Bloomberg News

Cheung Kong Says China Crunch Is ‘Golden Time’ for Expansion

November 17, 2011

(Updates with the number of Cheung Kong projects in China in eighth paragraph.)

Nov. 17 (Bloomberg) -- Cheung Kong Holdings Ltd., the developer controlled by Hong Kong billionaire Li Ka-shing, is seeking acquisitions in China as the country’s liquidity crunch makes it a “golden time” for the company.

The developer is generating sales from its projects in China, Executive Director Justin Chiu said at a forum in Hong Kong today. He predicted the nation’s curbs to ease gains in home prices will be in place for the next 12 months.

China this year increased down-payment requirements and mortgage rates on some homes and imposed housing purchase restrictions in about 40 cities. Standard & Poor’s in a report on Sept. 27 said the credit outlook for Chinese developers will be “increasingly severe.”

“We have many projects in China that are generating a lot of cash, so we are actively looking at acquisition opportunities,” Chiu said, declining to be more specific. ‘It’s really a golden time for us.”

Cheung Kong joins other investors outside the mainland who may be seeking investments in the country. Billionaire investor George Soros is planning a property fund to invest in real estate projects in China, 21st Century Business Herald reported Nov. 15. CBRE Global Investors, manager of $94.8 billion of real estate assets, is mulling its first investment in the nation’s housing market in four years in anticipation the government will start easing its property curbs, Greater China Country Manager Richard van den Berg said this week.

Falling Prices

“The measures will probably be in place for at least another 12 months,” said Chiu. “We will see transactions falling a bit.”

Chinese housing data may show prices in the nation’s four biggest cities are falling as Premier Wen Jiabao pledges to maintain a one-and-a-half year battle to lower prices to a “reasonable” level. Housing prices in Beijing, Shanghai, Guangzhou and Shenzhen -- home to 66 million people -- dropped from a month earlier by as much as 0.3 percent in October, a government report will show tomorrow, according to five analysts surveyed by Bloomberg News.

Cheung Kong is either building or has completed over 60 projects in more than 20 Chinese cities, including Shanghai, Beijing, Guangzhou, Qingdao, Chongqing and Dongguan. Sales from China outside of Hong Kong rose to HK$4.4 billion in the first half from HK$2.6 billion a year earlier, according to its interim report.

Low Mortgage Rates

Nanjing will be China’s next “big city” after Shanghai and Beijing, Chiu said, adding that the eastern Chinese location offers lot of potential.

In Cheung Kong’s home market of Hong Kong, Chiu said the city’s housing prices will be backed by low mortgage rates for the next one to two years, adding that the real estate market will be “OK.”

Home prices in the city have slid to the lowest in more than six months while the value of housing transactions plunged 50 percent in October from a year earlier, after the government raised minimum down-payment requirements, boosted mortgage rates and increased land sales to curb a housing bubble. Hong Kong home prices may fall as much as 30 percent by 2013, according to Barclays Capital Research’s Andrew Lawrence.

The developer may also be interested in Taipei as the city’s housing market is “worth looking at,” Chiu said at the MIPIM Asia conference in Hong Kong today.

--With assistance from Bonnie Cao. Editors: Linus Chua, Malcolm Scott

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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