Tuesday, November 26, 2013

The Peak of Hong Kong Property

Hong Kong’s Opus: a case of twisted loftiness?

When the smart money gets out of the market, who should be going in? That question will be on many real estate buyers’ minds when they consider the current state of the top end of the Hong Kong residential market. And lofty it is. As detailed in this SCMP article on Peak homes sold, a house on Barker Road in HK’s Peak district has just sold for $69 million. At 5,700 square feet, that works out to a whopping $12,000 per square foot. This latest deal follows on the back of another sale last week of a 6,800 square foot house on the same street that sold for $95 million, or $14,000 per square foot. This earlier deal represented the third most expensive home ever sold in Hong Kong.
This flurry of activity at the nose-bleed end of the the market is likely to encourage over ultra-premium property holders to sell. An apartment unit at the Frank Gehry-designed Opus could sell for over $60 million, or $11,000 per square foot, which would make it the most expensive flat in Hong Kong, and perhaps all of Asia.
These numbers are particularly extraordinary considering the restrictions that the Hong Kong government has been imposing to cool the wok-hot market. Mortgages are limited to 40% of appraised value, and transaction stamp duties for luxury dwellings range from 4.25% for primary residences to 8.5% for secondary residences. For the Opus apartment alone, the stamp duty would represent either $2.56 million or $5.12 million, depending upon first or second home status. Those additional costs alone would buy a palatial home in other most places in the world.
Buy or sell? When it comes to real estate, it’s always safer to follow the smart local money.

How to Get Rich – Literarily!

A money manager for the ages

Everything I needed to know about managing money I learned from... classic fiction? So asserts this thought-provoking article from the Wall Street Journal's Marketwatch column. Who are the suggested literary Midases and what do they espouse that could put you into the financial 1%?
Daniel Defoe (Robinson Crusoe), on having the appropriate emotional detachment and perspectives about money
Charles Dickens (Little Dorrit) and Anthony Trollope (The Way We Live Now), on avoiding bad investment decisions and fraudsters
George Eliot (Middlemarch) and Gustave Flaubert (Madame Bovary), on curtailing potential ruinous consumer credit
Charles Dickens (A Christmas Carol), on saving, not hoarding
Leo Tolstoy (Anna Karenina), on performing due diligence and knowing the value of assets.
Okay, these historical folks may not have been a Rothschild or Morgan, but they certainly knew a thing about how emotions and circumstances can impact many outcomes in life, including wealth accumulation. So one might characterize these books as a holistic approach towards asset management, one which also confers wisdom on loads of other things (not to mention dispensing hours of entertainment). Therefore, instead of heading down to your local private banker, perhaps give the local library a try. An added benefit awaits you - you won’t get charged a 2% front-end load.

Thursday, November 21, 2013

JP Morgan: No Thanks to $2 billion China Deal!

Spotlight too bright for JP Morgan these days

Okay, now the US SEC’s investigation into JP Morgan’s hiring of Chinese princelings to win deals is really starting to take a bite. As reported in this Wall Street Journal article and elsewhere, JPM has resigned from acting as a bookrunning lead manager for a $2 billion offering for China’s well-regarded China Everbright Bank. What?? An investment bank turn down a cherry piece of business in a strong market? NFW. Banks almost never walk away from such promises of money. Unless...

As it turns out, JPM had once hired Tang Xiaoning, son of the chairman of China Everbright Group, a state-backed conglomerate that owns China Everbright Bank as well as a brokerage and insurer. Might Mr. Tang have helped his then-employer win a deal that his Dad had a hand in awarding? No one is commenting for the record. However, relationships such as this are now casting a lengthening shadow for companies caught in the spotlight of regulatory scrutiny.

Tuesday, November 19, 2013

Biggest Church Begets Biggest Scandal

Senior pastor David Yonggi Cho accused of siphoning off millions in church funds; his camp denies the allegations

By Cho Yeon-hyun, religion correspondent
The HankyorehNov. 15, 2013


30 elders from Yoido Full Gospel Church, the world’s largest megachurch, held a press conference at the Korea Ecumenical Building in Seoul’s Jongno district on Nov. 14 to allege that senior pastor David Yonggi Cho and his family funneled off hundreds of billions of won from church donations.

Yoido Full Gospel Church (left) and senior pastor David Yonggi Cho
The sheer scale of the amounts alleged by the elders to have been misappropriated is beyond the imagination. The elders made public a report from an investigation into three alleged improprieties by Cho made by a special investigation committee and ethics committee formed within the church last year. This time around, the allegations came from members of a group called the Prayer Meeting for Correcting the Church, including elders Kim Dae-jin and Kim Seok-kyun.

