ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

USA house has voted to support HK human rights lol, now just need senate and Trump support. Beijing not happy. Next 12 months IMHO there should be significant crash in HK asset markets. Possibly contagion effect into China? especially compounded by trade war.

HK property prices collapsed pretty badly i think about 70% during AFC couple decades back. History could repeat itself again, especially after such a steep run up in prices after GFC.

Interesting times. China will likely "quell" the rebellion soon, otherwise risk spreading to other states. Xinjiang region in particular might become flashpoint again, then might end up with warring states and provinces again, especially if those state owned enterprises and factories start closing down and people become jobless and hungry...

(16-10-2019, 10:03 PM)BlueKelah Wrote: [ -> ]USA house has voted to support HK human rights lol, now just need senate and Trump support. Beijing not happy. Next 12 months IMHO there should be significant crash in HK asset markets. Possibly contagion effect into China? especially compounded by trade war....

Yeah, all these events are not helpful to the current trade-war situation between the US and China - they will only worsen the current state of affairs. It certainly means we have to keep our investments(particularly HK) under watchful eyes till the dust settles, and HSI may drift even lower.

At the same time, we are also heading into the window-dressing period in abt 2 months' time.

-------------------------- Possible impact to some property counters' earnings  --------------------------

HK retail rents down sharply in Q3: CBRE
Wed, Oct 16, 2019 - 5:50 AM   Hong Kong

RETAIL rents in Hong Kong, among the most expensive in the world, fell sharply in the third quarter, property consultancy CBRE said on Tuesday, following anti-government protests that have pushed shop sales to a record low.

High street retail rents fell by 10.5 per cent in the July-to-September quarter compared to the previous quarter, CBRE said, the sharpest quarterly decline since the first quarter of 1998 at the time of the Asian financial crisis.

Overall, high street rents are likely to decline by another 5 to 10 per cent over the remainder of 2019, the consultancy said......

https://www.businesstimes.com.sg/real-es...in-q3-cbre

(09-10-2019, 12:38 PM)holymage Wrote: [ -> ]Mainlanders dislike Hong Kongers for their perceived superiority and arrogance towards Mainlanders, as well as Hong Kongers push for "independence". The current protest incident has further reinforce this mindset. I read from several sources that numerous Mainlanders declare that they will not contribute to Hong Kong's economy by avoiding travelling to HK / investments in HK etc.
Furthermore, how would the Hong Kongers treat Mainlanders? Would you enjoy being in a place where you are not welcome by the locals?
On the other hand, businesses where there are existing price/ product safety arbitrage between Mainland and Hong Kong will recover faster than others.

It is true that service is a key factor for success in tourism. We only have to look at our regional neighbours and think about why Thailand is doing much better in building its tourist economy, than everyone else.

In the short-term, the mainlanders will certainly not wish to visit HK. Similarly, an ethnic Chinese tourist probably wouldn't think of visiting KL in 1969, or Jakarta in 1997. But in the long-term, tensions ease. And while things 'may never be the same again,' people and businesses do return when the dust settles, and wounds heal.

In my personal experience, I have never thought HK to be able to deliver a pleasant holiday experience. It is expensive, tourist areas are super crowded, and customer service is so-so. The fact that (mainland) tourists returned, and in greater numbers, after the Occupy Central movement in 2014, suggests that HK may be satisfying certain tourist market segments which are seeing value in being a HK tourist, which people such as myself do not. Such as daigou (代购).

Over the long-term, if it remains much cheaper to make (luxury) purchases in HK, it is likely that price-conscious mainland shoppers will return. Patriotism notwithstanding.

But if daigou is the driver of business to HK retailers, then business can deteriorate quickly if mainland changes its sales/import tax policies.

I have no doubt that HK economy will recover in the long-term to its previous economic peak. But who knows how long that would take. My money is that this round it will take longer than previous crisis: 2014 occupy central, 2008 financial crisis, SARS epidemic, Asia financial crisis etc.

I doubt people will spend money to visit a place where they are not welcome. Even if Hong Kongers change their attitude to seek a better economy, would Mainlanders see the same way? During this current political crisis, national flags are burnt, China-related businesses are vandalized, several videos of Mainlanders getting beaten up have gone viral and state media propaganda of a separatist movement. There is underlying changes in sentiment towards each other from both parties. If you have the impression that someone detest you, would you still spend money at his store when you can spend elsewhere?

It is another story if mainlanders can reap tangible benefit, patriotism notwithstanding. If it is cheaper to maker purchases in HK, mainlanders will return to arbitrage. While it is a possibility, what is the probability that mainland will change its protectionist policies in the mid term.

Lastly, with regards to purchasing in HK, in the minds of mainlanders, there are several intangible benefits to that. Due to several safety scandals, numerous mainlanders would rather purchase baby milk powder as well as vaccine appointments in HK. These business in my opinion, will recover faster than others.

(17-10-2019, 05:18 PM)holymage Wrote: [ -> ]I have no doubt that HK economy will recover in the long-term to its previous economic peak. But who knows how long that would take. My money is that this round it will take longer than previous crisis: 2014 occupy central, 2008 financial crisis, SARS epidemic, Asia financial crisis etc.

I agree that it is prudent to always assume the worst-case scenario.

My opinion is that a year or two of lost sales/profits/dividends is acceptable if there is a high probability of a recovery over the longer-term. 

If the scenario is such that retail businesses do not recover from their 50% fall in sales, then yes, most of their valuations now will make sense.

