Shareholders may reap windfall from Lau purchase It may sound too good to be true, but Chinese Estates Holdings chairman Joseph Lau Luen-hung is buying some of his company's assets, which means more profit for his shareholders. Lau is buying a portfolio of complicated equity linked notes and a couple of London properties from his property flagship that will generate a profit of HK$271.4 million, some of which he may give out as a special dividend. We are not sure if Chinese Estates shareholders were as amazed as we were to discover that the company actually owns a couple of credit-linked notes in Cathay Pacific Airways and Japan Airlines, along with high-interest notes in Barclays and Morgan Stanley. They were all acquired during the financial crisis - with the exception of the Cathay Pacific notes - and now sit on a profit of almost HK$100 million, according to the firm's estimation as of the end of last month. There was no word on how much Lau had to pay in total, but his largest purchase was a six-storey luxury terrace, 1,650-square metre house in Eaton Square, London. The firm bought the property in November 2003 after taking out a loan of HK$409.9 million, but the latest value was stated as HK$345 million. After a recent investment portfolio reassessment, Chinese Estates said the disposal had provided a good opportunity to cash out and offer additional funding to pursue other investment opportunities. Lau did a similar connected deal five years ago when he bought 11 properties and a Chinese art collection for HK$632 million. Included in the transaction were four detached houses on Barker Road for HK$382 million, at a then sky-high price of HK$28,000 per square foot. Given Barker Road is fetching some HK$50,000 per square foot now, it is safe to conclude that the deal five years ago was a gift, and of course you know who usually ends up holding the gift. Outsider still in the race A few weeks ago China Strategic Holdings was seen as an outsider in the bid to take over AIG's Taiwan life insurance business. But yesterday the tiny battery maker signed an agreement with Primus Financial, the venture run by former Citigroup Asia head Robert Morse, to provide up to HK$7.6 billion for buying at least 60 per cent of Nan Shan Life Insurance. It also made a conditional appointment of Morse as a vice-chairman if it succeeds in acquiring Taiwan's second-largest life insurer. China Strategic is one of three short-listed parties for the second round of the takeover. Taiwan's Cathay Financial Holding and a tie-up between the Caryle Group and Taiwan's Fubon Financial Holding are still in the race. The Fubon bid is said to be less than US$1.5 billion, according to a media report. Just two months ago, 10 Taiwanese and overseas firms indicated an interest in Nan Shan. They included Kohlberg Kravis Roberts, MBK Partners, Affinity Equity Partners, Bain Capital, Oaktree Capital Management and Chinatrust. Earlier this week, it was reported that China Strategic was backed by a group of tycoons, including Joseph Lau, New World Development chairman Cheng Yu-tung and Henderson Land Development chairman Lee Shau-kee. Property favoured asset Average middle-class Hongkongers have more than half their assets wrapped up in property. That was the finding of CLSA in its latest report, which showed that the city's middle class have increased their investment in real estate from 15 per cent of assets in 2007 to 51 per cent this year. 'With banks offering near-zero interest rates, Mr and Mrs Hong Kong want better places to park their money,' said Amar Gill, CLSA's head of thematic research. 'One area of demand will be larger flats for upgraders since 77 per cent of our sample live in units no larger than 800 square feet. This was backed up by CLSA's finding that 31 per cent of its respondents were planning to buy a property in the next 12 months. Stocks represented only 4 per cent of Hongkongers' investment portfolios. But if you are looking to increase your property exposure, Sun Hung Kai Properties and Midland Holdings may be the logical choices.