A real ‘win-win’ in action

So what’s been going on in my absence? On the financial front, I notice that Swire Pacific, the biggest single holding in my equities portfolio, fell some 18% suddenly last week. At the same time, the conglomerate spun off part of its Swire Properties real-estate business in a separate listing (with the rather retro-sounding trading code of 1972 – the date the unit was founded, I think).

To hear all the waffling among analysts beforehand, Swire Pacific was to be reduced to a hollowed-out shell retaining a mishmash of undesirable aviation, distribution and shipping assets, while the subsidiary landlord would be where all the action is. As it turns out, the valuation of the Swire Properties shares that have recently materialized in my portfolio accounts for the 18% drop almost perfectly. This is what you would expect, but it also raises the question: why bother? The holding company is somewhat diluted as a property play, but on balance I don’t see an iota of extra (or reduced) value for shareholders. I guess we’re supposed to wait years for exciting results.

In fairness, the big Swire bosses look very pleased with themselves having added a fourth counter to their existing line-up of Swire Pac, Cathay Pacific and HAECO to the Hong Kong stock market. Maybe that was the point, in which case how can we not share in their joy, and indeed thank them for brightening up our lives during these gloomy times?

As a landlord, Swire benefits from the ongoing influx of Mainland tourists in Hong Kong. This same influx, of course, imposes a variety of unpleasant and damaging costs on the rest of the city’s population and economy. From my point of view, this may seem Panglossian, serendipitous kismet – but it is all part of a carefully designed plan: if the invasion of Mainland ‘locusts’ continues, I earn higher dividends; if an outbreak of SARS or something drives them away, I have a nicer town to live in. The Big Lychee’s government constantly blathers about ‘win-win’ situations, but this is the real thing.

While I was away, the Hong Kong-Mainland cultural clash – at least partly rooted in pressure on housing, hospitals, rents and babies’ milk powder – grew in intensity. The Great Dolce & Gabbana Siege of 2012 was followed by the now-infamous YouTube video of Mainland scum dribbling noodles all over the floor of our pristine MTR trains, leaving noble Hongkongers with no choice but to push the emergency button to bring the full wrath of mass-transit justice upon the messy peasant invaders. Peking University’s embarrassing Professor Kong Qingdong accused Hong Kong people of being running dogs of British colonialism, and the next thing we know, the culture war is world news. The Cantonese ‘bastards, dogs and cheats’ are now launching ‘anti-locust’ websites.

Yesterday’s South China Morning Post pleaded for moderation, and its business columnist wrote a defence of Mainland shoppers’ importance to our economy that curiously played down the negative impacts of the large-scale influx of tourists on those of us who are not landlords or owners thereof. It is not beyond the realms of possibility that Hong Kong officials – wisely keeping their heads down publicly in all of this – are calling editors and begging for some badly needed harmony to help calm things down.

Meanwhile chatterers are wondering how much Professor Kong’s views reflect those of Beijing. His outburst was on an obscure Internet broadcast, but it gained sufficient attention to get it pulled by censors had it been referring to, say, Tibetans or Uighurs. You can get away with insulting Japanese or Westerners this way online, however, which would imply that Beijing deep down sees Hongkongers on a par with foreigners. Then again, you can also smear other fellow Chinese or Taiwanese in this manner, provided they do not enjoy government favour.

It would be nice to think that the latest Ngong Ping 360 Death Ride disaster would keep tourist numbers down, but I fear it will take far more than that. I can’t see anti-tourist Facebook pages helping, either. I bought my Swire shares back during the SARS crisis, when airlines were grounded and malls deserted, and they were going for a fraction of today’s price. Taking subsequent dividends into consideration, I pretty got them for free, which is why I can be even more philosophical about their and Swire Properties’ current fate as Hong Kong ponders the Mainland Mass-Tourism Menace. It would take another earth-shattering outbreak of deadly pestilence or an equally cataclysmic crash of the Chinese economy to bring the share price/visitor numbers down. More’s the pity. When do we start seeing Swire Properties dividends?

