B2Companies & Finance MONDAY, APRIL 9, 2007 SOUTH CHINA MORNING POST

Tom Holland [email protected] Homebuyers paying dearly for buying in a rising market Set Chinese free to invest abroad Investors find little to cheer

hina’s policymakers want to recycle more capital abroad in order to reduce upward pressure on the yuan and slow official reserve accumulation. Before they can achieve any meaningful results, about despite record prices however, they will have to twist a few arms among the Ccountry’s different financial regulators in order to get the current rules changed. When they succeed, it will be good news for Hong ...... Kong’s stock market. sell their units at higher prices, with Owners at Cheung Kong’s Metro Sandy Li It is now a year since China announced its qualified domestic some optimists even buying more Premium cost Town in Tiu Keng Leng Station, Easter homes hunting institutional investor, or QDII, initiative intended to allow Despite positive news that a mysteri- than one unit. Most units were being Owners are taking up to Tseung Kwan O, are no better off. mainland financial companies to invest abroad on behalf of their ous buyer last month paid a record sold for an average of HK$17,230 per A 638 sq ft unit at the develop- The property market performed well 30pc loss on investments during the Easter holiday with more clients. HK$33,000 per square foot for a pent- square foot...... ment changed hands for HK$2.6 mil- By any standards, the scheme has been a dismal failure. To house at the Legend and better than But now, these buyers are sitting lion. The owner had paid HK$3.75 than 200 new flats snapped up, date, domestic and international banks, insurance companies and expected land auction results indi- on over-priced homes, and do not Sale price for a Legend development flat million. according to market sources. a lone fund manager have been allotted quotas worth almost vidual homeowners are not feeling know what to do. last month in HK$m Simon Ko, general manager at Bel-Air, a project by Pacific US$18.5 billion to invest in foreign markets. Estimates of how particularly upbeat. “For the past two years, develop- Ricacorp’s Tiu Keng Leng branch, Century Premium Developments in much money has actually been invested differ, but most analysts Last year, scores of homebuyers ers had adopted a high price strategy said the project had attracted many , sold 70 units. seem to agree the amount is somewhere between US$500 million rushed into the market only to find that practically eliminated the op- investors when it was first launched New World Development sold and US$1 billion. In other words, in the year since the QDII scheme out later that they had paid big pre- portunity for investors to make any in mid-2005. more than 20 units of in was introduced, only around one day’s worth of China’s foreign miums for their flats. profit from resale,” said Shih Wing- “Some investors are being forced Kennedy Town on Saturday. The exchange inflows has been recycled abroad. According to property agents, a ching, the chairman of Centaline to hold their flats for lease instead of average selling price was HK$5,400 27.6...... per square foot. The reasons for this woeful lack of interest are simple enough. 1,918 square foot flat on a middle floor Property Holdings, the parent of selling them at a loss,” he said. When the QDII scheme was first promulgated, the officials who in Block Two of the Legend in Centaline Property Agency. Mr Shih said developers and Cheung Kong’s Sausalito in Ma On drew up the rules erred deliberately on the side of caution. Jardine’s Lookout was sold last Most home owners who bought Ringo Ng Chi-chung, sales man- agents had talked up the market by Shan saw almost 70 units sold at The China Banking Regulatory Commission has so far month at HK$14,389 per square foot flats from developers since the mid- ager at Property’s Tsuen releasing news of record high trans- prices of HK$4,900 per square foot to restricted banks to offering bond investments. The mainland’s or HK$27.6 million – 18 per cent less dle of 2005 were now suffering from a Wan branch, said some owners with action prices to give the impression HK$6,500 per square foot. insurance regulator has yet to approve any life insurance company than what