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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (6415)	9/14/1998 12:35:00 PM
From: Bosco	Read Replies (1) \| Respond to of 9980

G'day all - dear Ramsey, it is true that HK govt land sale [or is it really a lease like the old days?] is a major revenue. However, there are many facets to it. 1st, most [if not all] of the new land for sale is reclaim land. I guess one can see it as a form of taxation, but this is more like a consumption tax, if one has to put it in that category. It is true that the land is the foundation of housing units; however, the superlative civil engineering is not to be underestimated. The building tycoons would proceed to tear down a building of 20 years old even if they had to buy out the existing flat owners if they could build twice as many units. A few years ago, I read about the coco cola bottling plant in HK, it had some amazing lifts going straight up. While you are right that RE is a major asset base for HK, it doesn't mean it wasn't overvalued. There were indeed HK residents holding more than one unit [for personal unit] for rental as well as speculation purposes. The last time I was there, the unit next to my relative was vacant [apparently, the owner has emigrated to Canada.] Additionally, there was a lot of money parked in HK. One rumor is some corrupted officials from the mainland have used HK to dash their loot [this probably was more prevalent in the mid 90s before the takeover.] The upshot is that while there is still a huge demand for housing - especially by those who can't afford it, even now - there was also a speculative bubble. The govt units you mentioned are likely public housing conversion. This will only help the existing renters who have been in effect living in a rent-control environment. best, Bosco

To: Ramsey Su who wrote (6415)	9/14/1998 11:24:00 PM
From: Dayuhan	Read Replies (2) \| Respond to of 9980

<<Since RE and the stock market are the two biggest assets for the people of HK, some opined that the crash of these two categories is in essence a devaluation of the HK$.>> RE and the stock market are a huge source of paper wealth, but only for a small percentage of the population. Look at the reverberations of the decline in value, in one very small case: The friend I talked to just moved his business to a larger space, getting a long term lease at an attractive price. He saved enough to add new hardware and hire new employees - he's in advertising, primarily on the internet, and demand is sufficient to justify the addition. Who loses? The owner of the building. Who gains? My friend, the people he hired, the people who sold him the hardware, the clients to whom he can offer more attractive prices, etc., etc. Multiply this by thousands of small and medium service enterprises, and you get the point. The RE bubble was a fundamental (and as you point out, artificial) distortion that directed resources from active, productive, activity to passive collection (your comment in a later post about factories closing because it's more profitable to rent the space out is a classic example). While it helped a few, it imposed a huge burden on business. Anyone who shops in Asia knows that HK is no longer much of a bargain. Why? Primarily the huge cost of retail floor space, which is inevitably passed on to customers. Bursting the bubble will cause a lot of pain to a few that can afford it (having raked in huge profits over the last few years), but I think it will ultimately improve the business climate and generate earnings across a wider spectrum. Business deals in HK, as always, mean trade. Seems to me (from a pretty superficial look) that the manufacturing has largely moved to the mainland, but the deals are still done in HK. China moves a great deal in and a great deal out, and money is being made. I did talk briefly with a fellow selling telecommunications equipment into the mainland, and his news was entirely positive. I didn't do any kind of comprehensive research, but the town certainly didn't seem flat. Restaurants and nightspots were full, stores were hopping, life was going on, crisis or not. Steve