More Hong Kong companies say business impacted by mass protests

[karlmarx]

The intent of most international (mainly finance) businesses located in Hk is to be able to access/serve the Chinese market. If these international businesses wish to maintain their access to Chinese markets, and enjoy lower tax, and fewer capital control regulations, there is probably no better place for them to be. Which is why we have yet to see any report of major companies relocating.

If these international businesses do uproot from HK, but still wish to do Chinese business, the most probable relocation will be to the mainland. Probably Shenzhen or Shanghai. Singapore?

There will likely be more wealth management business for Singapore, as some of the rich people move their money to what they perceive to be the 'Switzerland of Asia.' And there may be a little more Chinese tourist in Singapore. But that's probably as much as Singapore can benefit. Singapore has a more defined role in catering to international businesses interested in the Asian Pacific market.

During the time of HK's 1997 handover, few of the HK businesses actually relocated to Singapore. The most prominent probably being Jardine. But it was only the listing of their public companies that was moved to Singapore. Although Jardine continued to grow its retail business in mainland China, their movement of listing to Singapore probably earned the ire of CCP leaders. Jardine's influence in HK's legco, and hence its business clout in HK, was gradually by the noveau HK rich. The lesson is simple; a business that is long on China risks losing long-term gains, if it flees at the sight of trouble.

As for HK residents migrating to Singapore, this will only take place in significant numbers if the companies that employ them do likewise. Since it is not likely for major HK companies to move to Singapore, then it is also less likely for HK residents to move to Singapore.

For those that are rich enough to consider moving without certainty of employment, it seems that Hkers much prefer western nations. Just as it was during HK's handover. More than 20 years after the handover, Canada, Australia, and UK still appear to be the preferred destinations, at least according to media reports. Even then, most of those who left in 1997 eventually returned to HK. Why? More business to be done there, of course.

[specuvestor]

Jardine was one of the taipans. Their logo says something. I think risk assessment wise it is right for them to move in 1997

Similarly I think it makes no sense for Chinese rich to keep offshore monies in HK, now or in 97

[dreamybear]

My present take on HK's real estate policies is that Beijing will eventually introduce social/housing reform measures. Just as they are doing in Xinjiang. 

In so doing, Beijing may alienate the few billionaire land owners. But that is a small price to pay. China now has far more economic resources and international business savvy, compared to 30 years ago when it first opened for business, to no longer need the assistance/acquaintance of the billionaires. Beijing has little to gain, and far more to lose, from allowing the billionaires to maintain the status quo.

I don't know what Beijing will do. But since all real estate leases expire in 2047, this gives Beijing a good opportunity to introduce land reforms then. But HK may be as good as gone if Beijing sits on their hands until 2047. So perhaps changes will coming sooner rather than later.

And so I'm bearish on HK real estate.

Interesting insights from karlmarx regarding the situation in HK. 

It seems in another SCMP article, land seizure has already been suggested.

"The Communist Party mouthpiece People’s Daily and its more strident offshoot Global Times inveighed Hong Kong’s developers and their vested interests as the “cause” of why many disaffected youth are rampaging through the city’s streets. In strongly-worded commentaries, the newspapers urged Hong Kong’s government to seize land from the developers and turn them into public housing. The papers specifically endorsed a proposal by the pro-Beijing political party DAB to use the Lands Resumption Ordinance, a law that traces its roots to 1924 during Hong Kong’s days as a British colony, to obtain the land."

Read more : https://www.scmp.com/business/article/30...d-reserves?

My interest was in HK Land was piqued recently by a few financial blogs but now, I am having second thoughts.

[dreamybear]

The intent of most international (mainly finance) businesses located in Hk is to be able to access/serve the Chinese market. If these international businesses wish to maintain their access to Chinese markets, and enjoy lower tax, and fewer capital control regulations, there is probably no better place for them to be. Which is why we have yet to see any report of major companies relocating.

If these international businesses do uproot from HK, but still wish to do Chinese business, the most probable relocation will be to the mainland. Probably Shenzhen or Shanghai. Singapore?

There will likely be more wealth management business for Singapore, as some of the rich people move their money to what they perceive to be the 'Switzerland of Asia.' And there may be a little more Chinese tourist in Singapore. But that's probably as much as Singapore can benefit. Singapore has a more defined role in catering to international businesses interested in the Asian Pacific market.

During the time of HK's 1997 handover, few of the HK businesses actually relocated to Singapore. The most prominent probably being Jardine. But it was only the listing of their public companies that was moved to Singapore. Although Jardine continued to grow its retail business in mainland China, their movement of listing to Singapore probably earned the ire of CCP leaders. Jardine's influence in HK's legco, and hence its business clout in HK, was gradually by the noveau HK rich. The lesson is simple; a business that is long on China risks losing long-term gains, if it flees at the sight of trouble.

As for HK residents migrating to Singapore, this will only take place in significant numbers if the companies that employ them do likewise. Since it is not likely for major HK companies to move to Singapore, then it is also less likely for HK residents to move to Singapore.

For those that are rich enough to consider moving without certainty of employment, it seems that Hkers much prefer western nations. Just as it was during HK's handover. More than 20 years after the handover, Canada, Australia, and UK still appear to be the preferred destinations, at least according to media reports. Even then, most of those who left in 1997 eventually returned to HK. Why? More business to be done there, of course.

Good analysis.

Article "Will Hong Kong people buy Singapore homes?" from property soul who migrated from HK :

"Hong Kong people are not buying investment. They are buying insurance.

Hong Kong people are not buying residences. They are buying permanent residence.

Emigration in Hong Kong has been on the rise again for the last few years. The popular destinations for Hong Kong people are still Canada and Australia. The new ones include Taiwan, Malaysia and Thailand, but not Singapore."

