Asian smart money selling property assets

I hate calling property market tops. But this time, it really seems to be it.

[…] ”follow the smart money”. By this I mean that you should study what businessmen and investors with long, successful track records are doing with their money. And possibly invest alongside of them. Unlike most investors who feel they have to chase returns to get rich, these people are already wealthy and can pick and choose which asset classes to invest in. Given this freedom, they are often attracted to assets which offer value relative to other assets. It pays to know what these people are buying and selling.

Which brings me to an important development in Asia this year. It’s become clear that many real estate investors in Hong Kong and Singapore are cashing out of property. These investors are among Asia’s wealthiest and they’re starting to exit their favourite asset. If this implies that property in Hong Kong and Singapore is close to peaking, as I suspect it does, then it has negative implications for the economies and stock markets of both cities. On a longer time horizon though, a re-balancing away from property as the primary driver of wealth generation could well prove beneficial.

I’ve been hearing a lot of anecdotes about insiders selling out of real estate, especially in Hong Kong. So an article in The Wall Street Journal this week entitled “Big players cash out of Hong Kong property” naturally caught my eye.


Wealth Tax: Back to Mesopotamia [2011 paper by BCG]

An old paper prepared by Boston Consulting Group back in 2011, warning that when all other avenues for resolving (or rather, just kicking the can down the road) the US-European debt crisis have been exhausted (austerity, pump priming for growth, debt restructuring, ZIRP, QE, inflation), authorities shall have no choice but to resort to the age-old solution: a large one-off Wealth Tax.

First, the preamble from the old 2011 ZH post:

As the following absolutely must read report, which comes not from some trader of dubious credibility interviewed by BBC, nor even from an impassioned executive from a doomed Italian bank, but from consultancy powerhouse Boston Consulting Group confirms, the “muddle through” is dead. And now it is time to face the facts. What facts? The facts which state that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the sustainable threshold by the definition of “stable” debt to GDP of 180%. The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed’s relentless pursuit of inflating our way out this insurmountable debt load have been for nothing. The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world’s financial asset holders: the middle-and upper-class, which, if BCG is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path. But not before the biggest episode of “transitory” pain, misery and suffering in the history of mankind. Good luck, politicians and holders of financial assets, you will need it because after Denial comes Anger, and only long after does Acceptance finally arrive.

And as BCG predicted then, and as we have seen played out over the last 3 years of the Eurozone lurching from one crisis to the next on what is basically the same unresolved debt problem, all other alternatives have since been exhausted:

We believe that some politicians and central banks – in spite of protestations to the contrary – have been trying to solve the crisis by creating sizable inflation, largely because the alternatives are either not attractive or not feasible:

  • Austerity – essentially saving and paying back – is probably a recipe for a long, deep recession and social unrest
  • Higher growth is unachievable because of unfavorable demographic change and an inherent lack of competitiveness in some countries
  • Debt restructuring is out of reach because the banking sectors are not strong enough to absorb losses
  • Financial repression (holding interest rates below nominal GDP growth for many years) would be difficult to implement in a low-growth and low-inflation environment

Inflation will be the preferred option – in spite of the potential for social unrest and the difficult consequences for middle-class savers should it really take hold. However, boosting inflation has not worked so far because of the pressure to deleverage and because of the low demand for new credit. Moreover the inflation “solution” while becoming more tempting, may come to be seen as having economic and social implications that are too unpalatable. So what might the politicians and central banks do?

Since the publication of Stop Kicking The Can Down The Road, a number of readers have asked us what would happen if governments persisted in playing for time. To what measures might they have to resort? In this paper, we describe what might need to happen if the politicians muddle through for too much longer.

It is likely that wiping out the debt overhang will be at the heart of any solution. Such a course of action would not be new. In ancient Mesopotamia, debt was commonplace; individual debts were recorded on clay tablets. Periodically, upon the ascendancy of a new monarch, debts would be forgiven: in other news, the slate would be wiped clean. The challenge facing today’s politicians is how clean to wipe the slates. In considering some of the potential measures likely to be required, the reader may be struck by the essential problem facing politicians: there may be only painful ways out of the crisis.

And the amount needed to tax from the assets of the wealthy? Roughly 30%.

Wealth Tax_30percent

Think that number wouldn’t be too far off from what is happening in Cyprus right now. And Cyprus may be just the first little example of what may soon be happening across many other countries and jurisdictions.


How to pitch, how to live

Great pitch to a panel of VC investors:

And an even more admirable approach towards living:

After a grueling day of telling other people what to do, Henry enjoys recovering with a glass of red wine and a foot massage, while watching Star Trek in his home theater. He is a firm believer in enjoying each day, and pursuing passions now rather than later. After all, if aliens blow up the Earth tonight, what was the point of sacrificing everything for tomorrow?

The magic of 1994: 願 Wish

The lightest touch of melancholy and regret flicked gently across the heart tonight, and I am reminded of this song…

From 1994, a standout year in the late teen/young adult years. A year memorable also for many outstanding Hong Kong films, when the city’s film industry was probably right at its apex in terms of the popularity, reach, influence (pan-Asia, probably even across the globe: think Quentin T) and box office results of both its commercial offerings as well as its more thespian, cinematic art-house films.