the owner had paid the de- paper loss if they had not immediate- several units dumped their stocks that property prices would continue ’ investment beyond a couple of initial pilot schemes. And the veloper 18 months earlier. The Leg- ly resold their property in the second- and took a 30 per cent loss. to climb. project in Mei Foo China Securities Regulatory end is a Cheung Kong (Holdings) de- ary market, he said. Mr Ng cited the case of an owner According to Centaline Property recorded 20 transactions. Commission has dragged its feet over velopment. Meanwhile, agents said home who sold a 647 sq ft flat at Chelsea Agency’s Centa-City Index, which in- Henderson Land Development China’s allowing the fund managers and stock Buyers who chose to pay a 3 per owners at Sun Hung Kai Properties’ Court for HK$2.03 million, after pay- cludes the transaction prices of sec- was the winner, selling more than 100 brokers it oversees to launch cent premium on an extended trans- in got ing HK$3.05 million. ondary flats in 45 of Hong Kong’s units at the Sherwood in Tuen Mun, policymakers international investment products of action completion period of up to 18 badly burned. Owners were caught Sales were made at HK$3,300 per housing estates, property values in Sai Wan Ho and will have to their own. months in 2005 from Cheung Kong up in asset deflation when the devel- square foot, against the HK$4,200 to edged up just 2.7 per cent for last year. Royal Green in Sheung Shui. As a result, the investment products must be regretting their decision. oper decided to slash prices by 30 per HK$4,500 per square foot when the Property prices for the first three ...... push the on offer are desperately unexciting. By Investors took advantage of the cent to sell the remaining units in property was released by the devel- months of this year have risen 2 per Frederick Yeung buying into a bank-run QDII product, long completion date, hoping to re- May last year. oper in March last year, he said. cent. regulators into clients of mainland banks can expect to earn a yield of about 5 per cent from relaxing their its investments in US dollar- rules denominated bonds...... At first, that appears better than the 3 to 3.5 per cent they would get from VIP gaming tables rule the action in Macau Chinese government paper. But when you factor in the 3.6 per cent by which the US dollar has fallen against the yuan over the past 12 months, QDII investors would actually be losing money in ...... yuan terms. Neil Gough Compared with the A-share market that has risen over 100 per Bountiful take cent in the past 12 months, QDII products are deeply unattractive. Others may be rushing in, but the Macau gaming revenue (HK$m) It is small wonder that Bank of China scrapped its first QDII “Angry Man from Chiu Chow” is not product in February in response to a lack of investor interest. interested in becoming the “Gam- Non-VIP table games Slots VIP baccarat Spicing up the QDII scheme to make it more enticing to bling Man of Macau”. 40,000 mainland investors would not be difficult. Banks are already For more than a year, colourfully experimenting with foreign exchange hedges and equity-linked nicknamed Hong Kong legislator notes. But if China’s economic policymakers really want to ship Chim Pui-chung was the largest sin- 30,000 more capital abroad, they will have to push the country’s gle shareholder in cruise-ship opera- insurance and securities regulators into relaxing their rules to tor Massive Resources International. allow more investment in foreign currency stocks. In the past two months, the company 20,000 The China Insurance Regulatory Commission has been talking listed on the main board has an- for months about letting insurance companies invest up to 15 per nounced two deals to grab a slice of cent of their assets in overseas markets. It should now enact Macau’s booming high-stakes gam- 10,000 regulations allowing them to do so – complete with a generous bling market. allowance for investing in overseas equities. Mr Chim does not doubt the en- 0 Equally, the CSRC should stop trying to support the overblown clave’s prospects: “I always say in 01 02 03 04 05 06 A-share market and allow fund managers and securities Legco, ‘Come on, Hong Kong SAR companies greater freedom to invest