Li Ka-shing heads west to Europe, bottom-fishing investment is in full swing
A few days ago, just as Sun Hung Kai Properties spent a huge sum to acquire the Xujiahui Center plot in Shanghai, Li Ka-shing's Cheung Kong Holdings was quietly preparing to sell the Oriental Financial Center (OFC) office building in Lujiazui, Shanghai. On one side, there is a desperate scramble for high-priced land in Shanghai; on the other, a calm and gradual slimming down. Wang Shi, Chairman of the Board of Vanke, once bluntly stated on Weibo: "The shrewd Mr. Li Ka-shing is selling properties in Beijing and Shanghai. This is a signal, be careful!"
On the morning of September 5, the competition between two Hong Kong real estate companies attracted the attention of the entire real estate industry. Sun Hung Kai and the Wharf-Henderson Land consortium fought fiercely for the Xujiahui Center plot. In the end, Sun Hung Kai proved more skilled, winning the best commercial plot in Shanghai with a bid of 21.77 billion yuan.
Almost at the same time, employees of Li Ka-shing's Cheung Kong Holdings were working overtime, preparing to sell the Oriental Financial Center (OFC) office building in Lujiazui, Shanghai, for over 6 billion yuan. The Oriental Financial Center (OFC) is adjacent to the Shanghai Tower and not far from the Jin Mao Tower and the Shanghai World Financial Center.
As the first completed project since Cheung Kong Holdings launched three major projects in Shanghai in 2011, this project could enter the market and begin operations in another year. The news that the Oriental Financial Center (OFC) is being sold has left many people confused. However, when considering that companies under Li Ka-shing have successively announced the sale of PARKnSHOP, Guangzhou Xicheng Duhuai, and Hong Kong Kingswood Ginza, everything seems to make sense. At the same time, according to public disclosures, since 2010, the CK Hutchison group has completed 10 acquisitions outside of mainland China, involving approximately 144.5 billion HKD. It is precisely for this reason that the industry has recently been heatedly discussing Li Ka-shing selling domestic assets to "reinvest in Europe," or "heading west."
Over the past three years, the investment logic of the richest Chinese person, Li Ka-shing, has perfectly illustrated a point: Greater China is like a commercial besieged city; those outside want to rush in, while those inside want to escape. On August 1, the latest interim results released by Hutchison Whampoa proved that Li Ka-shing's investment focus is still moving westward. As a representative of the "Hong Kong Dream" for a generation, the Li family has revealed an increasingly strong "European complex." So far, about half of the company's assets have been transferred to Europe, with a cumulative overseas acquisition amount of 144.5 billion HKD over three years.
"I arrived in Hong Kong in 1940 and have special feelings for this land. As a Chinese person, I will always be Chinese. I will never withdraw capital from Hong Kong; I rarely speak so firmly." This was Li Ka-shing's declaration at the interim results meeting last August. However, the Li family's investment trajectory seems to tell a different story. Li Ka-shing's overseas investment first became known to the market through the 2000 "selling Orange" myth, buying low and selling high, earning a massive 113 billion HKD. This June, Li Ka-shing extended his reach to the European continent. Led by the holding parent company Cheung Kong Holdings, he spent 9.7 billion HKD to acquire a 35% stake in AVR, the largest waste-to-energy company in the Netherlands. In the latest interim report, Chairman Li Ka-shing used the term "important milestone" to describe the first positive EBITDA recorded by European telecommunications after deducting capital expenditures. Economist Kwan Cheuk-chiu believes that the Hong Kong market is gradually becoming saturated, and there is no shortage of competitors from the mainland and overseas, leading to slow profit growth in retail and telecommunications businesses.
According to public information provided by Hutchison Whampoa, since 2010, the CK Hutchison group has completed a total of 10 acquisitions outside of Hong Kong and mainland China, involving an amount of approximately 144.5 billion HKD. This includes 124.1 billion HKD in infrastructure investment and 21.4 billion HKD in telecommunications acquisitions. Among these, the European region accounts for as much as 97.1%.
Guo Jiayao, Chief Strategist at China Silver Asset Management, said: "Businessmen will always value the return on investment. Slow profit growth in Hong Kong is constrained by multiple factors such as excessive competition and soaring labor and rental costs. The European economy is sluggish, and asset prices are at historical lows. Li Ka-shing has gradually shifted his investment focus westward." This is traceable. In 2010, European business EBIT accounted for only 17% of the group's total EBIT, with Hong Kong accounting for 30% and mainland China ranking second at 28%. As of June 30 this year, the European EBIT share has risen to 31%, while Hong Kong and the mainland have fallen to 17% and 18%, respectively. If asset depreciation is deducted, Europe recorded an EBITDA of 15.8 billion HKD in the first half of the year, which is 2.4 times that of Hong Kong. Taking capital expenditure as an example, Hutchison Whampoa spent a total of 11 billion HKD in the first 6 months, with 7.6 billion HKD invested in the European region, accounting for as much as 69%. During the period, Hong Kong and the mainland combined spent 1.43 billion HKD, which is even less than the expenditure in other Asian regions (2 billion HKD).
