"China's Warren Buffett" Has Just Sold Off His China Assets

On the 8^th of this month, Pacific Century Premium Developments and PCCWannounced they had signed an agreement to sell Pacific Century Place.  The disposal of a landmark project in the center of Beijing—two office buildings, two blocks of serviced apartments, and a mall—confirmed that Li Ka-shing and son Richard have turned bearish on Chinese real estate.

Li, reputed to be the richest man in Asia, and his family have been on a selling spree in Mainland China since last August.  During that time, “Superman,” his nickname because of an almost-infallible sense of market timing, has unloaded Guangzhou’s Metropolitan Plaza, Shanghai’s Oriental Financial Center, and Nanjing’sInternational Financial Center.  With Richard’s disposal of Beijing’s Pacific Century Place, it appears the Li family will no longer hold any large real estate developments in the Chinese mainland. 

Li did not earn his nickname for nothing.  He started as a salesman of plastic flowers and bought big in the wake of riots in Hong Kong at the time of China’s Cultural Revolution, snapping up bargains.  He was also an early investor in Mainland China, jumping in before it became fashionable. That proved to be smart.  He has, wrote one observer, “a record of being able to predict the mainland property market.” 

Li’s maneuvers are now considered a leading indicator.  So what is the significance of his recent sales?  He told the respected Caixin website, just before the Pacific Century Place announcement, that the disposals of properties in China were “sell-high-buy-low” moves.  As he noted, “The talk of our disinvestment is a big joke.”

Yet Li, No. 20 on last month’s Forbes rich list with a fortune of $31.0 billion, is selling in China and not buying.  And it looks like he is leaving not a moment too soon. Dongfang Daily, a Chinese paper, quotes an unnamed “industry insider” who tells usSuperman “will always sell his assets two to three years ahead of crises.”

This time, the crisis will surely hit sooner than that.  Why?  Values are already tumbling.  The sales price for Pacific Century Place, for instance, is thought to be 30% lower than last year’s asking price.

Now that Li is out of major China developments, others will probably take the hint. “Why would you buy anything when Li Ka-shing is selling?” asks Euromoney.  The magazine posed the question in connection with Li dumping assets in his home base, Hong Kong.  There, he has gone on another “de-risking” binge, with among other things, an initial public offering of Power Assets Holdings , a sale of a 24.95% interest in retailer AS Watson, and a disposal of a 60% stake in Terminal 8 West in the Kwai Tsing container port, all this year.  Li also tried to offload supermarket chain ParknShop last year, but the effort failed. 

In March, Li made it clear that just about everything was for sale in the next 12 months.  “We will not rule out the option,” he said.

It would be nice to think that Li, an octogenarian, is dumping assets at the end of an illustrious career so that his China sales say more about him than the state of the Mainland property market.  Yet Li is busy redeploying assets to Europe, indicating he is not exactly contemplating retirement.  And in some ways the Hong Kong disposals are an added indication of his bearishness because the city’s economy is so tightly bound to the rest of China these days.

That’s why Simon Black, an investor and entrepreneur, looks correct.  “Li wants out of China,” he writes.  “All of it.”  Superman’s sudden move out of Chinese property has been termed an “evacuation,” and it looks like he hopes to get out of the rest of his Chinese investments too.  Li, for instance, has been progressivelyselling his stock in ChangYuan Group, a Shanghai-listed electronics manufacturer based in Guangdong province.  When viewed in connection with his Mainland China and Hong Kong disposals, this move looks part of a relentless trend. 

The Chinese themselves see special significance in Superman’s sales.  Wang Shi, chairman of China Vanke , China’s largest home builder, says the sell-off of “the smart Mr. Li” is a warning.  Critic Luo Zhiyuan said the sales imply “the coming of a crisis.”

We should probably take our cue from the man called “the Warren Buffett of China.” After all, the Chinese Buffett has just about unloaded all his China assets.