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9 Responses to A real ‘win-win’ in action

  1. Allen Pinsent says:

    Speaking of the SCMP, there have been a very large number of opinion pieces by pro-Beijing Hong Kong and Chinese officials recently. Is it just me? No doubt part of their plan to get all of HK (including residing expats) on side.

    Did you know that the Chinese government run propagandist TV ads on the Chinese-language networks (i.e. TVB and ATV) every day (6 on ATV and 6:30 on TVB) before the news? I had no idea until a while ago. These ads hark back to era of Mao and the Little Red Book – you’ll be surprised.

  2. Walter De Havilland says:

    This ‘anti-locust’ thing is a bit like the pot calling the kettle black. The locals only learned to line up for the MTR a few years ago, meanwhile I still see locals regularly eating on the MTR, yelling into their mobiles like the possessed and spitting in public places. Moreover, the locals can claim no high ground when they tolerate a harbour full of shit and air that you chew. Lastly, I generally find Mainlanders more polite than their Hong Kong counterparts and in Beijing the English is much better.

    Some Hong Kong people are truly confused and biting the hand that feeds them.

  3. Probably says:

    Hemmers,
    A little bit of a rose tinted view of Swire A shares I feel.
    In the last 12 months their value has fallen 32% and the volume of shares offered in the new 1972 listing reflect only around 12.5% (at launch) of the value of Swire A back at the end of last year when all became apparent to the markets.
    As an (albeit minor) Swire shareholder myself I certainly am under the impression that I have “lost out” by this launch.

  4. Watcher says:

    You ain’t seen nothin’ yet. The CE of Swire Properties is a maniac. It’s well within his capability to undo within a couple of years all the good his predecessor (Keith Kerr) did over 20 years. Sell! Sell! Sell!

  5. The Man in Black says:

    @Walter De Havilland

    The “Locust” term referring to Mainlanders has nothing to do with manners yes or no, but with the heavy influx of Mainland pregnant women, without both parents having any ties to Hong Kong, nor speaking Cantonese, yet still receiving HKID for their kids straining the healthcare here beyond belief. Add this with the property buying Mainlanders (properties which stay vacant) hence the term “locust” is born. I don’t think anybody has something against the extra tourist dollar Mainland Chinese bring to HK.

    The anti-mainland vibe you get from D&G protests, street graffiti on simplified Chinese signs, and the recent outrage with the MTR incident,… is local peoples way of venting for the government unwillingness to tackle these problems. After all do not forget people here do not have any vote or say into policy-making at all!

  6. Walter De Havilland says:

    @The Man in Black says

    I’m afraid I must partially disagree with you. It is about manners, conduct and behaviour but of course obviously the fact that the mainlanders are tying up resources is also a big issue. As someone who has worked in a major local hospital I am fully aware of these issues.

  7. Danno McSpoon says:

    I was in Hong Kong this week having dinner in a nice restaurant, only to be unfortunate enough to be seated next to two mid-career bankers. I was unable to avoid overhearing a dreary conversation about fast cars. The man sitting next to my side related how one of his friends crashed his luxury car into the luxury car of a mainland Chinese. To set the scene of the encounter that followed described the Chinese as “Mainland scum”. (For the rest of the story, the guy whose car was wrecked didn’t do anything particularly scummy!)

    The phrase stuck in my mind, and I was somewhat shocked to see it used here. Has it become a standard term in the expat community to refer to those over the border? I do hope not. I suppose for the simple reason that pejoratives that denigrate people so harshly due to where their from don’t seem appropriate in the modern world.

  8. Rinky Dinky Marxy Sparksy says:

    You can tell men are old when they discuss money instead of women at the dinner table (or in their blogs).

    The history of the world is a struggle between classes, not a struggle of cultures.

    The end of the world will be a product of the crisis of capitalism.

    So start talking about girls and we may be saved. Temporarily.

  9. Walter Wong says:

    Rinky Dinky,

    Guess you never spent any time with successful Chinese under the age of forty. Money first, sex second, all the time, every time.

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