Changing China
Giant on the move
How cheap is cheap?
How cheap is cheap?
That was the most frequently asked question among bankers and private equity experts attending a recent forum in Hong Kong, as they swapped strategies about how to pick up stressed assets during the financial crisis.
When Lehman Brothers collapsed a year ago, everyone shared the same view: The global financial crisis was just beginning.
But one year on, many global markets have bounced off the bottom and some have recovered quite nicely. The Shanghai benchmark index, for instance, has gained more than 50 percent since the beginning of this year. As a result, views among bankers and top investment strategists about ongoing risks to the business outlook have started to diverge.
“Valuation is still a big threat,” said Michael Kim, a former senior Carlyle executive who founded MBK Partners after leaving the U.S. buyout giant.
“If a W-shaped recovery is going to happen, I think it will be a tremendous buying opportunity,” said Kim, referring to the possibility of a “second dip” market correction.
Andy Xie, former chief Asia economist at Morgan Stanley who earned his reputation in the financial industry as one of the most bearish analysts in Asia, forecast that a “second dip” in China’s market could occur next year.
Hong Kong for the weekend
Many Asia bankers and dealmakers are based in Hong Kong but nowadays many of them only stay in the territory for weekends. So where are they during the rest of the week? China, of course.
With deal flow suddenly picking up, it’s getting difficult to fix lunch or dinner appointments with bankers in Hong Kong during the work week, because they spend more time in Beijing, Shanghai and other mainland cities to have food or drinks with the potential China clients. Last week, one Hong Kong-based private equity dealmaker canceled an appointment in the former British colony at the last minute, saying he had to remain in Beijing to wait for a Chinese entrepreneur to sign a deal. In an apology email, he said: “To be honest, Hong Kong to me is purely like a weekend destination these days.” Another friend who works as a private equity investor once joked he and many others are merely “so-called Hong Kong-based” workers.
The fact is, more and more “Hong Kong-based” financial professionals have started to print double addresses and telephone numbers — listing Hong Kong and either Shanghai or Beijing contact details — on their name cards. Hong Kong used to be a focal point in Asia for opportunities in property, telecom, retail and financial sectors, but the epicenter has clearly moved to mainland China in recent years due to the surge in opportunities and cheaper valuations there. “There are no deals in Hong Kong now. It’s just the so-called Asia headquarters for many banks. The fact is, almost everybody is travelling,” said a financial industry friend. “Hong Kong is still the financial centre without a doubt, but it remains as the financial centre because of China,” he added. For many years, Hong Kong called itself “Asia’s World City” to promote its advantage in international trade, but some bloggers have begun to joke in online postings that Hong Kong is now becoming “Just Another Chinese City”. Hong Kong’s low tax rate is a key reason why many bankers spend five days a week in China but still want to be officially “based” in Hong Kong. If Shanghai were to allow low tax rates for foreigners, that might quickly change. Indeed, airlines serving Hong Kong, including Cathay Pacific and Dragon Airlines, must be happy to see the current trend continue — shuttling those executives to work in the mainland and back to Hong Kong for the weekends.
But Hong Kong taxi drivers have started to complain and feel nervous about the rise of Shanghai and Beijing. Twice I have been asked by drivers something to this effect: “So, you are from Shanghai? Then why do you come to Hong Kong to work? Shanghai is the future. People will soon forget Hong Kong.”
My answer? ”Don’t top leaders in Beijing always say ‘Hong Kong’s tomorrow will be better’?”
Photo Caption: Skyline view of Hong Kong island. Photo by George Chen
To some degree, this news is right. However, it looks like a story more than a reality la. Actually, HK is much more international than Beijing and Shanghai, by the observations from the airport only. As a Chinese, i believe HK, SH and other cities of China will be better and better along with the ongoing development of China economy entity. One point is that China govn is able to deal with its domestic issues, such as the corruption, national problems and imbalance between regions. So……Nothing is impossible.
Dear Editor,
Well done by way of writing it.
These new,interesting words were created by business schools,writers and economists.
As long as it suits their aspirations,needs and achieved their goals in some extents,then they started going for some other new,attracting words for consolidations,sudden static stage and for further market expansions.
Now a days, it has become customary to say that,recession is over,financial institutions were learned from their back fired results etc.,
Time to buy assets and immovable properties at cheaper denominations and for further selling,profits in future economic growing maps.
Actually speaking, that is not happening at present.
Slight recovery in real estate,consumer durables,automobiles and houses for building,rent,and for purchases.
The word !Cheap!is a very sweet word for borrowers and for sellers.
Whereas, prices are going up in all sectors.
Notably,among food grains,power,video player, systems,educational tools prices are increasing day by day.But, income generations are still in snail pace.
Good,humorous article on economic point of view.