Tycoons damaging Hong Kong's credit culture
HOW creditworthy are Hong Kong's billionaire-tycoons?
Despite the glamour and prestige they project, the city's old money are dishing out one nasty surprise after another.
As bankers and investors wake up to the reality that they might never be made whole, the easy credit culture long afforded to the elite will inevitably come to an end.
New World Development Co's decision not to repay coupons on its perpetual notes was a rude awakening but it was by no means an outlier.
Emperor International Holdings Ltd, a fellow developer that sells luxury apartments, said it had HK$16.6bil (US$2.1bil) in bank borrowings that are either overdue or have breached loan covenants, which may result in immediate repayment requests.
Emperor is a household brand in Hong Kong.
The 82-year-old patriarch Albert Yeung started with a jewellery store in the late 1960s, selling Rolex and Omega watches.
But over the years, the 'king of clocks and watches' expanded into media and real estate. Emperor Entertainment, in particular, is closely associated with local culture. It manages a roster of canto-pop singers and actors such as Nicholas Tse.
Or consider Far East Consortium International Ltd, which went public more than half a century ago.
The builder, known for projects at the city's iconic old Kai Tak airport, has pan-Asia ambition.
It has joined forces with Chow Tai Fook – New World's parent – to develop a casino complex in Brisbane ahead of the 2032 Summer Olympics.
Just like New World, Far East is sowing confusion among its US$360mil perpetual note holders.
In its latest annual report released in late June, the company said it would no longer pay dividends.
Investors are now worried that it would follow its business partner's footsteps by not repaying coupons.
The builder's open market operations are equally alarming.
In the fiscal year ending March, it bought US$4mil principal amount of perpetuals but resold at a loss.
This is a sharp turn of events.
Last September, Far East won a concession from its investors, buying time to redeem debt.
The builder promised then that it would 'aim to initiate partial call' in the first quarter of 2025.
Its own trading activities suggest it has not done so. Until recently, the city's old money had it easy.
The name brand itself spelled investment grade.
As of last June, nearly 70% of New World's bank loans were unsecured.
In addition, local borrowers could issue bonds governed by English law.
By comparison, dollar notes from mainland developers, such as China Evergrande Group, had to follow New York law.
For issuers, this law might be more stringent in the event of consent solicitation, where a company asks to change the terms of its securities. But that leniency is running thin.
Granted, New World managed to eke out an US$11.2bil loan refinancing deal – perhaps because when it owes banks so much money, it owns them.
Others may not be so lucky. — Bloomberg
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. The views expressed here are the writer's own.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
2 minutes ago
- New Straits Times
Anwar arrives in Jakarta for two-day working visit to Indonesia
JAKARTA: Prime Minister Datuk Seri Anwar Ibrahim has arrived in Jakarta for a two-day working visit to Indonesia, which will include the 13th Annual Consultation with Indonesian President Prabowo Subianto. The aircraft carrying the prime minister touched down at Halim Perdanakusuma International Airport at 8pm local time, where he was received by Malaysian Ambassador to Indonesia, Datuk Mohamad Syed Husrin Tengku Hussin. Also present to welcome him were senior Indonesian government officials, including Foreign Minister Sugiono, Home Affairs Minister Tito Karnavian, and Jakarta Deputy Governor Rano Karno. During the visit, the prime minister is also scheduled to visit the Asean Secretariat in Jakarta at the invitation of Asean Secretary-General Dr Kao Kim Hourn. Anwar will deliver a policy speech on Asean in the context of Malaysia's Asean Chairmanship in 2025, underscoring the country's commitment to regional integration and community-building. In 2024, Indonesia ranked as Malaysia's sixth-largest global trading partner and second-largest within Asean. Bilateral trade grew by 4.5 per cent, rising from RM111.21 billion (US$24.39 billion) in 2023 to RM116.29 billion (US$25.5 billion) in 2024.
