Friday, October 4, 2013

Lui Family

Asian wealth: gambling on property

Asia’s changing fortunes

Since this note was published, Bloomberg has issued a correction and reinstated Li Ka-shing at number one. We have left this note unchanged as its discussion of the changing bases for Asian fortunes still stands. As, it seems, does its observation about the flimsiness of rich list rankings.

Who would have thought a trifling $100m could feel so significant? That is the gap between Li Ka-shing, just demoted to second place on Bloomberg Asia’s rich list, and Lui Che-woo, who is tops. Mr Li’s $29.5bn pile looks downright forlorn now that someone else has a bigger one. Mr Lui’s wealth flows from Galaxy Entertainment, his Macau casino operator. Mr Li’s fortune is spread around, but is firmly rooted in property, as are so many of the fortunes in the region. Does Mr Lui’s rise mean property is becoming less important?

That would be a shock to Hong Kong’s established order. Next to China’s giant state-owned enterprises and HSBC, the top of the Hang Seng index is still dotted with tycoons’ property empires and other ventures. Of the top five Asian fortunes, three – Mr Li, Lee Shau-kee and Cheng Yu-tung – owe much to Hong Kong’s periodical real estate booms. Mr Lee helped found Sun Hung Kai, thenHenderson Land. The two have a market capitalisation of $50bn. Mr Li’s Cheung Kong and Hutchison Whampoa dwarf that at $94bn. Much of Mr Cheng’s Chow Tai Fook empire is private: its eponymous jewellery group and New World Development are valued at $24bn.

Mr Lui’s leap up the list is the result of Galaxy’s position as one of six casino operators in Macau, where gambling revenues jumped a fifth last year to $45bn. A punt of $130 (HK$1,000 – now the minimum table bet) on Galaxy two years ago would have produced $603. For Mr Lui it formed the bulk of the $14.2bn he added to his fortune last year, just shy of the $14.4bn made by Sheldon Adelson, whose Sands casinos compete with Galaxy in Cotai, the territory’s gaming hub. But look carefully, and it was K Wah, Mr Lui’s property, hotels and building materials group, that won the casino licence in 2002. China’s gambling appetite might have created fortunes, but these are still founded on property bets.
Bloomberg’s rich index is calculated daily and reflects share price movements. It would take a fall of less than 1 per cent in Galaxy, all else being equal, to put Mr Li back at number one. Hopefully the patriarch of a gambling fortune can take that in his stride.

K. Wah Stones

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