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Bloomberg

Hong Kong’s old-school tycoons lose to Chinese bosses

(Bloomberg) – The prediction was vintage Jack Ma, as provocative as it is prescient. “It’s the internet age,” proclaimed the Chinese billionaire in October 2013, just weeks after his intention to go public with Alibaba Group Holding Ltd. in Hong Kong had been scuttled by regulators. “It no longer belongs to Li Ka-shing.” Ma’s search of the famous Hong Kong mogul raised a lot of eyebrows back then, but few would disagree with him now. The last few years have seen a remarkable change in fortunes between tech-savvy Chinese tycoons and their old-school Hong Kong counterparts – a trend that shows little sign of fading any time soon. Ma and some of her peers, the combined wealth of China’s 10 richest people has tripled since 2016 to $ 425 billion, according to the Bloomberg Billionaires Index. For Hong Kong, it doubled to $ 218 billion during the same period. Li, once the richest person in Asia, is now ranked No.13, several places below Ma, who finally listed Alibaba in New York in 2014.The changes highlight the declining relevance of Hong’s businessmen. Kong who built their empires on real estate, ports and infrastructure. In their heyday, when the former British colony was the much-needed gateway to a rapidly developing mainland China, Li and his peers were courted by Beijing for their business acumen and access to foreign capital. Nowadays, their political influence is waning and their businesses are increasingly viewed by investors as obsolete.Moreover, Hong Kong’s future as a financial center faces an existential threat as the Chinese Communist Party collides. undoing the “one country, two systems” framework that has supported the city’s success for decades, resulting in a dramatic drop in the stock valuations of Hong Kong’s largest conglomerates. Over the past five years, five of the city’s major groups – CK Hutchison Holdings Ltd., New World Development Co., Henderson Land Development Co., Sun Hung Kai Properties Ltd. and Wharf Holdings Ltd. Their shares are now 0.5 times book value on average, compared to 10 for the five companies controlled by some of China’s richest tycoons, according to data compiled by Bloomberg. It doesn’t have a lot of growth, ”said Andy Wong, founding partner of LW Asset Management in the city. “Investors prefer to focus on growth more than on the value of a business,” he said, adding that technology-driven industries are attractive, especially after the pandemic. listed companies have been slow to catch up. On the other hand, their counterparts across the border have harnessed technology to provide a range of services to consumers and build wealth. Chinese tycoons have also benefited from the rapid recovery of the $ 14.3 trillion economy after Covid. China was the only major economy to grow last year, while Hong Kong saw back-to-back contractions in 2019 and 2020.Most of China’s richest billionaires come from the tech industry, including Pony Ma of Tencent Holdings Ltd., Bytedance Ltd. founder Zhang Yiming and William Ding of NetEase Inc. The wealth of Zhong Shanshan, the current richest person in China and founder of bottled water giant Nongfu Spring Co., is nearly $ 69 billion, or more than double that of Li. Many Hong Kong business empires owe their success to government policies that encouraged only a small group. from deep-pocketed developers to bidding for plots of land, a system that has made Hong Kong the most expensive real estate market in the world. The windfall of rising prices has allowed tycoons to diversify into utilities, retail, ports and infrastructure, but this formula has been difficult to replicate in larger markets like mainland China due to high capital requirements, local competition and regulatory barriers, said Richard Harris, founder. of Port Shelter Investment Management, based in Hong Kong, for example Sun Hung Kai Properties Ltd. The land bank in mainland China is roughly 2.3% of that owned by Country Garden Holdings Co., a Guangdong-based developer controlled by billionaire Yang Huiyan. expanding into new businesses, Harris said. “A lot of them are very happy to make sure they don’t lose” what they have, he said. Yet even that has proven difficult in recent years as Hong Kong’s economy has been battered by anti-government protests and the pandemic. , the developer led by billionaire brothers Raymond and Thomas Kwok, reported the biggest drop in underlying profit since 2013 for the year ended June. Swire Pacific Ltd., one of two centuries-old British trading companies, recorded an underlying loss last year, the first since listing in 1959. Its flagship product, Cathay Pacific Airways Ltd., is in business. difficulty despite a government-led rescue. flagship of the diverse empire Li built after his family fled to Hong Kong from the mainland in 1940, saw its first drop in profits since the conglomerate’s overhaul in 2015. As tensions mount between China and the West, the CK Group is facing headwinds overseas. Australia blocked it from acquiring a local gas pipeline operator due to national security concerns in 2018, and some Hong Kong conglomerates have started looking further for growth opportunities. New World Development Co., which is dedicated to building infrastructure, hotels and shopping malls, is accelerating its expansion in insurance, health care and education in mainland China. CEO Adrian Cheng said he is keen to expand the non-real estate service business. Much of the effort “revolves around non-traditional businesses,” a spokeswoman said. Wire Pacific invests in healthcare groups in mainland China. Jardine Matheson Holdings Ltd., owner of luxury hotel group Mandarin Oriental International Ltd., is partnering with private equity firm Hillhouse Capital Management Ltd. to seek investment opportunities in China and Southeast Asia. while the CK Group and Wharf did not respond to requests for comment. Swire said the group’s financial strength and ability to invest remain strong and that it is considering new areas. Henderson Land said it is diversifying from real estate, with a strong presence in Hong Kong and China, and incorporating sustainable technologies. Li’s personal investment vehicle, Horizons Ventures, has invested in food-based foods. of plants, renewable energies and digital services. The company’s early bet in Zoom Video Communications Inc. jumped to $ 11 billion last year during the pandemic, or a third of Li’s wealth. He was also an early supporter of Facebook Inc. , Spotify Technology SA and Siri. The post-pandemic recovery will be crucial for Hong Kong tycoons to consider similar bets on emerging industries, according to Falcon Chan, a partner of Deloitte China. it’s essential to think about what’s the next big bet, ”Chan said. “What some of these great players do over the next year or two will have a huge impact if they are to pivot.” More stories like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP

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