Moves won't have much impact on broader real estate market
Hong Kong tycoon Li Ka-shing pared investment in Chinese property in recent months, leading to market speculation that the billionaire lacks confidence in China's real estate market.
But experts said on Thursday that confidence is just a minor factor, and his moves have mainly been driven by a strategic shift to Europe and the yuan's depreciation. His sales will also have a limited impact on the country's property investment, they said.
In October, Li sold retail property complexes and offices in Shanghai and Hong Kong in deals worth about 50 billion yuan($ 7.39 billion), according to the calculations of the Global Times.
As of Thursday, the amount of property sales by Li stood at 80 billion yuan since 2013.
On September 27, Cheung Kong Property Holding and the Li Ka Shing Foundation, both owned by the businessman, sold an office and retail property complex in Shanghai to China Life Insurance for 20 billion yuan, according to a filing the company sent to the Hong Kong stock exchange.
Li has traditionally been referred to as "superman Li" in China for his acute sense of business opportunities and instincts about economic trends. So his latest moves sparked speculation that the influential investor is pulling out of China's real estate market because he has a negative view of its prospects.
Slower gains in Chinese housing prices, reflecting policies rolled out by local governments at the beginning of October, provide some evidence for that view.
For example, while new home prices in Beijing rose 1.2 percent in the first half of October, the gain still slowed notably from 4.9 percent in September, according to the National Bureau of Statistics.
Yet, "China's real estate market will not collapse," Yan Yuejin, research director at E-house China R&D Institute, told the Global Times on Thursday. He said changes in price trends meant that speculative buying has been largely curbed.
"This is just a normal adjustment cycle," Yan said.
He was positive about the outlook. "As housing demand stabilizes and bubbles are squeezed out, the market will enjoy a stable and sound rebound in the long run."
The positive outlook may also have been evident in leading property developer Vanke Group's increasing acquisition of land. In October, Vanke paid 16.55 billion yuan for sites that will be developed into 20 projects, the National Business Daily reported on October 28.
Similar speculation about Li's withdrawal from China emerged in 2015, after he sold properties in Shanghai and scaled up investment in Europe.
But Li at the time said such speculation was "completely untrue," according to media reports. Li noted that he was confident about China's economy, pointing out that the retail outlets he owned in the mainland stood at 2,300 in 2015, up 77 percent from 2013.
In recent years, Li, in his 80s, has been stepping up efforts to diversify his business, selling assets at peak prices and redistributing capital to markets where he might achieve better and safer returns, Zhang Dawei, an analyst with Centaline Property, told the Global Times on Thursday.
The European markets, especially the UK, which have been experiencing economic downturns, are such destinations. Currently, the UK represents about 37 percent of Li's company assets, with investment in such sectors as electricity, natural gas, retail, and basic infrastructure.
Market prospects in the UK have been bolstered by the pound's decline after the Brexit referendum, experts noted.
Li is also preparing to bid for a majority stake in the UK electricity grid operator National Grid, the Financial Times reported on September 22, citing people close to the talks.
The sale is valued at 11 billion pounds ($13.59 billion).
Li's recent property sales might be a way to raise funds for that deal, Yan said.
The yuan's recent weakness is also prompting investors to offload yuan-denominated assets, according to Zhang.
The central parity rate of the Chinese currency weakened to 6.7858 against the dollar on October 28, touching a six-year low.