I haven't visited HK for a long time. I googled abt VAT / GST & discovered there is no sales tax in HK. Although several of the listed HK luxury stores(gold, jewellery, watches etc) we discussed in this forum have branches both in mainland China & HK, all else being equal(i.e. assuming no protest or situation in HK resolved back to more/less original state) I wld assume Chinese travellers will travel to HK to buy because it is cheaper compared to purchasing in the equivalent local Chinese branches. As such, I am guessing the mainland branches cld be performing more of the roles of "servicing" or "urgent" buys or simply because the sales tax saved wld be less than the cost / hassle of travelling to HK.

Furthermore, Chinese travellers may accumulate their shopping list and visit HK once in a while to buy luxury items, however, this may not work well for gold(jewellery pieces) due to the fluctuating gold prices.

If the HK situation deteriorates, perhaps one of the strategies for HK-grown luxury retailers can be to open more mainland branches and staff these stores with local Chinese to migitate the "tensions" or even create a separate "brand" to cater to the mainland Chinese. That's of course assuming the HK-grown retaliers' brand is perceived(by the shoppers) to be superior to the local home-grown Chinese brand.

Actually, I have the feeling that the protestors do not form the majority of the HK population. I think people with mouths to feed, with committments, or the slightly older generation differentiate reality vs ideals. Perhaps unless we speak to a HK citizen who is very closely in tune with the situation on the ground, we cannot say for sure. The various media do not seem to paint a clear-cut picture - on one hand, there are pictures/videos of streets full of people, violence, etc, on the other, there are videos of people who though concerned, do not really condone actions of the protestors.
Meet Hong Kong's Teenage Protesters | The Dispatch
Hong Kong protests: is there a silent majority yearning to speak out but intimidated by violence?


At the end of the day, it is all abt taking calculated risks - investing is also abt risk mgmt, though fortune does sometimes favour the brave.

The romantic in me would actually hope NBA continues its stance. I have lived long enough to realize that one always has to pay for standing their stand. The irony of censuring someone who used censured media in your home ground.

NBA boss Silver says losses in China row 'substantial'

[NEW YORK] NBA commissioner Adam Silver said Thursday the league has suffered "substantial" losses following its dispute with China. "I don't know where we go from here," Silver said at Time magazine's Time 100 Health Summit in New York. "The financial consequences have been and may continue to be fairly dramatic."

Chinese firms suspended lucrative sponsorship and telecast deals with the NBA after Houston Rockets general manager Daryl Morey tweeted support for pro-democracy protesters in Hong Kong. "The losses have already been substantial," Silver said. "Our games are not back on the air in China as we speak, and we'll see what happens next."

Silver said Chinese government and business officials called for Morey to be fired for expressing his opinion.

"We were being asked to fire him by the Chinese government, by the parties we dealt with, government and business," Silver said. "We said there's no chance that's happening. There's no chance we'll even discipline him."

https://www.businesstimes.com.sg/life-cu...ubstantial

As Hong Kong protests hit business, landlords offer HK$1 rents in city’s most expensive office towers
* Only 14 per cent of the office space in Central was leased to mainland Chinese tenants in the first three quarters of 2019, down from 58 per cent in 2018 and 57 per cent in 2017
* Average office vacancy rates jumped to a 14-year high of 7.4 per cent in September across Hong Kong, up from 4 per cent a year earlier

Pearl Liu  
Published: 12:19pm, 22 Oct, 2019
Updated: 3:25pm, 22 Oct, 2019

Some landlords are getting desperate in attracting tenants to their offices in Hong Kong, as more than four months of civic unrest have deterred many companies – especially mainland Chinese tenants more willing to pay top dollar for marquee addresses – from expanding their businesses in the world’s costliest commercial property market.

Extra sweeteners are the order of the day, real estate agents said, especially for buildings that lack the cachet of famous anchor tenants, as landlords throw in incentives to persuade reluctant tenants to commit. Some owners are willing to charge a token HK$1, and up to HK$100 per month, for the first three months of occupation, adding the sweetener to the usual rent-free period that applies for corporate tenants, said Colliers International’s head of office services Fiona Ngan.

“Some second-tier offices and buildings with multiple owners in Central are now thinking of offering license periods of between one and up to three months, for anything between HK$1 and HK$100 to lure tenants amid the dire market condition,” she said.

The desperation underscores how Hong Kong’s worst political crisis in decades has disrupted the decade-long bull run in the city’s property market, causing the prices of new apartments, lived-in homes, retail space and commercial offices to fall across the city. Protest rallies that began in early June have since deteriorated into regular street clashes, with the police firing tear gas and deploying water canons to disperse the radical protesters who are resorting to vandalism and arson.

More details in https://www.scmp.com/business/companies/...ice-towers

It's a sad situation in HK, pragmatic dreamybear thinks for people who prefer the western system, instead of joining the protests, it may be a better idea to work very hard & earn/save as much as possible and emigrate .... as it gets closer to Yr2047, I think it wld get more and more difficult to plan ...

Protests while making a point, also affect the ordinary peaceful folks who just want to get on with their lives.

--------------------------------------------

Hongkongers pursue overseas passports and sell homes at huge discounts to fund move as city’s protests rage on
Published: 10:00am, 17 Oct, 2019

- Emigration inquiries have risen fourteen fold since the protests started more than four months ago, says Midland Immigration Consultancy
- A homeowner in Tuen Mun sold a flat 25 per cent below market value to finance emigration application.

Hongkongers’ interest in emigrating has jumped fourteen fold as the four-month long anti-government protests show no signs of ending, and many are selling their property before the housing market deteriorates further to finance their move, according to Midland Immigration Consultancy.......

https://www.scmp.com/business/money/weal...-they-sell

What is at stake for global luxury brands if Hong Kong protests continue?
5 min video