If assets and liabilities are calculated, total assets in Europe are 351.6 billion HKD, accounting for 44.5%. The cumulative liabilities of the single Europe 3 Group are 125.1 billion HKD. If infrastructure, ports, and retail businesses are added, the total European debt exceeds half of the group's total liabilities. Guo Jiayao analyzed that the level of capital expenditure determines the priority of the company's resource allocation. Li Ka-shing's willingness to endure 8 consecutive years of losses (2003-2011) to continue investing in the European 3G business fully proves the status of Europe in his heart. The appearance of high-leverage financial investment in Europe indicates that this process of asset migration is far from over.
Chinese investors keep pace with giants, property investment immigration becomes the first choice
Coincidentally, with the promulgation of relevant property purchase immigration acts by several European countries, more and more Chinese investors are choosing to purchase property locally and invest in related projects. As early as the beginning of this year, the Worldway Group high-profilely announced at an official press conference that the "2013 European Immigration Year" was launched simultaneously in major cities in mainland China, as well as in Hong Kong and Macau. It clarified that European investment immigration would be the strategic focus of Worldway in 2013. Cyprus and Portugal property purchase projects would be the "golden keys" to opening the door to Europe, and it would coordinate all advantageous resources to make comprehensive plans and deployments, committed to providing satisfactory immigration services for Chinese investors. In July of this year, Worldway and the Greek Ambassador to China jointly launched the inaugural ceremony of the Greek property purchase immigration project, taking the lead in introducing Greek property investment immigration to the Chinese market. This opened a new chapter for the immigration industry entering the "European Immigration Era."
In the past, the door to European investment immigration had been closed, and the only available UK investment immigration had always been a niche project due to high thresholds and immigration supervision requirements. With the outbreak of the European debt crisis following the global financial crisis, the door to EU investment immigration has gradually opened. Some non-traditional European immigration countries have successively amended their immigration laws and launched new investment immigration policies to boost their domestic economies. The British "Sunday Times" reported that in 2012 alone, more than 1,000 Chinese investors purchased properties in Cyprus; about 80% of Chinese immigrants are concentrated in Paphos, a tourist town on the southwest coast of Cyprus. A Hong Kong-based investment company pledged in June to invest 290 million euros in a golf resort in Paphos. Since Portugal promulgated the Golden Residence Visa Program at the end of 2012, hundreds of investors have submitted applications so far, 90% of whom are Chinese investors; the applicant with the highest property investment amount of 1.47 million euros is also from China. The Greek "Second Home Project," together with the Cyprus property purchase immigration and the Portugal "Golden Residence Program," have become the three most eye-catching mainstream projects in Europe in 2013, favored by global investors for their low investment amounts, low living costs, high quality of life, and Schengen area advantages.
It can be seen that under the influence of the financial crisis in various European countries, more and more Chinese investors are eagerly heading to Europe to bottom-fish. In particular, the property purchase immigration policies launched by various European countries are very much to the taste of Chinese investors. Investment immigration is an excellent way to quickly obtain EU status, providing convenience for working, doing business, studying, and living in 31 countries including EU and European Economic Area countries and Switzerland; at the same time, children will have free space for development throughout the EU and the European Economic Area in the future. European immigration, which was once out of reach for Chinese people, can now be said to be within reach for many domestic families.
Correspondingly, the policies of traditional immigration countries such as Australia, New Zealand, and Canada are tightening, and European investment immigration has replaced them, with its advantages becoming even more prominent. European investment immigration policies are relatively loose, with short processing cycles and relatively simple residency requirements; EU countries have sound legal systems, social stability, developed economies, high educational standards, and superior quality of life, which are also the main reasons for attracting most immigrant families.
In addition, now is a better time to exchange RMB assets for Euro assets and bottom-fish in the European property market. The protracted European debt crisis has forced the European economy into a downturn, with the Euro to RMB exchange rate fluctuating around the "8" mark; on one side are domestic purchase restrictions and high housing prices, and on the other is the European property market in a trough period. Grasping the current property purchase immigration policies of European countries, property investment immigration to Europe has become the first choice for investors.