First, they claim that Cho returned only 64.3 billion won (US$60.2 million) of the 163.3 billion won (US$152.9 million) he borrowed from the church while building the CCMM Building between 1992 and 1998, when he was chairman of the church‘s Mission Society. The remaining 99 billion won (US$92.7 million), they say, was never returned.

By the elders’ account, construction payments of 28.5 billion won (US$26.7 million) and 16.6 billion won (US$15.5 million) were made at the time to Next Media Corporation and Facility Management Korea, companies managed by Cho’s eldest son Hee-jun.

It is also being claimed that Cho’s third son Seung-jae’s International Club Management Group bought three floors of the building from the church for 29.5 billion won (US$27.6 million) and sold them back three years later for 37.2 billion won (US$34.8 million) - pocketing the difference of 7.7 billion won (US$7.2 million).

In addition to allegedly appropriating 34.2 billion won (US$32 million) in Kukmin Ilbo newspaper lifetime reader memberships from 50,000 people for stock investments, Cho Hee-jun was also accused by the elders of making off with a total of 240 billion won (US$224.7 million) in assets related to the church.

They also claimed that David Cho’s wife Kim Sung-hae, president of Hansei University, has yet to account for 10.5 billion won (US$9.8 million) paid by the church as support for Bethesda Christian University, an institution she runs in the US. The elders also view US real estate purchased by the university for around US$15 million as having been bought with church money.

In total, the elders are accusing the Chos of embezzling as much as US$500 million or more in church money.

Associates of David Yonggi Cho insisted he had “no connection with any direct exchanges of money.”

Kim Sung-hae’s camp said the details of the Bethesda Christian University situation would be brought to light by prosecutors, who are currently investigating, but added that the elders’ claims were “merely allegations, not facts, and not worth responding to each one.”

The most explosive part of the allegations is the sheer amount of money supposedly received by David Yonggi Cho. The elders claim he received a severance payment of 20 billion won (US$18.7 million) when he stepped down as head pastor in 2008 - and that even that was decided without their knowledge or any voting by major church decision-making bodies. They also said no information was available on the whereabouts of 12 billion won (US$11.2 million) a year paid between 2004 and 2008 - 60 billion won in total - for “special missionary expenses.”

The elders gave a yearly total of 100 billion to 120 billion won (US$93.6-112.3 million) in donations received by the church. This would mean the annual amount taken in by the headquarters dropped by almost half from about 200 billion won a year when Cho spun off the Jisungjun center in downtown Seoul around the time he handed over senior pastor duties to Lee Young-hoon in 2008. Nevertheless, it remains the largest amount received in donations by any religious body in South Korea.

The elders also claim that Cho continued controlling the church even after his “retirement” by making decisions as “governor” - to the point where his successor Lee had difficulty exercising his authority on appointments and finances.

One of the former elders at the press conference, Ha Sang-ok, previously admitted to taking part in giving 1.5 billion won (US$1.4 million) while collecting the book “Madame Butterfly in Paris” from a female vocalist in France named Jeong who anonymously wrote the account about an affair with Cho.

“A sect leader might violate the commandments and do as he wishes, but a pastor cannot do that,” Ha said. “Over the past 14 years, I have met with Rev. Cho many times to try to persuade him to repent and return to being a great pastor, but the corruption has continued. That‘s why I had no choice but to disclose it to the outside world.”

The elders also made public a statement allegedly made by Cho saying he would give Jeong 1.5 billion won in exchange for her making no future mention of their extramarital relationship, along with copies of receipts for the two transactions totaling 3 billion won.

The church’s public relations office said the claims were “a personal matter that the church has no comment on.”

Lee Won-gun, an elder who functions as Cho’s “chief of staff,” said Cho is “unconcerned with money, to the point where I’ve never once seen him talk about giving money or not giving money to somebody.”

“There will be a response from this side after looking at the elders’ claims,” Lee added.

Cho is currently on trial for alleged causing 15.7 billion won (US$14.7 million) in damages to the church by instructing it to buy 250,000 shares of his eldest son’s stocks at a rate four times market value.

During the press conference, a physical altercation occurred when a number of Cho’s supporters attempted to rush the platform at the press conference and accused the elders of “insulting” the pastor.

Monday, November 18, 2013

Blood Money

Prime Minister Wen Jiabao: “That’s my girl!”

