Chinese billionaires keep bubbling up in property market
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.