abroad on behalf of their government. You must wake up’.” Chip turnover and Breakdown of clients. With A shares trading at price to earnings valuations of “This year there might be more net winnings (HK$b) net winnings (%) around 40 times, compared with around 20 times for H shares, it is visitors to Macau than Hong Kong.” Estimates Estimates likely they will get plenty of takers despite the currency risk. However, when Massive’s shares According to Stephen Green at Standard Chartered in surged in February after it said it was Shanghai, simple rule changes could initiate outflows worth US$10 buying a stake in a VIP gaming room billion this year. That would do little to alleviate the upward operation at Sands Macao casino, Mr 21 pressure on the yuan, but over time the potential outflows would Chim decided to cash out. 1,298.58 39 be many times greater. “I made my profit then I sold,” he And given that the first stop for many QDII investors would be said. “[Massive] is making quite a lot H shares, any new rules would be good news for the Hong Kong of investments in Macau. But they are 40 stock market. not the chief bosses [of the casinos], they only have some special tables.” Massive is not the only one taking 35.711 Tax an interest in some very special ta- THE INFORMER bles. Mr Chim’s timely exit comes as a Total VIP chip turnover To junkets or VIP operators rush of new investment piles into Net winnings To casino Macau’s red-hot VIP gaming market, which last year grew 27 per cent to SCMP Graphic Sources: DICJ, SCMP Research HK$35.7 billion and made up 65 per Events Results cent of gaming revenue in the terri- Instead, casino licence-holders February deal gives it a 20 per cent maximum price of HK$100 million. the private Shanghai VIP room, ac- tory, revised government data show. like Lui Che-woo’s Galaxy Entertain- stake in the profit from Hou Wan, the But if competition between casinos counted for 14 per cent of the casino’s Tomorrow, HK: Hong Kong General Tomorrow Final: AAC Acoustic Last month, timber trader- ment, Sheldon Adelson’s Las Vegas junket operation that controls five in recent years has driven up the market share in the fourth quarter, Chamber of Commerce: “Vietnam’s Technologies Holdings, Angang Steel, turned-casino play Teem Founda- Sands, Stanley Ho Hung-sun’s Socie- high-stakes tables in the Sand’s pri- commissions paid to junkets, the down from 24 per cent the previous business and investment outlook”. China Communications Construction, tion said it would pay an additional dade de Jogos de Macau and Steve vate Chengdu VIP gaming room. junkets too must battle it out to quarter. China Golden Development Holdings, HK$765 million to buy the 51per cent Wynn’s Wynn Resorts hand most of Hou Wan is a master junket or VIP attract and retain the big bettors. In February, Long Success set Wednesday, April 11, HK: American China Mining Resources Group, China it did not already own of two gaming the post-tax windfall over to a net- operation, which in turn relies on a Teem’s purchase of the two Wynn aside a HK$5 million provision to Chamber of Commerce breakfast: Shipping Container Lines, Enric Energy junkets at Sands and Wynn casinos, work of middlemen responsible for network of 500 freelance junket and Sands junkets may not look like a break off its junket service agreement “South China port and infrastructure Equipment Holdings, GZI Transport, after a HK$539 deal in September bringing in high rollers, lending them agents who help bring in high rollers big deal, but at HK$1.3 billion the at the Imperator VIP room at Galaxy’s development – ‘Field of dreams or fatal Hainan Meilan International Airport, gave it initial 49 per cent stakes. money and collecting debts: a hefty and receive a commission on each price is about 120 per cent of the older Waldo casino hotel. The com- attraction?’” Ritz-Carlton. Haitian International Holdings, Shanghai Growth Enterprise Market-listed commission paid to the so-called credit-backed gambling chips firm’s market capitalisation. pany swung to a loss of HK$2.5 mil- Forte Land, Shenzhen Investment, Long Success has a 70 per cent stake junket agents and VIP operators. bought by their customers. The target firms have strong track lion in the nine months to last De- Thursday, April 