The rich face the investment dilemma
2023-7-1
The global economy has been severely hit by covid19 in the past three years, combined with the gloomy effect of Russia-Ukraine war since last year, global supply chains has been severely damaged, and the economies of various countries have been further striking by these spillover effect. Hong Kong has also been slapped hard by this environment. Cross-border trade has plummeted to the lowest level, the local first-hand property market has been weakened by the diminished demand and second-hand market transactions have also fallen. Equities prices of large blue-chip companies have declined to year low, and the market values have also suffered big losses.
First-generation of the rich in Hong Kong started their business in the 1960s and transformed into real estate companies in the 1980s  and 1990s. Riding with the economic boom, many companies’ markets value easily exceeded HKD 10 billion. The second generation of the rich have been taking over the family’s businesses since year of two thousand. Most of them cultivated heartily these businesses since then. Consequently, these businesses grew bigger and stronger, the company's market value and profit also rose to elevated level.
Hong Kong is different from other places in the world. Among the top ten richest people in its ranking, no less than seven in the list are engaging in property related business. There were ever more than one richest man in China who were property tycoon. Under new national policy to suppress the speculation, real estate industry has been fading rapidly, and the listed property companies have fallen through one by one.
Under strict protection, second-generation of the rich in Hong Kong purchased the lands at low price and sold flats at soaring prices and earned a lot of money in this operation. Past decade, the third-generation of the rich began to take over and continued to play the property value-added investment game.
Until three years ago, the situation changed. Due to the epidemic and immigration issues, coupled with a slowdown of the global economies, demands for first-hand properties have been dropping sharply. The whole property industries are under pressure.
It is too easy to make money in real estate industry in Hong Kong, so that the third generation the rich rarely jump out of this comfort zone to start new businesses abroad, which is why sticking to the real estate industry are still the mainstream. Hong Kong real estate industry will not experience free fall like the China domestic market. From the prospect of medium- and long-term development, the industry shows low growth or even negative single-digit growth which is inevitable.
If the third-generation do not make any changes, the wealth of the fourth generation will fall back to the level of ordinary wealthy households. If they success to transform their business into the most profitable artificial intelligence industry, Hong Kong can shine brilliantly again.
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The Hong Kong Monetary Authority (HKMA) and the Hong Kong Association of Banks (HKAB) have launched the Anti-Scam Consumer Protection Charter, which aims to raise public awareness about credit card information safety. The charter, jointly developed by participating card-issuing banks and merchant institutions in Hong Kong, features four key principles. The industry is directed to not send instant electronic messages with embedded hyperlinks or request personal and credit card information online. |
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2. Haunted apartments being caught up 2023-07-01 23:44:07 |
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Property market sentiment has improved slightly, with even "haunted" apartments being caught up in the feel-good factor and some fetching good prices. A unit below a double murder in J Residence, Wan Chai, recently sold for HK$10 million. The original owner of the property lost HK$1.8 million after having held it for seven years. With an area of 593 square feet and a one-room partition, the transaction price is about 15 percent lower than the market price. The price per sq ft is HK$16,863. The vendor bought the unit in 2016 for HK$11.8 million and its value depreciated about 15.3 percent during the period. |
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3. Luxury brandd returning to Hong Kong 2023-07-02 08:46:51 |
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Tourists are not the only ones returning to Hong Kong, even luxury brands. According to CBRE, May saw the return of several high-end brands in the retail leasing market, including Chanel. The fashion luxury brand committed to a portion of the retail podium, measuring 18,000 sq ft, at Capitol Centre in Causeway Bay for a reported monthly rent of about $4.0m or $222 per sq ft. Apart from Chanel, Luk Fook Jewellery also leased new spaces in the city. Data from CBRE showed that the jewellery brand leased two ground floor shops, measuring 2,500 sq ft in total, of Golden Crown Court at 66-70 Nathan Road in Tsimshatsui for a monthly rent of $550,000. |
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4. George Soros’ Foundations lay off 40% staff 2023-07-02 20:03:09 |
