Property Hunter Magazine August Issue 2014 | Page 55

The Richest Man in Asia Is Selling Everything in China
there are implications for the entire world.
Here in Chile is a great example.

Australia in Global Top 10
for Price Growth

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.
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.
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,

Not to mention, China could put the entire global
financial system on its back just by dumping a
portion of its Treasuries in order to defend the
yuan.
Now, you’d think that a major credit crunch with
far-reaching consequences in the world’s second
largest economy, its largest manufacturer, and
its largest holder of US dollar reserves, would be
constant front-page news.

Perth, Western Australia

Property advisory firm Knight Frank has released
analysis, placing Australia in the top 10 nations
globally for real estate price growth.
The Knight Frank Global House Price Index
for the first quarter of 2014 sees the nation at
number seven on a ranking of countries with
the biggest price gains.

But it’s not.

Michelle Ciesielski, an associate director at
Knight Frank, says the result highlights a return
to form for Australia and other markets.

Most traditional investors are unaware that what’s
happening in China will likely have far greater
implications to their investment portfolios than
the policies of Janet Yellen and Barack Obama
combined. At least for now.

“The turnaround in the US, Australian and
Icelandic housing markets is evident with three
countries now appearing in the top 10 rankings
for annual price growth alongside key emerging
markets such as China, Turkey and Brazil.”

And folks who don’t see this coming and keep
buying at the all-time high may see their portfolios
turned upside down. Quickly.
At the same time, some investors who are
conservative and cashed up may realize a real
‘blood in the streets’ moment.

Dubai topped the annual rankings, but prices
rose by only 3.4 per cent in the first quarter,
compared to a 9.2 per cent jump over the same
period in 2013.
Croatia, Cyprus and Greece were the weakestperforming housing markets in the 12 months
to March 2014.

Again, using Chile as an example, I’m starting to
see over-leveraged property owners coming to
the market in droves ready to make a deal. This
is great news because my shareholders and I are
able to buy far more property with US dollars than
we could even just six months ago.
I expect this trend to hold given that China is just
at the beginning of its process.
It’s said that the Chinese word for “crisis” is a
combination of “danger” and “opportunity”.
This isn’t entirely accurate. ‘Weiji’ can have several
meanings, but is probably best translated as
‘dangerous’ and ‘crucial point’.
We may certainly be at that crucial point, and
now might be a good time to take another look at
your finances and consider selling before a major
crash.

Although the index saw slower growth in the
first quarter of 2014 compared to last quarter, it
still recorded annual growth of 7.1 per cent.
Ciesielski says their outlook remains bullish for
future results.
“We expect to see the index’s performance
strengthen again in the second quarter,” she
says.
“All eyes will remain on central banks, in
particular the Federal Reserve, the Bank of
England and the European Central Bank.”
And she says the pace of monetary policy
change will be the determining factor.
“The issue is not when interest rates rise but the
speed and extent to which they do.”

The richest man in Asia certainly thinks so.

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