12, HK: Hong Kong Xiamen International Port, Xinyu in the profits from a VIP room at Gal- The junket deals are unique be- Massive announced a second records and are among the few jun- cember, compared with a profit of General Chamber of Commerce seminar: Hengdeli Holdings, Yue Da Holdings axy’s Grand Waldo casino. cause, arguably, they give investors deal last week, a letter of intent with kets in Macau licensed to serve the HK$3.1 million a year earlier. “Hong Kong and PRC double tax The prospects look good. “As more direct exposure to the VIP mar- junket operator Filipe Lau to acquire US-owned casinos, whose designat- Citing “increasing competition in arrangement: The continuing evolution”. April 11 Final: APT Satellite Holdings, competition intensifies, casinos will ket than they can get by purchasing 20 per cent of the profit from the Nep- ed VIP agents are also required to the Macau gaming market”, Long China Pharmaceutical Group, China be more reliant on junkets to attract shares in casino licence holders. tuno VIP room at Galaxy’s newly pass muster with the no-nonsense Success said it would instead focus Friday, April 13, HK: Hong Kong General Wireless Technologies, CNPC (Hong and retain customers, a tendency The Macau government collects opened StarWorld casino hotel for a regulators in the state of Nevada. on “developing high-profit custom- Chamber of Commerce: “The disconnect Kong), COSCO International Holdings, that is evidenced by the rising junket 39 per cent of all gaming revenue as Of the 92 registered junket opera- ers” at the newer Jun Ying room at between data and decision”. First Pacific, Foxconn International commission rate over the past three tax. The commission or cut of tors in Macau, only 10 were affiliated Galaxy’s Grand Waldo casino. Holdings, Geely Automobile Holdings, years,” Credit Suisse analyst Gabriel winnings paid out to major VIP jun- As competition with the Sands and only two to the Long Success collects commis- American Chamber of Commerce Glorious Sun Enterprises, Great Eagle Chan wrote in a research note. ket operators is generally between 30 Wynn, said Mr Chan. sion and a cut of bottom-line revenue luncheon: “The new frontier in mobile Holdings, High Fashion International, Why bother with these new and per cent and 40 per cent of gaming intensifies, casinos He calculates that the Wynn jun- at the Jun Ying room. entertainment”. JW Marriott Hotel. Minmetals Resources, PacMOS non-traditional casino plays? Be- revenue. That leaves the casinos ket, Dore Entretenimento, account- “When people bet, win or lose, it’s Technologies Holdings, Ping An cause contrary to appearances, the themselves with only 20 per cent to will be more ed for 30 per cent of the casino’s VIP all our profit,” chairman Wong Kam- Wednesday, April 18, HK: American Insurance (Group) Co. of China, Shanghai dragon’s share of VIP revenue from 30 per cent of each dollar won. reliant on junkets market share in the fourth quarter. leong said. “The most important Chamber of Commerce breakfast: “How Zendai Property, Singamas Container Macau casinos, both foreign and lo- Investors are keen on a piece of ...... Turnover at Sands junket Sat Ieng, thing is to keep bringing in the cus- social media affects your business”. Holdings, Sun Hung Kai & Co, Symphony cal, does not go to the house. the action. Massive’s HK$140 million Gabriel Chan, analyst, Credit Suisse which controls eight gaming tables in tomers.” Bank of America Tower. Holdings, Theme International Holdings, TPV Technology, Win Hanverky Holdings Hong Kong Productivity Council seminar on enterprise resources planning for toy April 12 Final: Anhui Conch Cement, manufacturing. HKPC Building. Asia Zirconium, China Mengniu Dairy, In Brief China Merchants Holdings Zijin gets partial nod for Monterrico Thursday, April 19, HK: American (International), China Travel Chamber of Commerce: “China’s tax International Investment Hong Kong, ...... reform – The shifting tax landscape”. Comba Telecom Systems Holdings, SK Corp unit to develop Shanghai official to become the offer, instead of the former and US$1 billion, or £9.76 to £19.52 Enoch Yiu Ritz-Carlton. Golden 21 Investment Holdings, coal mine in mainland chairman of Pudong bank threshold of 70 per cent. per share. Greenfield