. EconoMonitor : EconoMonitor » China’s Shadow Banking System

    http://www.economonitor.com/blog/2014/04/chinas-shadow-banking-system/

    EconoMonitor : EconoMonitor » China’s Debt Vulnerability

    http://www.economonitor.com/blog/2014/04/chinas-debt-vulnerability/

    EconoMonitor : Satyajit Das

    http://www.economonitor.com/blog/author/sdas3/

  11. Towers where no lights burn at heart of China’s puzzle – FT.com

    http://www.ft.com/intl/cms/s/0/b4bb0140-c576-11e3-a7d4-00144feabdc0.html#axzz2zEmPrLjm

    … excerpt …

    The slide was largely owing to declining real estate investment, which also experienced its weakest growth in more than a decade. The situation is certain to get worse in the coming months as new housing floor space under construction contracted 27.2 per cent in the first quarter.

    … and …

    “Prices are falling and sales are really terrible because too many apartments have been built and so many of them are empty,” said a sales manager at a property development on the outskirts of Yuncheng who would only give his surname, Guo. “Even in a situation like this they are still building new housing complexes, it’s completely crazy!”

    Mr Guo said that in the district where the Highsee steel mill has gone out of business, the local government approved 800,000 square meters of new construction last year even though the district’s total population is only 300,000.