Read more : https://www.propertysoul.com/2019/08/02/...ore-homes/

dreamybear also dream of having insurance PR in UK, Australia, Canada or US.

[soros]

The offer of permanent residence in Cyprus caught my attention : it requires investment in 2 properties valued at "300,000 euros or more" which does not seem to be too onerous. But the problem may be the local banking system is weak.

[dreamybear]

The offer of permanent residence in Cyprus caught my attention :  it requires investment in 2 properties valued at "300,000 euros or more"  which does not seem to be too onerous. But the problem may be the local banking system is weak.

Thanks soros.  

There is also the Golden Visa scheme (investing in Portugal) which requires a property investment of Euro 500k. But Portugal is too "exotic" in terms of language / culture. UK is the most ideal with good universities, a thriving financial center, and language.

[karlmarx]

Interesting insights from karlmarx regarding the situation in HK. 

It seems in another SCMP article, land seizure has already been suggested.

"The Communist Party mouthpiece People’s Daily and its more strident offshoot Global Times inveighed Hong Kong’s developers and their vested interests as the “cause” of why many disaffected youth are rampaging through the city’s streets. In strongly-worded commentaries, the newspapers urged Hong Kong’s government to seize land from the developers and turn them into public housing. The papers specifically endorsed a proposal by the pro-Beijing political party DAB to use the Lands Resumption Ordinance, a law that traces its roots to 1924 during Hong Kong’s days as a British colony, to obtain the land."

Read more : https://www.scmp.com/business/article/30...d-reserves?

My interest was in HK Land was piqued recently by a few financial blogs but now, I am having second thoughts.

HK Land is not without merit. It has a portfolio of very good commercial properties on Hong Kong Island. It has very low gearing. It has been consistent in its dividend distribution, which despite being only half of its earnings, is presently yielding about 4% on share price. Compared to some of the higher geared REITs, HKL looks like a safer, albeit lower-yielding proposition. Furthermore, its share price are at 1/2 year lows.

Drawing on these data, which can be easily accomplished by spending a few hours on HKL's annual reports, it is easy to arrive at a conclusion that HKL is an 'okay' investment proposition. Is it? I don't know. It may well bring investors the returns that they seek. 

Personally, I think there are safer ways to make a 4% yield, in addition to capital appreciation.

[dreamybear]

Thanks karlmarx.

I went to take a quick look at HKL's AR, and yeah, it owns quality prime assets(with the likes of JPM, HKEX, LVMH Grp, etc as tenants) & is related to MCL / Jardine Matheson - I must have been a bear living in a well all these years. I think investing is a journey much like the Asian education system - start young, if not there won't be enuff time to gather knowledge.

That aside, yeah, the discount to NAV is pretty attractive - according to shareinvestor, Price(USD) 5.5 vs NAV(USD) 16.5. One thing I don't like(personally) is the forex part.

According to AR2018, HKL has a significant amt of investment properties of USD32,740.9m in HK/Macau. Once the great "reset" or HK lease expiry comes in 2047(and assuming no extension or "SERS" / "VERS" type of policy), does anyone know what it means in actual accounting ? Will it mean all properties become 0 value like our HDB flats after the lease expire ?

Regarding HK retail sales, it seems that even though everyone knows the HK numbers will be bad, jewellery/watch counters like LK(590.HK), OW(0398.HK), CTK(1929.HK) are still some way off their 5 year lows(Yr 2016). Cld it be perhaps reflecting that most of their sales are derived from mainland China(either in China itself - CTK or chinese tourists buy in HK - OW/LK) ?

--------------------------- Other news --------------------
Hong Kong's August retail sales worst on record as protests escalate
Updated: 02 Oct 2019 06:50PM

..................Sales of jewellery, watches, clocks and valuable gifts plunged 47.4 per cent on-year in August, data showed, after a revised 24.3 per cent drop in July.

Medicines and cosmetics fell 30 per cent in August, compared with revised 16.5 per cent fall in July. Department store sales dropped 29.9 per cent in August, against a 10.4 per cent fall in July.

Hong Kong-based skin care and cosmetics chain operator Sa Sa International posted 32 per cent year-on-year drop in its sales in Hong Kong and Macau in August, and expected its performance in September to remain "very weak".......

Read more at https://www.channelnewsasia.com/news/asi...d-11963286

[karlmarx]

With regards to multi-brand beauty and cosmetics retailers, I believe Sephora is the most popular among Asia ex-HK consumers.

Sa Sa has captured the HK market very well but in other Asian cities where it has expanded -- where the dominant player is probably Sephora -- it performs poorly.

So Sa Sa's prosperity is wholly dependent on HK natives and mainland tourists. Since it is not likely for Sa Sa to succeed in the Asian markets where Sephora is dominant, Sa Sa will need to grow its business by having more mainland tourist customers.

Earlier this year, Sephora announced that it is returning to the HK market. Will it be successful this time? Maybe those that frequent IFC mall can share their observations.

https://insideretail.asia/2019/04/03/sep...confirmed/

Like HKL, Sa Sa also has very nice numbers. But how profitable is Sa Sa going to be in the future? Is the present market price cheap in relation to that?

[weijian]

From value investing standpoint, there are really only 2 ways to "play" the current macro situation at HK now.

The first is along the lines of "buying a fair asset overly beaten down via a great price". The 2nd would be "buying a great asset at fair prices which would continue to eventually appreciate and assuming the macro situstion doesnt change its long term fundamentals.

For the former, these could be those retailers or transportation providers. Those dependent on tourists and luxury demand with high local (hk) concentration are great candidates.

The latter could be some of the property owners/developers with hard assets, and in the short run, the impact of protests isnt going to impact their earnings or asset value much. Of course, there is then the question of whether things will return to the norm after everything has passed.