Chapter 54 2. The impact of the financial crisis on Hong Kong

●Thirty years of reform and opening up have been too successful. None of our mainland entrepreneurs have dealt with the real Great Depression. ●After experiencing the Great Depression, you must be conservative. This is the principle to deal with the Great Depression. ●Look at these people who have experienced the Great Depression, they obviously underestimated the Great Depression, and they were still too optimistic. ●They are too optimistic when they are very pessimistic, that's the difference. Due to the impact of the financial crisis, although these rich people in Hong Kong have also lost a lot recently, their conservative mentality is different from ours.Since the 30 years of reform and opening up have been so successful, none of our mainland entrepreneurs have experienced the real Great Depression, so they are blindly optimistic.

Let me take Hong Kong's "Four Heavenly Kings" as an example. Hong Kong's "Four Heavenly Kings" are all engaged in real estate. What is the biggest difference between these people and our mainland entrepreneurs?That is, our mainland entrepreneurs have not experienced the Great Depression, but they have all experienced depressions to varying degrees. I would like to explain it to you with a simple data, so that everyone can understand.Let me take the gearing ratio of our listed companies as an example. What is the gearing ratio?It is the percentage of debt divided by capital (equity).Entrepreneurs of our mainland listed companies only have personal hard struggles, lacking the baptism of the Great Depression, appearing radical and impetuous.The gearing ratio of our listed companies is between 100% and 300% on average, which is very high.The "Four Heavenly Kings", like our mainland entrepreneurs, also have a history of personal hard work.But one thing that is different from us entrepreneurs is that each of them has experienced many depressions.You see, what is the debt-to-equity ratio of the companies of the "Four Heavenly Kings" who have experienced the Great Depression?Let's guess?Moreover, the companies of Hong Kong's "Four Heavenly Kings" are all very large, hundreds of times the size of many of our listed companies.Moreover, the legal system in Hong Kong is relatively complete, the credit system is relatively sound, the legal system is good, and the credit system is good, so we should be able to borrow more money. Our listed companies are small in scale, the legal system is not perfect, and the credit system is not very good. , dare to borrow 100%-300%, so the "Four Heavenly Kings" should borrow more, right?

On the contrary, their gearing ratio is only 20%.Our listed companies are 100%-300%, why?Because our entrepreneurs have not experienced the Great Depression, they are impetuous. After experiencing the Great Depression, you must be conservative.According to my data, even if they borrow money and suddenly increase the debt ratio, they will repay the debt as soon as possible and lower it.Let me take Li Ka-shing’s acquisition of Hutchison Whampoa through Cheung Kong in 1978 as an example. Before the acquisition, Cheung Kong’s debt-equity ratio was 30%, but it suddenly increased to 90% in the year of the acquisition, but it dropped to below 20% in the following years.Why?They were afraid, afraid of the Great Depression, but the Great Depression finally came, so I wonder how Li Ka-shing actually dealt with this problem.

Li Ka-shing's handling of the Great Depression is worth learning from.We can see from some of his remarks that this man is quite cautious.In March 2008, Li Ka-shing said that he called on investors to do what they can due to the sharp drop in the mainland stock index. In May, he believed that it was impossible for our mainland property market to continue to make huge profits. Then in August, he pointed out that The U.S. real estate industry will continue to be downgraded, and its weakness will affect the whole world. In addition, global inflation and energy prices are high, which is very unfavorable to the economy.

In terms of practical actions, he immediately stopped all investments in Hutchison Whampoa in October 2008, and cashed out a large amount.Taking the investment in Shanghai as an example, in May 2008 he sold the outside of Century Commercial City at a price of 4.4 billion yuan. In June, he sold Yujing Mansion at a discount of 24%. In January 2009, he sold it at a price of 1 billion yuan. Shops on Shanghai Golden City Road.In addition, he has a lot of cash in his hands. Let's do the math, he has almost $22.1 billion in cash.Of the US$22.1 billion, about 70% is held in cash, and the other 30% is held in treasury bonds, so the amount of liquidity is very large.Why do you do this?Prepare for the Great Depression.

I just talked about the "Four Heavenly Kings", including Li Ka-shing, Lee Shau Kee, Brother Guo Bingxiang and Zheng Yutong. They are conservative enough, but such conservative people can make mistakes.For example, Comrade Li Zhaoji in the "Four Heavenly Kings" is known as the "Asian Stock God".This Asian stock god stumbled in the stock market in early September 2008. He said that he would not dare to make public predictions on the Hang Seng Index since then, because the predictions were all wrong, and he was very nervous.Moreover, during the financial crisis in the United States, the Lehman Brothers investment company went bankrupt, and Lee Shau Kee invested in it.And not only he was in it, I found that many people including Soros had invested in it, so many people were killed.

Lee Shau Kee's original words are as follows: Under the financial crisis, the stock market fluctuates and the market is turbulent. At present, I don't know how to predict the stock market.In addition, our gambling king is called Stanley Ho. He said that December 2008 was the most difficult time in Hong Kong, because all walks of life will do year-end settlements, that is, year-end settlements. I am afraid that there will be more bad news than good news.He expects it will take two to three years to recover.He said that because Hong Kong's business activities are relatively diversified, unlike Macau, which is all about gambling, he thinks that Macau will be hit harder.Look at these people who have experienced the Great Depression, they obviously underestimated the Great Depression, and they are still optimistic.But our mainland entrepreneurs are more optimistic. They are still too optimistic even when they are very pessimistic. This is the difference.