Property investors shift to Southeast Asia amid Hong Kong unrest

Property investors shift to Southeast Asia amid Hong Kong unrest
Property stocks in Hong Kong have plummeted since June, with developers being forced to offer discounts on new projects and cutting office rents. (Reuters)
Updated 14 October 2019

Property investors shift to Southeast Asia amid Hong Kong unrest

Property investors shift to Southeast Asia amid Hong Kong unrest
  • The summer of rage in Hong Kong has been fueled by years of simmering anger toward Beijing

KUALA LUMPUR: From luxury Singapore apartments to Malaysian seafront condos, Hong Kong investors are shifting cash into Southeast Asian property, demoralized by increasingly violent protests as well as the China-US trade war.

Millions have taken to the streets during four months of pro-democracy demonstrations in the southern Chinese city, hammering tourism while also forcing businesses to lay off staff — and the property sector is feeling the pain.

Property stocks in one of the world’s most expensive housing markets have plummeted since June, with developers being forced to offer discounts on new projects and cutting office rents.

Hong Kong businessman Peter Ng bought a condominium on the Malaysian island of Penang — which has a substantial ethnic Chinese population and is popular among Hong Kongers — after the protests erupted.

“The instability was a catalyst for me,” the 48-year-old stock market and property investor told AFP, adding he was worried about long-term damage to the Hong Kong economy if the unrest persists. “Investors will always look at things like that, political stability.”

And Derek Lee, a Hong Kong businessman who owns a Penang apartment, said he knew others in the semi-autonomous city who were considering investing in Southeast Asian property because of the unrest.

“People are thinking about how to quicken their ideas, how to make a more stable life,” the 55-year-old told AFP.

Adding to the allure of Malaysia is its relative affordability and prices much lower than Hong Kong.

The Malaysia site of Southeast Asian real estate platform Property Guru has seen a 35 percent increase in visits from Hong Kong, according to its CEO Hari Krishnan. 

While Hong Kong’s protests are primarily pushing for greater democratic freedoms and police accountability, the summer of rage has been fueled by years of simmering anger toward Beijing and the local government over falling living standards and the high costs of living.

Hong Kong’s property market is one of least affordable in the world with sky-high prices fueled, in part, by wealthy mainlanders snapping up investments in a city which has failed for years to build enough flats to meet demand.

But now mainland Chinese, who traditionally viewed property in Hong Kong as a safe investment, are opting for rival financial hub Singapore as a result of the protests and the US-China trade war, according to observers.

There has been a jump this year in sales of luxury apartments in the city-state — which like Hong Kong is known for pricey property — driven partially by mainland Chinese buyers, according to the consultancy OrangeTee & Tie.

“The protests in Hong Kong have made some of the (mainland Chinese) based there ... (more concerned) about investing in Hong Kong real estate, so they carry that investment to Singapore,” said Alan Cheong, executive director of the research and consultancy team at Savills.

As well as hitting China’s economy, trade tensions may have discouraged some Chinese from investing in the West and pushed them toward Singapore, with its mostly ethnic Chinese population.

“I think they don’t want to go to the West,” said Cheong.

Singapore is “the closest country culturally to China other than Hong Kong, and I think they feel more comfortable with that.”

There are further signs the stable, tightly ruled city is benefiting from the Hong Kong turmoil — Goldman Sachs last week estimated as much as $4 billion flowed out of Hong Kong to Singapore this summer.

And analysts warned there was little hope of Hong Kong’s property market recovering soon.


Why North American investors are gobbling up booming bitcoin

Updated 1 min 9 sec ago

Why North American investors are gobbling up booming bitcoin

Why North American investors are gobbling up booming bitcoin
  • Digital currency soars to record high amid dramatic $3.4bn global market shift

LONDON: Bitcoin has grabbed headlines this week with its dizzying ascent to an all-time high. Yet, under the radar, a trend has been playing out that could change the face of the cryptocurrency market: A massive flow of coin to North America from East Asia.

Bitcoin, the biggest and original cryptocurrency, soared to a record $19,918 on Tuesday, buoyed by demand from investors who variously view the virtual currency as a “risk-on” asset, a hedge against inflation and a payment method gaining mainstream acceptance.

But the boom represents a shift in the market, which has typically been dominated by investors in East Asian nations like China, Japan and South Korea since the digital currency was invented by the mysterious Satoshi Nakamoto over a decade ago.

