Li Ka-Shing Says `Worst Is Yet to Come' in Global Economy Slump
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By isabel rojo tiong in General Published: Saturday, 23 August 08 - 12:57 AM (GMT +08:00) Last Updated: Saturday, 23 August 08 - 02:29 AM (GMT +08:00) |
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Aug. 21 (Bloomberg) -- Hong Kong billionaire Li Ka-shing, who predicted China's stock market bubble would burst, says the ``worst is yet to come'' from the global credit crunch.
The crisis is turning Li ``very conservative about acquisitions,'' he told reporters in Hong Kong today while announcing the results of his companies Hutchison Whampoa Ltd. and Cheung Kong (Holdings) Ltd.
The U.S. housing slump has triggered more than $500 billion in credit-market losses for banks globally and led to the collapse and sale of Bear Stearns Cos., the fifth-largest U.S. securities firm. Li, Asia's richest man according to Forbes Magazine, controls companies that operate businesses including retail, real estate, container ports and energy in 57 countries.
``Mr. Li's views tend to be accurate,'' said Castor Pang, a strategist at Sun Hung Kai Securities Ltd. in Hong Kong. ``Looking ahead, signs of a U.S. economic slowdown will become even more obvious. Asia has a high correlation with the U.S., so market performances will likely get worse.''
Sometimes called ``superman'' by Hong Kong's media for his investing skill, Li arrived in Hong Kong from mainland China in 1940 and built his Cheung Kong (Holdings) Ltd. into Hong Kong's second-biggest developer by market value from a company he founded in 1950 to make plastic flowers.
Li's comments echo those of Kenneth Rogoff, former chief economist at the International Monetary Fund, who said ``the worst is yet to come in the U.S.''
Credit-market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, Rogoff, a Harvard University professor of economics, said in an interview in Singapore on Aug. 19.
`Needs to Shrink'
``The financial sector needs to shrink,'' Rogoff said. ``I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.''
Hong Kong will be shielded to some extent because of China's economic outlook, Li said.
Hong Kong's negative real interest rates are keeping the housing market stable and real estate ``has always been a big part of the economy here,'' Li said at today's briefing.
China, the world's fastest growing major economy, will see its economy continue to grow above 8 percent ``in the next few years,'' Li said.
China's CSI 300 Index is down 54 percent this year, the most among 88 major benchmark indexes tracked by Bloomberg, because of concern measures to cool inflation will damp both profit and economic growth.
`Must Be a Bubble'
Li, whose company invests in real estate and ports in China, said in May last year that China's stock valuations ``must be a bubble,'' and that prices were likely to decline.
The gauge surged 7.9 percent yesterday, the most in four months, after JPMorgan Chase & Co., in a report, said the government may spend as much as 400 billion yuan ($58 billion) to boost growth. Today, the benchmark slid 3.5 percent.
``Relying on government to support the stock market is not practical,'' said Li, who said he couldn't substantiate the accuracy of the report. ``Investors need to take their own risks.''
Hutchison Whampoa Ltd., his largest company, posted first half profit that beat analysts' estimates after narrowing losses on high-speed mobile-phone services and boosting port and energy earnings.
Profit dropped 63 percent to HK$10.7 billion ($1.4 Billion). The year-earlier profit was boosted by a HK$35.8 billion gain from selling a stake in an Indian wireless carrier. Cheung Kong's profit gained 60 percent to HK$6.68 billion, not including the contribution from unit Hutchison. more...
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