New Straits Times
2 minutes ago
- New Straits Times
Tesla enters deal with Samsung
SEOUL: Tesla chief executive officer Elon Musk said the United States automaker had signed a US$16.5 billion deal to source chips from Samsung Electronics. Samsung shares rose more than 4.0 per cent after the news. "Samsung's giant new Texas fab will be dedicated to making Tesla's next-generation AI6 chip. The strategic importance of this is hard to overstate," Musk said in a post on X yesterday. If he was referring to Samsung's upcoming plant in Taylor, Texas, the deal could revive the project that has faced delays amid Samsung's struggles to retain and win major customers. "Samsung agreed to allow Tesla to assist in maximising manufacturing efficiency. "This is a critical point, as I will walk the line personally to accelerate the pace of progress. The fab is located not far from my house." Samsung earlier announced the US$16.5 billion chip supply deal without naming the client, who it said requested confidentiality about the details of the deal, which will run through the end of 2033. Three sources briefed about the matter said Tesla was the customer for the deal. Samsung faces mounting pressure as it trails rivals such as TMSC and SK Hynix in the race to produce artificial intelligence chips. This lag has weighed heavily on its profits and share price. Samsung, the world's top memory chip maker, also makes logic chips designed by customers through its foundry business. Kiwoom Securities analyst Pak Yuak said the latest deal would help reduce losses at Samsung's foundry business, which he estimated exceeded US$3.63 billion in the first half of the year. The Samsung-Tesla deal may also be significant for South Korea, which is seeking US partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce potential US tariffs. Samsung is grappling to boost production yields of its latest two-nanometer technology, but the order is unlikely to involve the cutting-edge tech, said Lee Min-hee, an analyst at BNK Investment & Securities. It has lost market share to TSMC in contract manufacturing, underscoring technological challenges the firm faces in mastering advanced chip manufacturing to attract clients like Apple and Nvidia, analysts said.
The Star
32 minutes ago
- The Star
Multitude of positive factors entrench Malaysia's economy on growth trajectory
KUALA LUMPUR: Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour has expressed optimism that Malaysia's economy remains on a strong growth trajectory due to multiple factors, such as resilient domestic demand and encouraging exports of electrical and electronic (E&E) products, despite headwinds from impending tariffs. The central bank governor said today that among the combination of positive factors supporting the economy are the frontloading of exports in the first six months, robust tourism activity that could raise Malaysia's export prospects, low unemployment and rising wages. Moreover, he highlighted that about 85 per cent of Malaysia's exports go to markets other than the United States (US). While uncertainties remain, particularly surrounding the final shape and scale of the US tariffs, BNM's revised growth forecast of 4.0 per cent to 4.8 per cent has taken into account multiple scenarios, including potential trade disruptions. "We have accounted for a range of tariff scenarios, including both favourable and less unfavourable trade negotiations outcomes as well as pro-growth policies in major economies. "A diversified export structure will help contain the direct effect from the US, as around 85 per cent of exports are to non-US markets, and no single market accounts for more than 15 per cent of Malaysia's exports,' he told Bernama in an exclusive interview. Abdul Rasheed noted that Malaysia's exports are spread across a wide range of products, consisting of E&E (40 per cent), non-E&E manufacturing goods (46 per cent) and commodities (14 per cent). He said almost half of the demand for Malaysian exports comes from Advanced Asia (19.4 per cent) and ASEAN countries (29 per cent). Domestically, Abdul Rasheed highlighted that domestic demand drives more than 90 per cent of Malaysia's economic growth. "Consumption is still resilient despite the tariff announcement, it's still resilient because income is still growing. Wages are still on an increasing trend, he said. In terms of unemployment, Abdul Rashee said that the rate is at three per cent and is lower than before the Covid-19 pandemic. "People have jobs. These are things that will support the consumption,' he said, adding that the government's ongoing policy support measures remain in place and support the growth. On July 23, Prime Minister Datuk Seri Anwar Ibrahim announced a cost-of-living relief package, which includes a one-off RM100 SARA cash aid, a reduction in the RON95 fuel price, toll hike postponements, and an expanded Rahmah Madani Sales allocation. "This will also provide some kind of spending from the rakyat and drive our domestic consumption,' he added. Turning to investments, Abdul Rasheed said Malaysia recorded RM378 billion in approved investments last year, with over half coming from domestic sources. He said these are tied to long-term national development plans and are expected to sustain momentum through this year and into 2026. In terms of exports, which are likely to be moderate in the second half of 2025 (2H 2025) as tariffs take effect and global growth slows, BNM expects E&E exports to continue supporting growth. Abdul Rasheed said this is underpinned by resilient demand for E&E and emerging opportunities in the artificial intelligence-related segment. "So this is where I think the question comes on tariffs. Exports will definitely be affected; everything in the world will be affected. However, if you look at global trade numbers, they are still growing. "Despite the challenging global environment, exports remained supportive of growth in 1H 2025, helped by robust growth in E&E exports.' "Frontloading activities ahead of anticipated tariff increase contributed to stronger export performance in the second quarter of 2025, although this has tapered down particularly in June,' he said. Abdul Rasheed highlighted that inbound tourism was also expected to provide support for exports in 2H 2025, driven by higher flight connectivity, visa exemptions and promotional activities leading to Visit Malaysia 2026. He said international visitor arrivals into Malaysia were 16.9 million from January to May 2025, which is 20 per cent higher than the same period in 2024. - Bernama
