Stocks a better bet than homes, says Lee

PUBLISHED : Wednesday, 06 June, 2012, 12:00am
UPDATED : Wednesday, 06 June, 2012, 12:00am

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Henderson Land Development chairman Lee Shau-kee says investing in stocks in Hong Kong is more profitable than investing in property.

Lee, speaking after the 150th anniversary ceremony of Hong Kong and China Gas, which is controlled by Henderson Land, said home prices were unlikely to see a big rise as land supply is expected to increase. Supply of non-luxury housing will increase substantially and, as a result, prices are unlikely to rise much.

Many property stocks are trading at a discount of as much as 60 per cent as investors grow cautious about the economic outlook amid uncertainties over the euro debt crisis.

'For example, a stock's asset value is worth HK$100, but when it is trading on the stock exchange, its trading price is just HK$40,' said Lee.

Because of the big discount, Lee reckons property stocks will see huge growth potential.

He cited an example: 'If your boyfriend gives you HK$10 million and you use it to purchase stocks, the value of the stocks will probably jump to HK$20 million in three years provided that the stock market goes back to its usual situation.'

But if the HK$10 million is used to invest in properties, 'you may get an amount slightly above HK$10 million,' said Lee.

Having said that, Lee said that the stock market in the short term was very risky. 'I neither buy nor sell at the moment,' he said.

Commenting on Hong Kong and China Gas' performance, Lee said the distributor of heating and cooking gas had performed well.

Hong Kong and China Gas managing director Alfred Chan also said the company would continue to invest in mainland cities as part of the group's expansion plans.

He said the company was in talks to buy up to eight new energy projects, costing more than HK$3 billion, which is part of the company's HK$10 billion three-year investment plan through 2013. Out of that investment, 70 per cent will be related to new energy businesses, including the supply of methanol and other so-called clean fuels.

Meanwhile, Bank of America Merrill Lynch has revised up its annual forecast for local home prices to between 5 and 10 per cent growth from negative 10 per cent this year and expects prices to stay flat in the second half.

Raymond Ngai, the investment bank's head of greater China property research, said the adjustment had been made because mortgage rates had unexpectedly dropped to 2.2 per cent from 2.5 per cent.

The slow pace of land supply this year, which can only yield about 5,000 units from sites offered by the government in the first two quarters, as well as the release of pent-up demand also drove home prices up by 7 to 8 per cent in the year to date.

'Further price increases will be capped by more government land sales and more new launches by the developers, and potential policy tightening,' said Ngai, who estimated flat prices would increase by no more than 5 per cent in 2013.

$10b

The amount (in HK dollars) Hong Kong and China Gas plans to spend on new energy projects this year and in 2013