HONG KONG — The oracle of Hong Kong has spoken. And his message: it’s time to consider buying stocks and real estate.
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Daniel J. Groshong/Bloomberg News
Li Ka-Shing reported on Thursday that his companies had severe profit declines in 2008, but he said that “if you buy in a slow market, in the medium term you get good returns.”
The proclamation on Thursday by Li Ka-Shing, the self-made billionaire who controls some of Hong Kong’s largest companies and carries enormous sway among investors throughout Asia, was made at a rare public appearance.
Exuding confidence, Mr. Li joked with reporters and looked anything but depressed about the sharp fall in profit his companies reported Thursday.
Whether Mr. Li is proved right about stocks and property — and he certainly has a lot to gain personally if he is right — his comments come at a time when stock markets have rallied on hopes that the economic slump may be bottoming out.
“If you have money in your pocket,” Mr. Li said, consider buying into stocks. As for the property market in Hong Kong, he said, “history tells us that if you buy in a slow market, in the medium term you get good returns.”
Mr. Li advised against borrowing to invest what remains a shaky and volatile environment.
Even though couched with caution, Mr. Li’s comments were enough to echo around the investment world and helped send the Hang Seng index up 3.6 percent Thursday.
Mr. Li is the man the local media call “Superman” and liken to the investor Warren E. Buffett, who controls Berkshire Hathaway. Considered one of Asia’s most powerful men, he is also one of the continent’s most generous philanthropists.
In the last year, as the economic crisis has dragged on and deepened, Mr. Li has jumped in from time to time to try to restore confidence.
Last September, shortly after the collapse of Lehman Brothers caused the world financial system to convulse, savers in Hong Kong lined up outside the Bank of East Asia, one of the territory’s best-known and biggest banks, responding to rumors that the bank was in trouble. Mr. Li let it be known that he had been buying shares in the bank, an expression of confidence that quickly helped put an end to an old-fashioned bank run.
And this month, HSBC was trying to raise $18 billion in a rights offering, prompting the bank’s shares to fall sharply. A majority of local residents here own shares in the bank, which is now based in Britain but has its roots in Hong Kong. When it appeared that the rights offering might falter, Mr. Li — along with several other Hong Kong tycoons — pledged to put about $300 million of his own funds into the issue.
Still, it has been a difficult year for Mr. Li, and the Superman title sat a little awkwardly on him on Thursday, after Cheung Kong Holdings and Hutchison Whampoa, the flagships of the property-to-ports-to-electricity conglomerate he controls, both reported declines in net profit of more than 40 percent for 2008.
Small wonder, given that the rapid slowdown in the global economy had tipped Hong Kong, along with the United States, Japan and others, into a recession and put a damper on the breakneck growth of neighboring China.
Rental and property prices in the territory, a mainstay of the conglomerate’s earnings, are expected to tumble further this year, hitting developers hard.
But the Cheung Kong group is not just any Hong Kong company, and Mr. Li is not just any Hong Kong company chairman. Thursday’s event was not just any annual news conference, but the pinnacle of the Hong Kong earnings season, complete with a boisterous media scrum that regularly lends the bespectacled and affable Mr. Li the aura of a pop star.
The complex network of companies Mr. Li controls — three of them members of Hong Kong’s benchmark Hang Seng index — epitomize the hustle and bustle of entrepreneurial Hong Kong and its roller-coaster economy.
And Mr. Li himself has the kind of rags-to-riches history that inspires every Hong Kong resident. The Cheung Kong group and its various interlinked companies grew out of the humblest beginnings imaginable: a plastic-flower manufacturing business the young Mr. Li set up in the 1950s.
Five decades later, Mr. Li is now one of Hong Kong’s leading developers of residential, commercial and industrial properties — about one in seven private residences here were developed by the group.
Hutchison Whampoa, of which Mr. Li also is chairman, operates businesses as diverse as ports, hotels, supermarkets and drugstore chains, and is a major telecommunications operator in Hong Kong and abroad.