Chemical Holdings, GZI Real A unit of South Korea’s top refiner A top Shanghai government and A consortium led by Hong Kong-list- Zijin, which has a 45 per cent stake The bidders said: “There will be If you have information on events Estate Investment Trust, IRICO Group SK Corp has signed a preliminary financial official is set to become ed Zijin Mining said investors repre- in the consortium, together with the no increase in the offer price of 350 that should be included here, please Electronics, Kee Shing (Holdings), Lee & agreement with mainland chairman of the Shanghai Pudong senting 38.67 per cent of Monterrico mainland’s second-largest copper pence per Monterrico share.” e-mail [email protected] Man Holding, ONFEM Holdings, Shui On authorities to jointly develop a coal Development Bank, where his wife Metals had accepted its £94.6 million producer, Tongling Nonferrous Met- The consortium also said it would Construction and Materials, Sinofert ...... mine there, a source said. is vice-president, Xinhua said. (HK$1.45 billion) takeover bid. als, and Shanghai-listed investment keep Monterrico’s listing on the AIM Holdings, SPG Land (Holdings), Spread Under the agreement, SK’s Ji Xiaohui, deputy secretary The group said it would not in- firm Xiamen C&D on February 5 an- and would restrict its shareholding in In this issue Prospects Holdings, TC Interconnect Chinese unit, SK China Holding, general of the Shanghai government crease the offer price even though the nounced a cash offer of £3.50 per the company to not more than 70 per Holdings, Wing On Company could participate in developing a and head of the city’s financial London-based company’s largest share for Monterrico, the owner of cent of its issued share capital. Bocom...... B1 GF Securities...... B1 International, Yurun Food Group new coal mine near Baoji in Shaanxi services office, will replace Jin Yun shareholder demanded a better offer. the untapped Rio Blanco copper and The 38.67 per cent acceptance in- CCB ...... B1 Lishen Battery ...... B1 AGM: Bank of East Asia, J.I.C. province, as well as a possible coal who is due to retire soon, the report The consortium has set Friday as molybdenum mines in Peru. cludes the 9.9 per cent shareholding Cheung Kong ...B2, B4 Massive Resources .B2 Technology, Nam Tai Electronic & chemistry project, the source said. said, citing unidentified sources. the deadline for the rest of the share- The Greater Europe Fund, Mon- held by five Monterrico board mem- China Life ...... B1 Monterrico ...... B2 Electrical Products China Molyb ...... B10 Morgan Stanley ...... B1 SK, which is leading South Vice-president Ma Li would be holders to accept the offer, according terrico’s largest shareholder with a bers, including chairman and chief China Pacific ...... B1 PCCW...... B4 Korea’s efforts to secure overseas moved to an insurance firm to avoid to an announcement posted on the 7.27 per cent stake, had said the offer executive Richard Ralph. CICC ...... B1 PetroChina...... B1 coal mines, is investing in mines or conflicts of interest, Xinhua added. It website of Alternative Investment undervalued the miner and would Monterrico closed on Friday at Citic Bank ...... B1 Ping An...... B1 Contact us Citigroup ...... B1 Simcere Pharma...B10 companies to help ensure steady did not say when Mr Ji would take Market (AIM) in London, where reject it. £3.385, similar to the offer price Country Garden...... B4 Teem Foundation ...B2 Business news desk supplies amid rising competition up the post. Mr Ji headed the Monterrico is listed. The fund’s adviser, Germany- which represents a 34 per cent pre- CRCC...... B1 Union Life...... B1 Telephone 2565 2653 with China and India. Shanghai branch of the Industrial The Zijin consortium will proceed based Wermuth Asset Management, mium to its closing price of £2.61 on Eurizon...... B1 West Mining ...... B1 Fax 2565 1624 South Korea is the world’s and Commercial Bank before with the deal as long as 50 per cent of indicated the fair value of Monterrico October 19, the last business day be- GDB ...... B1 Zijin Mining ...... B2 E-mail [email protected] second-largest coal importer. Reuters moving into government. Reuters Monterrico’s shareholders accept should be between US$500 million fore the offer became effective.