When it comes to the New York Times’ and the US SEC’s investigation into JP Morgan’s relationships with China’s princelings (first blogged here in August 2013), the digging goes on. The emerging details are impressive, as set out in this New York Times updated article and, from last year, this New York Times chart of the Wen family and its dealings. The article focuses on Wen Ruchun (aka Lily Chang), daughter of ex-Prime Minister Wen Jiabao, her advisory firm Fullmark Consultants and the myriad business deals that she did with JP Morgan in the years leading to and around the 2008 global financial crisis. The names of individuals and entities directly involved (including China Railways Group, Ping An Insurance, the China Banking Regulatory Commission) is elite, and the likely sums that went around this network of influence peddling and pocket-lining is staggering. The full amount of money involved in the various schemes may never be publicly known.
As eye-popping as this one case in isolation may be (together with the fact that the Wen family made several billion dollars on their Ping An dealings alone), it sheds light on the fact that the hiring of princelings and other insiders by large banks and corporations has been “business as usual” for decades. Anyone claiming to be ignorant of this practice must have been doing business on Mars. In some respects, it’s not dissimilar to Lance Armstrong crying out that he doped because everyone else did. How could he be competitive otherwise? The differences between Lance and the banks are many, of course, not the least of which is that cycling’s practice was conducted behind a dark shroud of secrecy, rather than merely a thin veil.

Thursday, November 14, 2013

Maid for Murder

This Wall Street Journal article sheds light on a disturbing issue – maids in India being severely abused, and sometimes killed, by those who employ them. Particularly troubling is that much of the cases point to violence by employers who are professional women. The WSJ article details a specific case where the battered body of a maid from West Bengal was found shortly after the Diwali festival in the Delhi residential compound of a lawmaker and his dentist wife. Neither have been charged with murder, but the police consider the wife as the prime suspect. Another helper to the family, a young boy, testified of cruel, almost slavery-like conditions imposed on them by the professional couple.
In reference to the increasing cases of violent behavior by professional women, an aid worker activist explained, “For so many years women were suppressed. And suddenly women are becoming empowered. Women are working.” The activist added that for some women, when faced with the pressure to run a home (especially around demanding holidays like Diwali) and do the bidding of relatives as well as excel professionally, “it all culminates in anger. And then the violence starts.” When society combines repressive attitudes about gender with the inherent prejudices imbedded in a caste system, the results can be tragic.

Wednesday, November 13, 2013

Uptown Girl

One-upping Brad PItt and Leo DiCaprio

Zhang Xin, CEO of real estate firm SOHO China, is one of the wealthiest women in China and the world. Her net worth is estimated at $3.6 billion. By developing and managing some of Beijing’s landmark commercial properties, she has risen to be wealthier than Oprah Winfrey and, in a sweet twist of justice for anyone with a modicum of taste, Donald Trump.
Now, in a small way, she has one-upped Brad Pitt and Leo DiCaprio by outbidding them on a tony (pictured) Manhattan townhouse, paying $26 million. The New York pied-a-terre features a roof terrace with a custom-built hot tub, a wine cellar, English garden, and a fitness floor with a waterfall, swimming pool and sauna.
By her own telling, she started from humble beginnings, sleeping on factory floors until a teenager. She scraped up enough savings and savvy to be educated at Cambridge University in the UK. After graduation, she worked at Goldman Sachs before returning home to China to seek her real fortune. She’s someone who has seen what life can dish out and take away. As such, a little star power is hardly going to phase this extraordinary woman.

Monday, November 11, 2013

What Chinese citizens hope to see from Third Plenum

Two elephants in the room – political freedom and economic welfare

The below is a re-print of an article that appeared in the www.shanghaiist.com website. True to long-held notions about the Chinese population, economics trump political freedom as the leading aspiration. Nevertheless, it is inevitable that, as the country gains a certain base level of material comfort, political freedom’s importance will increasingly become the larger elephant in the room. 
The Third Plenum is currently underway, and the China Communist Party’s Central Committee is reportedly discussing major reforms from "development of a socialist market economy, democracy, cultural development, social harmony and ecological progress." Here's what Chinese citizens want to see according to a Global Times survey:

According to the poll, more than 63 percent of the respondents said they will pay close attention to the plenary session, while some 36 percent said they will pay no attention.

In the multiple-choice survey on what respondents hoped from the plenum, reforms on the social welfare and social security systems, income distribution system and anti-corruption mechanism led the votes.
    • Nearly 80 percent of those surveyed said they look forward to reforms in the social welfare and social security systems, while over half of the respondents also welcomed reforms on the income distribution and anti-corruption fronts.
    • In comparison, only about 33 percent of the respondents chose the political system as their desired area of reform.
    • It also suggested that respondents who were male, older or holding at least a bachelor's degree are more prone to calling for political reforms.
    • The result shows that while political reforms are aspired for by people mainly from the elite class, the majority of the public pay more attention to issues that are related to their livelihood, said Xu Yong, dean of the Research School of Politics at Central China Normal University.