But while 1994 witnessed a host of big commercial movies and widely anticipated art films which cemented or rather, gilded the reputations and careers of many big name directors, actors/actresses, cinematographers…a little movie slipped past almost unnoticed, helmed by a then yet to be considered first-tier director, who casted fresh faces for his movie, and which actually earned a restricted rating from the censors for its ribald themes and scenes. The movie went on to become a sleeper hit and launched the careers of several of its young actors.

But for me, the movie was most notable for its theme song and music video, starting and ending with a group of friends saying their goodbyes around a grave in a white cemetery, while the deceased friend and ghost in question is perched on a nearby tomb, looking on his own funeral, a very young and fresh-faced Jordan Chan.
[the different yet same white flowers and petals offerings reflect the different personalities and characters of each friend, the film is about young Individualism after all. yet in the end, everyone and everything is the same]

From the 1994 film, 晚九朝五 Twenty something, the song 願 Wish sung by Sandy Lam.

願 林憶蓮 Yuan – Sandy Lam (電影『晚九朝五』主題曲 )

Can’t seem to find the original full music video. But here is the amazing Sandy Lam singing the full version live.


[And yes. That lady was in Chungking Express too.]

Oil palm crushed

When the local stock index is making new record highs but your portfolio of local stocks is not (last high watermark was woefully back in Feb 2012), you can be sure there must be a few lagging stocks in there.

Norway drops Asian palm oil firms in show of green credentials

* Fund sells out of 23 Asian firms to slow deforestation

* Environmentalists welcome shift, urge more action

By Joachim Dagenborg and Alister Doyle

OSLO, March 8 (Reuters) – Norway’s $710 billion sovereign wealth fund has pulled out of 23 Asian palm oil companies after accusing them of causing deforestation, winning praise from environmentalists.

It said it sold stakes in the firms after a review of companies that have cleared forests for palm oil plantations in Malaysia and Indonesia. Palm oil is used in many foods and consumer goods such as soaps, lipstick and peanut butter.

The fund is one of the world’s biggest investors, underpinned by Norway’s oil and gas assets. Last year it expanded its investment guidelines to include deforestation as a threat to future growth.

Stakes in firms including Wilmar, KL Kepong and Golden Agri-Resources Ltd were sold during 2012, according to the fund’s annual report released on Friday.

Of these, the biggest holding had been in Singapore-listed Wilmar, worth 382 million crowns ($67.29 million).

“In the first quarter of 2012 we sold our stakes in 23 companies that by our reckoning produced palm oil unsustainably,” the fund said, without naming any firms.

Norway has given more than any other developed nation to help slow deforestation, partly as a way to avert climate change. Indonesia is home to the world’s third-largest expanse of tropical forests and is the top prodicer of palm oil. Malaysia is the world’s second largest producer.

The companies deny that they are a threat to forests.

Golden Agri’s website, for instance, says: “we aim to be the leader in sustainable palm oil production.” Wilmar and KL Kepong similarly say that they support best practices and standards to protect the environment.


The Rainforest Foundation environmental group has long accused Norway of double standards by investing billions of dollars in palm oil or soya farmers while also giving cash to nations from Brazil to Indonesia to slow deforestation.

“We are very happy with this development in the palm oil sector,” said Nils Hermann Ranum, of Norway’s branch of the Foundation.

Still, he said that Norway should do more to pull out of other sectors that cause deforestation, such as logging companies, oil and gas firms, soya and meat producers.

By the Foundation’s estimates, Norway had investments totalling $13.2 billion in companies damaging rainforests at the end of 2012, against $14.4 billion a year earlier. “They need a more coherent policy,” he said.

Norway has programmes to slow deforestation worth $1 billion each for Brazil and Indonesia, as well as smaller projects in nations from Guyana to Tanzania.

Many companies, including Anglo-Dutch consumer group Unilever Plc and Swiss food group Nestle, have cracked down on palm oil suppliers in recent years because of worries about deforestation.

Deforestation accounts for up to about a fifth of greenhouse gases from human sources. Forests soak up carbon dioxide as they grow and release it when they burn or rot.

Yngve Slyngstad, head of Norway’s fund, told Reuters that Oslo was trying to invest more in palm oil producers whose policies did not damage forests that are home to endangered animals such as orang-utans and absorb greenhouse gases.

“We have sold many of the small companies and concentrated investment in larger companies who often have a better practice,” he said.

Among palm oil firms, the fund more than quadrupled its holdings in Malaysia’s Sime Darby to a value of 688.8 million crowns at the end of 2012 from 150.7 million crowns a year earlier.

Palm oil stocks pressed and crushed by the double whammy of declining CPO prices as well as a large shareholder suddenly possessed by a righteous sense of Sustainability.

Oh well, it could had been worse. I could be holding oil seeds and olam and faced with short-selling activists hell-bent on muddying the waters. Consoling myself now with clipping the coupons/cashing in the dividend checks of the retail reits which somehow and fortuitously ended up in the portfolio. In this current near-ZIRP environment here there and everywhere, high single-digit yields seem so princely…

But one man’s misery may be another man’s opportunity. I wonder if a friend involved in carbon sequestration and other CDM projects may be seeing more opportunities, despite the collapse in CER prices (courtesy of Obama and his successful burying of the Kyoto Protocol at Copenhagen in 2009) a little while back. This is one aspect of the plantation industry I have always been interested in, probably for familial and ancestry reasons.