Saturday, May 3, 2014

The richest man in Asia is selling everything in China

From Sovereign Man

April 16, 2014
Sovereign Valley Farm, Chile
Here’s a guy you want to bet on– Li Ka-Shing.
Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor.
Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it.
Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago.
Once the deal concludes, Li will no longer have any major property investments in mainland China.
This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?
Simple. China’s credit crunch.
After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to reign in credit growth.
The shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.
Historically, growth rates of these proportions have nearly always been followed by severe financial crises. And Chinese leaders are doing their best to engineer a ‘soft landing’.
If they’re successful, the world will only see major drops in global growth, stocks, property, and commodity prices.
If they fail, the spillover could become pandemic.
This isn’t important just for Asian property tycoons like Li Ka-Shing. Even if you don’t know Guangzhou from Hangzhou from Quanzhou, there are implications for the entire world.
Here in Chile is a great example.
Chile is among the top copper producers worldwide, China among its top consumers. With a major slowdown in China, however, copper prices have dropped considerably.
Consequently, the Chilean economy has slowed. The peso is down nearly 10% against the US dollar in recent months, and the central bank is slashing rates trying to prop up growth.
There are similar situations playing out across the globe.
Not to mention, China could put the entire global financial system on its back just by dumping a portion of its Treasuries in order to defend the yuan.
Now, you’d think that a major credit crunch with far-reaching consequences in the world’s second largest economy, its largest manufacturer, and its largest holder of US dollar reserves, would be constant front-page news.
But it’s not.
Most traditional investors are unaware that what’s happening in China will likely have far greater implications to their investment portfolios than the policies of Janet Yellen and Barack Obama combined. At least for now.
And folks who don’t see this coming and keep buying at the all-time high may see their portfolios turned upside down. Quickly.
At the same time, some investors who are conservative and cashed up may realize a real ‘blood in the streets’ moment.
Again, using Chile as an example, I’m starting to see over-leveraged property owners coming to the market in droves ready to make a deal. This is great news because my shareholders and I are able to buy far more property with US dollars than we could even just six months ago.
I expect this trend to hold given that China is just at the beginning of its process.
It’s said that the Chinese word for “crisis” is a combination of “danger” and “opportunity”.
This isn’t entirely accurate. ‘Weiji’ can have several meanings, but is probably best translated as ‘dangerous’ and ‘crucial point’.
We may certainly be at that crucial point, and now might be a good time to take another look at your finances and consider selling before a major crash. The richest man in Asia certainly thinks so.

My comments
Recently, a friend of mine asked my what am I doing with my money I told him I still have some portion of my money in stock market that I invested after 2013 general election and hanging on to it until today, even though many of them had gone up substantially. I certainly did not add any more positions after that. A big substantial of them are in cash. I know I am not smart enough to time the market. I also know that I am not fast enough to act ahead of the crowd.
A case in point will be one day crash on hot stocks which I don't think most of the time people had enough time to cash out in time.
The trouble with fundamental guys are they are always wrong on the timing, sometimes they are too early. In some cases, 2 - 3 years too early. In Lee Ka Shing case, I am not too sure whether he is right but the fear that he has could be too early too.They have an edge because they stick to their consistent calls until the days of blood of the street come.
I was surprised that a value investor like Jeremy Grantham though is aware of the stock market is overvalued by 65% and bull run is over and getting into overtime but yet he thinks it still has about 1 - 2 years to go. That 's scary.
I realize that most of the people are quite late to the party already. Yes, they are a little bit scared but greed will eventually overwrite fear and ultimately ended up with tears.

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