Chi­nese bil­lion­aires keep bub­bling up in prop­erty mar­ket

Calgary Herald - - FINANCIAL POST - VENUS FENG AND EMMA DONG

Nowhere on Earth is wealth be­ing cre­ated faster than in China’s main­land prop­erty mar­ket.

The col­lec­tive net worth of the coun­try’s rich­est de­vel­op­ers has rock­eted up­ward since the start of the year, adding US$44.3 bil­lion to the for­tunes of seven real es­tate ty­coons. As China’s reg­u­la­tors move to tame a fren­zied prop­erty mar­ket, in­vestors are bet­ting that the largest com­pa­nies will squeeze out smaller com­peti­tors and ex­tend their dom­i­nance in a con­sol­i­dat­ing in­dus­try.

“It’s like a self-re­in­forc­ing theme — the more prop­erty stocks rally, the more buy­ers are con­fi­dent on the con­sol­i­da­tion theme that’s ben­e­fit­ing the largest play­ers,” Alan Jin, prop­erty an­a­lyst at Mizuho Se­cu­ri­ties Asia said by phone.

Lee Wee Liat, a Hong Kong­based an­a­lyst at BNP Paribas SA, said that over­seas funds are also im­prov­ing the ap­peal of some long-dis­missed com­pa­nies that pay record-high div­i­dends. “The story be­comes very com­pelling,” Lee said.

In­vestors are bet­ting those large de­vel­op­ers — many of whom main­tain cross in­vest­ments or have a his­tory of trad­ing as­sets — will con­tinue to wrest mar­ket share from smaller busi­nesses.

Hui’s Hong Kong-listed China Ever­grande Group, the coun­try’s largest de­vel­oper, has risen 534 per cent this year and re­ported that its rev­enue more than dou­bled through June. Sun’s Sunac China Hold­ings Ltd, a res­i­den­tial and com­mer­cial de­vel­oper based in Tian­jin, in­creased rev­enue 25.9 per cent and is up 501 per cent. China Ever­grande chair­man Hui Ka Yan and Sunac’s Sun Hong­bin have col­lected the vast ma­jor­ity of the year’s gains, adding US$42.5 bil­lion be­tween them.

Kaisa Group Hold­ings, which op­er­ates in more than 50 cities, has risen 222 per cent, af­ter re­bound­ing from a cor­rup­tion con­tro­versy that threat­ened to bank­rupt the busi­ness and halted trad­ing of its shares from April 2015 un­til this March.

The rise has added US$648 mil­lion to the for­tune of chair­man Kwok Ying Shing, 52, who owns 24 per cent of the firm and has a net worth of US$948 mil­lion, ac­cord­ing to the Bloomberg Bil­lion­aires In­dex. Kwok also owns eight per cent of watch re­tailer Hengdeli Hold­ings and elec­tronic com­po­nents maker Mega Med­i­cal Tech­nol­ogy, re­spec­tively. His brother, Kwok Ying Chi, the com­pany’s for­mer direc­tor, has a 14-per-cent stake val­ued at US$756 mil­lion.

The valu­a­tions are also helped by a lim­ited pub­lic float for com­pany shares, as well as cross deal­ing among the ty­coons. Kaisa shares, which quadru­pled in Septem­ber, reached a record high the day af­ter a group led by the wife of prop­erty mogul Joseph Lau bought about US$600 mil­lion worth of Kaisa bonds, her sec­ond in­vest­ment in the busi­ness this year.

Hui’s US$33.4 bil­lion gain this year puts him just US$5.2 bil­lion be­hind Alibaba Group Hold­ing Ltd. founder Jack Ma, Asia’s rich­est per­son worth US$46 bil­lion, ac­cord­ing to the Bloomberg in­dex, a daily rank­ing of the world’s 500 rich­est peo­ple. Lau has added US$908 mil­lion this year and has a US$8.9 bil­lion net worth.

“Lim­ited liq­uid­ity of the stock is part of the rea­sons for stock surge,” said Philip Tse, vice-pres­i­dent of Bank of Com­mu­ni­ca­tion In­ter­na­tional Hold­ings, “but the fun­da­men­tals of the main­land real es­tate com­pa­nies are still per­form­ing well with in­crease both on sales and mar­gins.”

A UBS Wealth Man­age­ment re­port re­leased this month said it ex­pects 20-per-cent earn­ings growth for large listed de­vel­op­ers in next 12 to 18 months. Still, the rally has be­gun to show some signs of weak­ness as China’s lead­ers have pledged to snuff out as­set bub­bles.

The Bloomberg China Real Es­tate Own­ers and De­vel­op­ers Val­u­a­tion Peers in­dex slipped 9.6 per cent from its peak on Sept. 21. The in­dex, which tracks 22 main­land de­vel­op­ers, is up 106 per cent this year.

JO­HANNES EISELE/AFP/GETTY IM­AGES FILES

A man works at a con­struc­tion site of a res­i­den­tial sky­scraper in Shanghai. China’s rich­est de­vel­op­ers have seen their for­tunes rise this year with their to­tal net worth adding US$44.3 bil­lion to the wealth of seven real es­tate ty­coons. In­vestors are bet­ting that the largest com­pa­nies will squeeze out smaller com­peti­tors in China.

NI­CO­LAS ASFOURI/AFP/GETTY IM­AGES

Bei­jing’s busi­ness dis­trict. Firms that yield record-high div­i­dends are help­ing fuel the prop­erty mar­ket.

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