Finance counsels

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 today after his companies, 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.”

Predictions from 81-year-old Li are closely watched in Hong Kong, where the media has dubbed him “Superman” for his investing acumen. Home prices in the city have risen 15 percent since March, when he told investors to buy 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 trading 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.”

Shanghai IPO

Li said he is considering listing his companies in Shanghai.

“Possible. Possible. But I will be more careful in this matter because I am representing a lot of shareholders,” Li said. “I will be more careful about the details, rules and requirements. But yes, if you ask me about listing in Shanghai, I am considering it.”

China’s stock regulator allowed IPOs on the mainland’s two exchanges to resume in July after a nine-month halt and has said foreign companies will be encouraged to list on the mainland. HSBC Holdings Plc, Europe’s largest bank, has appointed advisers for a share sale in Shanghai, the company said on Aug. 4. and Lenovo Group Ltd. said it may revive plans for an offering in China.

The benchmark Shanghai Composite Index has jumped 72 percent this year, compared with a 45 percent gain in the Hang Seng Index.

Property Gains

Hutchison, the world’s largest container port operator, has risen 50 percent in Hong Kong trading in 2009, even as China’s exports dropped 22 percent in the first seven months. Cheung Kong stock has fallen 33 percent in Hong Kong this year.

Cheung Kong, Hutchison’s largest shareholder and the world’s second-largest real estate developer by market value, said today net income gained 4.7 percent to HK$11.5 billion ($1.5 billion), almost double analysts’ estimates. Hutchison posted a 33 percent decline in first-half profit as the global recession curbed sales at mobile-phone and retail units and cut port traffic.

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 containerized shipping, and the pace of the decline 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 personal loans.”

Chaozhou-Born

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, U.K.; Buenos Aires; Freeport, Bahamas; Sohar, Oman; and Amsterdam. Falling oil prices eroded Hutchison’s energy earnings.

Hutchison’s net income dropped to HK$5.76 billion, or HK$1.35 a share, from a restated HK$8.6 billion, or HK$2.01, a year earlier, the company said in a statement to the Hong Kong stock exchange today. That compared with the HK$4.8 billion median of five analysts’ estimates in a Bloomberg survey.

Continued losses at Hutchison’s 3 Group, its high-speed mobile-phone companies in markets including the U.K. and Italy, come in a year that Li plans for the unit to become profitable. Cheung Kong benefited from a 22 percent increase in Hong Kong home prices and a tripling in the fair-value gain from its investment properties.

Losses to Narrow

“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.

Canning Fok, managing director of Hutchison Whampoa, said 3G losses will narrow this year, declining to reiterate Li’s March forecast of breaking even.

“Given the economic situation, we are being more conservative,” Fok told reporters for English-language media at a briefing in Hong Kong today.

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 percent gain this year compares with a jump of 57 percent in the index. Sino Land Co., controlled by the billionaire family of Chairman Robert Ng and his father Ng Teng Fong, is the best performer, climbing 84 percent.

Healthy Market

On its own, Cheung Kong fared better. Excluding Hutchison, profit gained 29 percent to HK$8.64 billion. Including the 49.9 percent-held unit, net income rose 4.7 percent to HK$11.5 billion, almost double the HK$6.06 billion median estimate of five analysts.

Hong Kong’s property market is “healthy” and Cheung Kong may raise home prices if sales improve, Victor Li, Li Ka-shing’s eldest son who is deputy chairman of Hutchison and Cheung Kong, told reporters today.

The city’s home prices have risen 22 percent 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 stood at 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.”

Source

Filed under: news by Guru