Cheung Kong Infrastructure, headed by Mr. Li’s son Victor, and HK Electric, one of the territory’s dominant power companies, also belong to the Cheung Kong/Hutchison stable of businesses.
Together, these businesses are a cross section of Hong Kong’s economy and reflect more than any other company the territory’s boom-to-bust character: riding the wave of Asia’s breakneck growth in recent years, and now suffering in line with the slowing global economy.
Mr. Li’s personal fortune has fallen as well, having slipped to 16th in the Forbes annual ranking of the world’s richest people, down from 11th in 2008, with a fortune now worth $16.2 billion — down from $26.5 billion a year ago.
Jaymee Ng contributed reporting.
Saturday, May 23, 2009
Rising Powers Challenge U.S. on Role in I.M.F.
WASHINGTON — Barely six months ago, the International Monetary Fund emerged from years of declining relevance, hurriedly cobbling together emergency loans for countries from Iceland to Pakistan, as the first wave of the financial crisis hit.
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Now, with world leaders gathering this week in London to plot a response to the gravest global economic downturn since World War II, the fund is becoming a chip in a contest to reshape the postcrisis landscape.
The Obama administration has made fortifying the I.M.F. one of its primary goals for the meeting of the Group of 20, which includes leading industrial and developing countries and the European Union. But China, India and other rising powers seem to believe that the made-in-America crisis has curtailed the ability of the United States to set the agenda. They view the Western-dominated fund as a place to begin staking their claim to a greater voice in global economic affairs.
Treasury Secretary Timothy F. Geithner, who once worked at the fund, has called for its financial resources to be expanded by $500 billion, effectively tripling its lending capacity to distressed countries and cementing its status as the lender of last resort for much of the world.
Japan and the European Union have each pledged $100 billion; the United States has signaled it will contribute a similar sum, though its money will take longer to arrive because of the need for Congressional approval. China, with its mammoth foreign exchange reserves, is the next obvious donor.
Yet officials of China and other developing countries have served notice that they are reluctant to make comparable pledges without getting a greater say in the operations of the fund, which is run by a Frenchman, Dominique Strauss-Kahn, and is heavily influenced by the United States and Western Europe.
A senior Chinese leader, Wang Qishan, said Friday that Beijing was willing to kick in some money, but he called for an overhaul of the way the fund is governed. China wants its quota — which determines its financial contribution and voting power — adjusted to reflect its economic weight better.
China’s contribution, Mr. Wang said, should not be based on the size of its reserves but on its economic output per person, which is still modest. Some American officials now expect a pledge on the order of $50 billion from China.
“Their arms may yet be twisted, but they simply do not want to pony up based on vague promises of governance reform,” said Eswar S. Prasad, a professor of economics at Cornell University who has discussed the matter in recent days with Chinese and Indian officials.
Given the inevitability that these countries will have a growing influence, the London summit meeting, which begins Thursday, is likely to be remembered “as the last hurrah for the U.S. and Europe rescuing the world economy,” said Simon Johnson, a professor at M.I.T. and a former chief economist of the fund.
One reason the I.M.F. has emerged as such a popular cause is that the United States has been unable to rally countries behind its other major priority: economic stimulus. The European Union opposes further stimulus packages in 2010, arguing that its social safety net makes an increase in government spending unnecessary.
European and American officials are also still divided, to a lesser degree, on how to rewrite international financial regulations. France and Germany are more receptive than the United States to giving regulators supranational authority to scrutinize global banks and other financial companies.
“The United States is desperately trying to assert leadership, as if it were 10 years ago, when the U.S. set the agenda,” said Kenneth S. Rogoff, an economist at Harvard and another former chief economist of the fund.
With more countries slipping into crisis by the week, there is general agreement that the fund needs additional resources. Since last year, the I.M.F. has made nearly $50 billion in loans to 13 countries. It is streamlining the process for making loans and loosening its strings, hoping to counter the resentment that built up against it during past crises because of its stringent demands.