Sunday, November 10, 2013

The Anti-Cinderella Story

The lie that $100,000 can buy

This story has appeared in multiple tabloids, and some parties have questioned its veracity. So this blogger does not stand by the facts of this account. However, the phenomenon is one that many people across Asia wonder about.
Time for a multiple choice Pop quiz time: Which segment of this story is the most absurd?
A. Chinese man divorces and sues wife in court over an “incredibly ugly” daughter who “horrified” him. He claims that the wife has had an affair. DNA test shows that he is wrong – it is his child.
B. Wife confesses, not to an affair, but having had $100,000 of cosmetic surgery in South Korea (before and after shots above) prior to knowing her husband and keeping the truth from him.
C. Court rules in favor of husband, awarding him $120,000 on the grounds of false pretenses.
D. All of the above. It's all tragic and loony at the same time. 
Given how widespread and extensive cosmetic surgery practice has gotten in Asia, it’s sadly no surprise that this has become a growing marital problem. Anecdotal stories of similar cases abound. Deception and superficiality have become a coupling that is too common in a region obsessed with getting ahead, or at least giving the appearance of it.

Friday, November 8, 2013

College Entrance Exam Day – Korea’s Holiest?

Praying to the Academic Gods

Thousands of families go into prayer. Airplane flight schedules are curtailed. Trading is delayed on the stock exchange. Military exercises are suspended, police security is tightened. In short, Korea holds its breath and goes into a hush. It’s college entrance exam day. It is perhaps the single most important day in a Korean’s life, since it can determine university options and therefore career and marriage prospects. Korea families are rabid about ensuring that students do as well as they can on this test. They spend almost $18 billion each year on private tutorial courses (called hagwon), by far the most education spending per capita of any country. School kids routinely stay up studying until 1 am only to wake up again at 6 am for years on end as they prepare for this fateful day. For those families who have to endure this pressure cooker existence, life can alternatingly feel like necessary ordeal or social insanity.
For decades, Koreans have complained bitterly about the rigidity of its education system. It seems absurd that so much of a person’s future should rest on the results of one arbitrary day. God forbid that a student should catch a cold or otherwise feel slightly off-kilter. It is a leading reason for the soaring teenage suicide rates in the country as well as the main motivation for families to want to emigrate to other, more flexible countries such as the US, Canada or Australia. However, old social structures die hard. Exams such as this are deeply imbedded in Korea’s Confucian past. Change is especially difficult when entrenched interests point to such hard work and discipline as key ingredients to Korea’s success over the years. 
Looking at the country from the outside, there is much that looks good about Korean society. It appears to be prosperous and family oriented, with a big middle class. However, from the inside, it can seem like a hyper-competitive, dogmatic existence. It’s a shame that so much of the burden of such a life should fall on emotionally fragile teenagers. The costs, though not always immediately apparent, are no doubt high.

Thursday, November 7, 2013

Poaching the Ivory Poachers

Nothing but heinousness comes of this brutality.

No, this blogger is not advocating committing murder. But the practice of poaching ivory from elephants needs to be exterminated. Now. This Shanghaiist article reports that 1.9 tons of illegally sourced elephant tusks have been found in the Tanzania home of three Chinese men. The culprits made lame excuses for the existence of the stash. The trio claimed that the tusks were being held for a friend. They asserted that they were simply small business people involved in the garlic trade, of all things (the tusks were hid among mounds of the pungent root). They were less sure-footed in explaining why they had tried to offer a bribe of $19,000 to the authorities to let things slide, or why they had dual license plates for their specially converted minibus.
As the tide of wealthy Chinese continues grow, one can only hope fervently that a consciousness of the heinous global rare wildlife trade (e.g. elephants, shark fins, bears, tigers) influences their consumption patterns. Paying large sums for rare gemstones, grape wine or fine cloth hardly has the same moral and environmental consequences as permanently killing off species that are both vital and magnificent to behold. 

Sunday, November 3, 2013

Asia Getting a Legatum Up

The Legatum Institute has just released its 2013 Prosperity Index. The Legatum Institute is a London-based independent non-partisan public policy organization. Its annual Prosperity Index attempts to define “prosperity” beyond just dollars and cents. Instead, its secret formula takes account of several social virtues - Economy; Education; Entrepreneurship & Opportunity; Governance; Health; Personal Freedom; Safety & Security; and Social Capital.
This year, the Institute took a five year view to chart how the Economy sub-rankings in the Index changed from 2009 to 2013 (above). The results? Serious downgrades for the US (from 12th to 24th) and many other European nations. Hong Kong also got roundhouse kicked on the chin, falling from 11th to 18th. Singapore slipped a touch, from a lofty 2nd to a still-lofty 3rd. All other Asian countries rose commendably, led by China’s improvement from a lowly 34th place to 7th. 
When the other criteria were factored into the index, Asian countries did not rank so well. Singapore led the region at #18, followed by Hong Kong at #19. The top ten nations consisted of Northern European countries, Canada and Australia / New Zealand.
Hopefully, as Asian countries mature enough to be able to begin to ask about the true meaning of life, they too will begin to break in soon into the top ten pack.
More details: Four Major Changes in Global Prosperity - Harvard Business Review