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George Soros’ Open Society Foundations will lay off at least 40% of its staff one month after the 92-year-old announced he handed the reins of the multi-billion-dollar foundation to his son, Alexander Soros. The job cuts were announced in a statement signed by Alexander Soros and the foundation’s president, Mark Malloch-Brown. It said the foundation would undergo “significant changes” to its operating model. “Through this new model, the Board aims to transform operations across the global network, with the goal of generating a nimbler organization better able to build on past achievements and confront urgent and emerging challenges,” the statement said. |
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5. Approved residential mortgage loans increased 2023-07-03 16:57:31 |
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Approved residential mortgage loans increased 20.3% MoM to $42.6b in May, the Hong Kong Monetary Authority (HKMA) reported. The increase was likely due to the 13.9% MoM uptick in mortgage applications in the same month. There were 9,530 applications in May/ Of the total mortgage loans, $13.5b (+39.9% MoM) and $22.4b (+5.2% MoM) were used to finance primary and secondary market transactions, respectively. The remaining $6.7b (+50.2% MoM) was used for refinancing. After adding the approved May applications, the outstanding value of mortgage loans reached $1.8289t, up 0.3% from April. |
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6. Tesla beat expectations in second quarter 2023-07-03 17:17:15 |
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Tesla beat expectations in the second quarter of 2023, announcing Sunday it produced nearly 480,000 vehicles and delivered over 466,000. The majority of production and deliveries were the Model 3 sedan and Model Y crossover, with 460,211 produced and 446,915 delivered. The electric car maker produced 19,489 of the higher-priced Model X and Model S and delivered 19,225. Dan Ives, an analyst at Wedbush Securities, said it was a “trophy case quarter” for the company, adding “Tesla bears,” or pessimistic Tesla investors, will be sent back into “hibernation mode.” |
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7. Uncertainty weighs on property market 2023-07-04 14:57:38 |
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Residential and retail property sales in Hong Kong are showing signs of slowing down amid economic uncertainty and interest rate movements. Only three deals were recorded at 10 major housing estates over the weekend, down by 50 percent from a week ago, according to Centaline Property Agency. It was also the third consecutive weekend with single-digit transactions since the prime rate was raised earlier this month. The market sentiment has "obviously improved" compared to last month but with competitive pricing, new homes took all the attention and purchasing power away from the secondary market, said Louis Chan Wing-kit, Asia-Pacific vice-chairman of the agency's residential division. |
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8. US interest rate could rise to 6 percent 2023-07-05 10:10:47 |
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BNY Mellon Investment Management has warned investors to be cautious as the US interest rate could rise to 6 percent and an economic "soft landing" could be difficult after the US treasury yield curve reached on Monday, the deepest inversion since the 1980s. A soft landing is usually defined as the US Federal Reserve making efforts to lower inflation to the 2 percent target while avoiding recession. BNY Mellon noted the odds of a soft landing were only a small of 20 percent and suggested cash and fixed-income portfolios including US Treasuries and developed market sovereign bonds for the coming quarter. |
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9. Office market sentiment improved in May 2023-07-05 21:25:45 |
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The office market sentiment improved in May with more leasing enquiries for Grade A office space, according to JLL. “Demand for office space is evolving as corporates are increasingly focused on a sustainable and healthy office environment in the post-pandemic era,” the expert commented. “From 2H22 to end-May 2023, JLL said 52.8% of the sizable new lettings and expansions (>15,000 sq ft, landlord-quoted area) involved commitments in green buildings, more than the previous years,” JLL added. |
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10. An interest rate hike later 2023-07-08 13:43:46 |
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An interest rate hike later this month was already in the cards for the Federal Reserve. But after the June jobs report, the timing of a second hike remains unclear. Job gains remain robust, wage growth is still going strong, and unemployment continues to hover near historic lows. That means the job market is stillfeling demand in the economy , which the Fed has been trying to slow through rate hikes. And Fed officials have made it clear they think the central bank still has more work to do to bring down inflation, which is still running well above the 2% goal. |
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