It is North American investors who have been the bigger winners in the 165 percent rally this year.

Weekly net inflows of bitcoin — a proxy for new buyers — to platforms serving mostly North American users have jumped over 7,000 times this year to over 216,000 bitcoin worth $3.4 billion in mid-November, data compiled for Reuters shows.

East Asian exchanges have lost out.

HIGHLIGHTS

  • North American exchanges win out in bitcoin boom.
  • Huge bitcoin flows to that region from East Asia.
  • Market players cite demand from large US investors.
  • Fewer retail punters in Asia another factor at play.

Those serving investors in the region bled 240,000 bitcoin worth $3.8 billion last month, versus an inflow of 1,460 in January, according to the data from US blockchain researcher Chainalysis.

The change is being driven by an increasing appetite for bitcoin among bigger US investors, according to Reuters interviews with cryptocurrency platforms and investors from the US and Europe to South Korea, Hong Kong and Japan.

“The sudden influx of institutional interest from the North American region is driving a shift in bitcoin trading, which is rebalancing asset allocations across different exchanges and platforms,” said Ciara Sun of Seychelles-based Huobi Global Markets, whose parent company has roots in China and operates in several Asian markets.

East Asia, North America and Western Europe are the biggest bitcoin hubs, with the first two alone accounting for about half of all transfers, according to Chainalysis, which gathers data by region with tools such as tagging cryptocurrency wallets.

Industry experts caution it is too early to call a fundamental shift in the market, particularly in an unprecedented year of pandemic-induced financial turmoil.

Growing flows to North America this year are not necessarily “an indication that the center of gravity is tilting toward the US,” said James Quinn of Q9 Capital, a Hong Kong cryptocurrency private wealth manager.

Others also point out that cryptocurrency trading is highly opaque compared with traditional assets and patchily regulated, making comprehensive data on the emerging sector rare.

Nonetheless, Chainalysis found North American trading volumes at major exchanges — those with the most blockchain activity — had eclipsed East Asia’s this year. This is not unheard of, with North America having moved ahead on occasions in the past, but never by such a large margin.

Volumes at four major North American platforms have doubled this year to reach 1.6 million bitcoin per week at the end of November, while trading at 14 major East Asian exchanges have risen 16 percent to 1.4 million, according to the data.

By comparison, a year before, East Asia led the way with 1.3 million a week versus North America’s 766,000.

Those interviewed said compliance-wary US investors, many of whom had been deterred by the opaque nature of the market in the past, are being attracted by the tightening oversight of the American crypto industry.

US exchanges are in general more tightly regulated than many of those in East Asia, and there have been several moves by American regulators and law-enforcement agencies this year to clarify how bitcoin is overseen.

A leading banking regulator said in July, for instance, that national banks could provide custody services for cryptocurrencies. The justice department also outlined an enforcement framework for digital coins in October.

“You’re increasingly starting to see distinctions in the market between those that have no regulatory or little regulatory clarity, versus those that do,” said Curtis Ting of major US exchange Kraken.

“Larger institutions seek the predictability that a regulated venue offers.”

Assets under management at New York-based Grayscale, the world’s largest digital currency manager, have soared to a record $10.4 billion, up more than 75 percent from September. Its bitcoin fund is up 85 percent.

“A lot of US funds are trading with large US counterparties,” said Christopher Matta of 3iQ, a Canadian digital asset manager with clients in the US, citing exchanges such as California’s Coinbase that are overseen by New York financial regulators.

“It tells you right there how important the regulatory nature of the space is, and having venues to trade on that are regulated — it’s definitely something that institutional investors are thinking about.”

Another factor behind the 2020 trend is a decline in the armies of retail investors in Asia who drove bitcoin’s 2017 boom, which pushed it to its previous peak.

In South Korea, strict regulations have been discouraging such investors, according to In Hoh of Korea University’s Blockchain Research Institute.

Concerns that major retail exchanges linked to China but based elsewhere could be caught up in a crackdown by Beijing may have pushed down demand, said Leo Weese, co-founder of the Hong Kong Bitcoin Association.

In October, for instance, Malta-headquartered OKEx, which was founded in China, suspended crypto withdrawals for nearly six weeks because an executive was cooperating with an investigation by Chinese law enforcement.