At a preparatory meeting two weeks ago, finance ministers of the Group of 20 agreed to “very substantially” increase financing, though the Europeans favored an extra $250 billion, not $500 billion.
Whatever their reservations about financing, the Chinese have seized on the fund for another purpose: to tweak the United States. The governor of China’s central bank, Zhou Xiaochuan, recently proposed that the American dollar be phased out as the world’s default reserve currency. As a replacement, he suggested using special drawing rights, or S.D.R.’s, the synthetic currency created by the fund that is used for transactions between it and its 185 member countries.
Few economists view that idea as a realistic one, at least for years to come. But the mere assertion that the dollar’s pre-eminence is waning — a theme picked up by Russian officials as well — sends a message.
“I don’t think the Chinese or Russians really believe the S.D.R. is a viable currency,” said Mr. Prasad, the Cornell economist. “But they’re laying down a very clear marker that they’re going to be much more assertive about their role.”
Mr. Geithner took the remarks seriously enough that he publicly reaffirmed the primacy of the dollar.
The United States will address China’s status this week, when it announces details of a new high-level strategic and economic dialogue with Beijing, led by Mr. Geithner and Secretary of State Hillary Rodham Clinton, according to a senior administration official, who spoke anonymously because the information was not yet public. The announcement will come after the first meeting between President Obama and the Chinese president, Hu Jintao, in London.
The Obama administration has personal reasons to support the fund. Mr. Geithner was the I.M.F. director of policy planning from 2001 to 2003, after his first stint in the Treasury Department. He recruited Edwin M. Truman, another former Treasury official and a longtime advocate of the fund, as a temporary adviser to develop policies for the Group of 20 meeting.
Just before leaving his academic position at the Peterson Institute for International Economics, Mr. Truman proposed that the fund issue $250 billion in S.D.R.’s on a one-time basis to be allocated to all its members, as another way of increasing its resources. Western European countries, he said, could use their S.D.R.’s to lend money to their troubled Eastern neighbors.
That proposal is in a current draft of the statement to be issued at the Group of 20 meeting. If all the American proposals for the fund are adopted, its resources will approach $1 trillion — a big number, even in these extraordinary times.
Yet for Mr. Johnson of M.I.T., it merely shows how difficult it is for the United States to marshal support for anything else.
“They can’t agree on fiscal policy; they can’t agree on regulations,” he said. “The only thing left is the I.M.F.”
Skip to next paragraph
Related
Obama Will Face a Defiant World on Foreign Visit (March 29, 2009)
Anglo-American Capitalism on Trial (March 29, 2009)
Times Topics: International Monetary FundReaders' Comments
Readers shared their thoughts on this article.
Read All Comments (68) »
Now, with world leaders gathering this week in London to plot a response to the gravest global economic downturn since World War II, the fund is becoming a chip in a contest to reshape the postcrisis landscape.
The Obama administration has made fortifying the I.M.F. one of its primary goals for the meeting of the Group of 20, which includes leading industrial and developing countries and the European Union. But China, India and other rising powers seem to believe that the made-in-America crisis has curtailed the ability of the United States to set the agenda. They view the Western-dominated fund as a place to begin staking their claim to a greater voice in global economic affairs.
Treasury Secretary Timothy F. Geithner, who once worked at the fund, has called for its financial resources to be expanded by $500 billion, effectively tripling its lending capacity to distressed countries and cementing its status as the lender of last resort for much of the world.
Japan and the European Union have each pledged $100 billion; the United States has signaled it will contribute a similar sum, though its money will take longer to arrive because of the need for Congressional approval. China, with its mammoth foreign exchange reserves, is the next obvious donor.
Yet officials of China and other developing countries have served notice that they are reluctant to make comparable pledges without getting a greater say in the operations of the fund, which is run by a Frenchman, Dominique Strauss-Kahn, and is heavily influenced by the United States and Western Europe.
A senior Chinese leader, Wang Qishan, said Friday that Beijing was willing to kick in some money, but he called for an overhaul of the way the fund is governed. China wants its quota — which determines its financial contribution and voting power — adjusted to reflect its economic weight better.
