Written by Chia-Peck Wong
Friday, 14 August 2009 12:46
HONG KONG: Billionaire Li Ka-shing, who predicted China’s stock-market bubble would burst in 2007, said the global economy won’t recover this year and told investors to be cautious about buying shares, especially with borrowed money.
“The worst is over for the global economy,” Li, Asia’s second-richest man, said after his Cheung Kong (Holdings) Ltd and Hutchison Whampoa Ltd posted better-than-estimated first-half earnings. “Yet it’s too optimistic to say the global economy has reached a turning point. The degree of decline has shrunk but that doesn’t mean it has stopped shrinking.”
The 81-year-old Li’s predictions are closely watched in Hong Kong, where the media has dubbed him “Superman” for his investing acumen. Home prices have risen 15% since March, when he told investors to buy the city’s real estate.
“The things he says influence many investors,” said Castor Pang, a strategist at Sun Hung Kai Securities Ltd in Hong Kong. “His predictions about the stock market have been the most accurate among Hong Kong tycoons.”
Li said investors should avoid margin trades or borrowing to buy stocks when prices are too high.
“I won’t buy stocks today,” Li said “It’s not that I wouldn’t buy at all, but if the prices are too high, I will be very careful. For example, if the P/E is low and the dividend yield is okay, and the stock isn’t overbought, I will buy.”
Cheung Kong, Hutchison’s largest shareholder and the world’s second-largest real estate developer by market value, said net income gained 4.7% to HK$11.5 billion (RM5.24 billion), almost double analysts’ estimates. Hutchison yesterday posted a 33% decline in first-half profit as the global recession curbed sales at mobile-phone and retail units and cut port traffic.
Hong Kong’s benchmark Hang Seng Index has risen 45% this year, after plunging 48% in 2008.
Global trade has shrunk and interest rates won’t rise in the short-term, Li said at a press conference after the results were announced. He said the worst is over for containerised shipping, and the pace of declines in Asia will slow.
“Globally, ports are steadier compared with 2008,” Li said. “They fell, but the degree of decline from now onwards won’t be as severe as in the past few months.”
Born in Chaozhou in the southern Chinese province of Guangdong, Li turned the plastics company he opened in Hong Kong in 1950 into investments in retailing, real estate, ports and energy in 54 countries.
That global scope hurt earnings at Hutchison, operator of container terminals in 49 ports including Hong Kong; Felixstowe, UK; Buenos Aires; Freeport, Bahamas; Sohar, Oman; and Amsterdam. Falling oil prices eroded Hutchison’s energy earnings.
“The fact that Hutchison’s 3G business is still not able to attain EBIT breakeven is a concern,” said Steven Leung, Hong Kong-based director of institutional sales at brokerage UOB-Kay Hian Ltd.
Hutchison is the key reason Cheung Kong, a developer of real estate in Hong Kong and mainland China, is this year’s worst performer in the six-stock Hang Seng Property index, analysts including Raymond Ngai from JPMorgan Chase & Co said.
Cheung Kong’s 34% gain this year compares with the index’s 57%. Sino Land Co, controlled by the billionaire family of chairman Robert Ng and his father Ng Teng Fong, is the best performer, with an 84% percent jump.
Hong Kong’s property market is “healthy” and Cheung Kong may raise home prices if sales improve, said Victor Li, Li Ka-shing’s eldest son who is deputy chairman of Hutchison and Cheung Kong.
Hong Kong home prices have risen 22% this year, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd and City University of Hong Kong. It stood at 69.4 on Aug 2 and may rise to 90 by the end of 2010, UBS AG analysts led by Eric Wong said in a July 27 report. The measure posted a record 102.93 in the last week of October 1997.
“Hong Kong is a lot better than many other places in the world,” Li Ka-shing said. “The government is already trying hard. The economy will take longer to recover. It won’t recover fully by the end of the year.” - Bloomberg