Shopping Abroad: China’s Rich Seek Shelter from Stock Market Storm in Foreign Property

property-chines

Around 91,000 wealthy Chinese sought second citizenship between 2000 and 2014, a factor that is fueling demand to buy foreign property

Jane Wardell and Kate Holton report: Realtors in Australia, Britain and Canada are bracing for a surge of new interest in their already hot property markets, with early signs that wealthy Chinese investors are seeking a safe haven from the turmoil in Shanghai’s equity markets.

“There is anecdotal evidence that Chinese buyers have intensified their interest in ‘safe haven’ global property markets, including London, as a result of the recent stock market volatility.”

Sydney realtor Michael Pallier said in the past week alone he has sold two new apartments and shown a A$13.8 million ($10.3 million) house in the harbourside city to Chinese buyers looking for an alternative to stocks.

“A lot of high net worth individuals had already taken money out of the stock market because it was getting just too hot,” Pallier, the principal of Sydney Sotheby’s International Realty, said. “There’s a huge amount of cash sitting in China and I think you’ll find a lot of that comes to the Australian property market.”

foreign-buyers

“It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money.”

Around 20 percent has been knocked off the value of Chinese shares since mid-June, although attempts by authorities to stem the bleeding are having some effect.

Many wealthy Chinese investors had already cashed out. Major shareholders sold 360 billion yuan ($58 billion) in the first five months of 2015 alone, compared to 190 billion yuan in all of 2014 and an average of 100 billion yuan in prior years, according to Bank of America Merrill Lynch.

While much of that money may initially be parked in more liquid assets like U.S. Treasury bonds and safe-haven currencies such as the Swiss franc, there is growing evidence that foreign property sales may receive a boost.

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“Chinese investors had already sunk around $5 billion into U.S. real estate in the first six months of 2015, more than the $4 billion they invested in the whole of 2014.”

“There is anecdotal evidence that Chinese buyers have intensified their interest in ‘safe haven’ global property markets, including London, as a result of the recent stock market volatility,” said Tom Bill, head of London residential research at Knight Frank.

Ed Mead, executive director of realtor Douglas & Gordon in London, said his firm had seen two buyers from China looking to buy whole blocks of flats.

State Department officials said they are reviewing the sale of the famous hotel to a Chinese insurance company with possible ties to the country's Communist Party. JUSTIN LANE/EPA

State Department officials said they are reviewing the sale of the famous hotel to a Chinese insurance company with possible ties to the country’s Communist Party. JUSTIN LANE/EPA

“It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money.”

RICH EXODUS

Since 2000, China has had the world’s largest outflow of high net worth individuals. Around 91,000 wealthy Chinese sought second citizenship between 2000 and 2014, according to a report by residence investment broker Lio Global, a factor that is fueling demand to buy foreign property. Read the rest of this entry »


Top Hong Kong Stock? Umbrella Maker

umbrella-HK

Hong Kong is having another umbrella moment.

First there was the umbrella movement last year when young people took to the streets to defy China’s plan for watered-down democracy. Now there is an umbrella maker that’s stunned the stock market.

“It is a bit crazy. The fundamentals do not justify the current stock price.”

— Hannah Li, strategist at UOB-Kay Hian

Jicheng Umbrella Holdings Ltd.1027.HK +13.29% is an unlikely title holder of Hong Kong’s best performing newly listed stock in 2015. At its initial public offering back in February, it received little interest with bankers pricing it at the low end of an indicated price range. But once it got trading it went through the roof, and at one stage last month it rose nearly 20-fold from its IPO price and is still up 14-fold as of Friday.

“It is a bit crazy,” said Hannah Li, strategist at UOB-Kay Hian. “The fundamentals do not justify the current stock price.”

The rally means the company is worth 9.1 billion Hong Kong dollars ($1.17 billion), and is trading at a price-earnings ratio of 100, far higher than the 11.2 for the average of stocks in the Hang Seng index.

[Read the full text here, at WSJ – China Real Time Report]

Exactly why investors are so keen on an umbrella maker to give it a sky high valuation is puzzling, while its shareholder structure looks even more bizarre. The Securities and Futures Commission, Hong Kong’s market regulator, issued a warning Thursday to investors that just 17 shareholders hold over 99% of the company’s shares (the major shareholder owns 75% of the company). This means a buyer could easily push the stock up substantially as there’s so few owners of the shares.

Ms. Li said while Jicheng’s business is in good shape, the small number of shares held by public shareholders is a major reason for the rally. Read the rest of this entry »