China’s contribution, Mr. Wang said, should not be based on the size of its reserves but on its economic output per person, which is still modest. Some American officials now expect a pledge on the order of $50 billion from China.
“Their arms may yet be twisted, but they simply do not want to pony up based on vague promises of governance reform,” said Eswar S. Prasad, a professor of economics at Cornell University who has discussed the matter in recent days with Chinese and Indian officials.
Given the inevitability that these countries will have a growing influence, the London summit meeting, which begins Thursday, is likely to be remembered “as the last hurrah for the U.S. and Europe rescuing the world economy,” said Simon Johnson, a professor at M.I.T. and a former chief economist of the fund.
One reason the I.M.F. has emerged as such a popular cause is that the United States has been unable to rally countries behind its other major priority: economic stimulus. The European Union opposes further stimulus packages in 2010, arguing that its social safety net makes an increase in government spending unnecessary.
European and American officials are also still divided, to a lesser degree, on how to rewrite international financial regulations. France and Germany are more receptive than the United States to giving regulators supranational authority to scrutinize global banks and other financial companies.
“The United States is desperately trying to assert leadership, as if it were 10 years ago, when the U.S. set the agenda,” said Kenneth S. Rogoff, an economist at Harvard and another former chief economist of the fund.
With more countries slipping into crisis by the week, there is general agreement that the fund needs additional resources. Since last year, the I.M.F. has made nearly $50 billion in loans to 13 countries. It is streamlining the process for making loans and loosening its strings, hoping to counter the resentment that built up against it during past crises because of its stringent demands.
At a preparatory meeting two weeks ago, finance ministers of the Group of 20 agreed to “very substantially” increase financing, though the Europeans favored an extra $250 billion, not $500 billion.
Whatever their reservations about financing, the Chinese have seized on the fund for another purpose: to tweak the United States. The governor of China’s central bank, Zhou Xiaochuan, recently proposed that the American dollar be phased out as the world’s default reserve currency. As a replacement, he suggested using special drawing rights, or S.D.R.’s, the synthetic currency created by the fund that is used for transactions between it and its 185 member countries.
Few economists view that idea as a realistic one, at least for years to come. But the mere assertion that the dollar’s pre-eminence is waning — a theme picked up by Russian officials as well — sends a message.
“I don’t think the Chinese or Russians really believe the S.D.R. is a viable currency,” said Mr. Prasad, the Cornell economist. “But they’re laying down a very clear marker that they’re going to be much more assertive about their role.”
Mr. Geithner took the remarks seriously enough that he publicly reaffirmed the primacy of the dollar.
The United States will address China’s status this week, when it announces details of a new high-level strategic and economic dialogue with Beijing, led by Mr. Geithner and Secretary of State Hillary Rodham Clinton, according to a senior administration official, who spoke anonymously because the information was not yet public. The announcement will come after the first meeting between President Obama and the Chinese president, Hu Jintao, in London.
The Obama administration has personal reasons to support the fund. Mr. Geithner was the I.M.F. director of policy planning from 2001 to 2003, after his first stint in the Treasury Department. He recruited Edwin M. Truman, another former Treasury official and a longtime advocate of the fund, as a temporary adviser to develop policies for the Group of 20 meeting.
Just before leaving his academic position at the Peterson Institute for International Economics, Mr. Truman proposed that the fund issue $250 billion in S.D.R.’s on a one-time basis to be allocated to all its members, as another way of increasing its resources. Western European countries, he said, could use their S.D.R.’s to lend money to their troubled Eastern neighbors.
That proposal is in a current draft of the statement to be issued at the Group of 20 meeting. If all the American proposals for the fund are adopted, its resources will approach $1 trillion — a big number, even in these extraordinary times.
Yet for Mr. Johnson of M.I.T., it merely shows how difficult it is for the United States to marshal support for anything else.
“They can’t agree on fiscal policy; they can’t agree on regulations,” he said. “The only thing left is the I.M.F.”
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