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| Come, let's make money together. |
Getting out of China & Hong Kong
While Li has publicly said that he was not abandoning China and Hong Kong, the actions of his companies seem to suggest otherwise. It has been reported that since 2010, the Li family has sold assets worth HK$186.8 billion (US$24.1 billion) located in China and Hong Kong, with 96.8% of the capital from the sale re-invested in Europe, especially in UK. He has not bought anything in China.
Li's maneuvers are considered by many as a leading indicator. According to some insiders, Li will always sell his assets 2-3 years before a crisis. According to Simon Black, he speculates that the impending Chinese credit crunch is the main reason why Li is evacuating China so quickly.
China's Shadow Banking - Of Global Concern
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.
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| Credit crunch coming? Li thinks so.... |
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.
Investments In The United Kingdom
Among Li's investments in Europe, he places more focus on the United Kingdom, reportedly because of UK's good investment environment and good legal system.
Some commentators have suggested that Li's preference for the UK can be attributed to his close relationship with HSBC bank. It is very obvious that Li's close business links with Michael Sandberg (ex Chairman of HSBC) go back many decades. Back in 1975, HSBC (led by Sandberg) had even saved one of Li's business from going under.
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| I'm happy to be in the UK! |
Utilities, Why Utilities?
Li's investments in the UK have largely been in British Utilities. See this graphic from 2011. It does look like Li had amassed a huge Utility Kingdom in the UK.
In the short run, savvy investors would observe that Utilities are pretty much recession proof industries. If indeed Li believes that China's impending credit crunch could hit the world hard, then parking his money in Utilities across UK (and Europe) makes a lot of financial sense. So his investment moves are coherent, pretty much protecting himself against any severe downside.
Over time, if UK grows and prospers, the Utilities will just have to become more valuable. Nothing too exciting, but solid bread & butter growth.
More recently, in mid 2012, Li paid 645 million pounds ($1 billion) cash for Wales & West Utilities Ltd. to almost double the size of the gas transmission businesses his companies control in the U.K.
“The price tag looks reasonable given the target company’s large-scale operations,” said Evan Li, a Hong Kong-based utility analyst at Standard Chartered Plc.
Buying Wales & West will give Li control of pipelines covering a quarter of the U.K.’s population as he steps up acquisitions in Europe following declines in valuations on concern the global economy will slow further. He led groups that acquired Northumbrian Water Group Plc for $7.5 billion including debt last year and Electricite de France SA’s U.K. power networks for 5.8 billion pounds in 2010.
Investments In Real Estate Development
Li's company, Hutchinson Whampoa, is also involved in the Convoys Wharf Project that I have blogged about previously, see this post. The Convoys Wharf project was very controversial. Boris Johnson (Mayor of London) had to step in to grant the Planning Permission, after the local council exceeded the statutory time limit.
China's Richest Man -王健林
China's richest man Wang Jian Lin has also gone into UK, buying up the One Nine Elms project. However, I don't think Wang has sold his property investments in Mainland China. Read more about 王健林 in my earlier blog post.
Hong Kong Knight Dragon
Knight Dragon, (controlled by Henry Cheng Kar Shun) has bought out the entire Greenwich redevelopment project, read my other blog post.
Li's Personal Advice for Individuals
Earlier this year, "Li Ka Shing teaches you how to buy a car and house in 5 years", advice went viral. It is a very good read, so please go read it if you haven't read it.
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| Thank you for the reminder, Mr Li. |
Happy Investing!
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