FT learns of billions lost by Hong Kong's largest developers

Shares in Hong Kong's four largest property developer families have fallen by more than a third over the past four years amid falling property prices and coronavirus restrictions. This is reported by the Financial Times (FT).

These companies are Lis of CK Asset, Kwoks of Sun Hung Kai Properties, Lees of Henderson Land and Chengs of New World Development. According to the FT, their shares have fallen on average by about 35% since April 2019, and their combined market value has fallen from approximately $132 billion to $86 billion by the end of March 2023. The fall in value occurred in New World and Henderson - by 62 and 40%, respectively.

The basic profit of developers against the backdrop of falling home sales and real estate prices (by 40 and 15%) also decreased. In Sun Hung Kai, in the six months to December 2022, it fell by 36%, in New World - by 14%. At Henderson Land, it's down 29% in all of last year.

Developers have also been hit hard by COVID restrictions in mainland China, where their combined revenue was $4.8 billion last year, down 40% from a year earlier. The figure is the lowest since 2019.

John Burns, Professor Emeritus of Politics and Public Administration at the University of Hong Kong, said Beijing's "marginalization of tycoons" from Beijing has hit Hong Kong's economy in addition to the property downturn and protests of 2019. Ho-fung Hung, professor of Chinese political economy at Johns Hopkins University, explained that the Chinese authorities are trying to reduce the political influence of big Hong Kong businessmen. For example, CK Asset Chairman Victor Li was stripped of his role on the standing committee of China's top political advisory body in March.

As homeownership remains out of reach for most Hong Kong residents, developers have been forced to build more housing, Burns added. “[Beijing] is basically telling them: we need your cooperation, we need your help. But you have to work with us on our political priorities,” he said.

Heron Lim, an economist at Moody's Analytics, noted that "Hong Kong developers did not see the debt risks that their mainland Chinese counterparts did." In his opinion, if the economy recovers, "Hong Kong firms can be in a good position."