Is it the right time to buy?

HONG KONG — I was on my way to New York on a Cathay Pacific flight, and I stopped by Hong Kong. It’s obvious that despite the financial slump that has hit other companies, Hong Kong’s largest airline is doing relatively well, with fully-booked flights to London, the US, Canada and other parts of the world. But like most other places, Hong Kong is also feeling the pinch, with companies facing bankruptcies and thousands of workers laid-off over the past few months. Hong Kong shares also took a slight tumble after the Chinese government failed to announce a bigger stimulus package. Last year, China revealed a $586 billion stimulus plan that would bolster the economy and help them achieve an 8 percent growth target this year.

Even the 140-year-old HSBC has been hit, with reports that its 2008 net profits plummeted to as much as 70 percent. Although London based, HSBC was founded in Hong Kong and has played such a major role in the lives of residents that people simply refer to it as “the bank.” Obviously, HSBC’s losses is creating a “ripple effect,” with global stock markets plunging at six-year lows after news came out that the bank lost more than $15 billion on disastrous investments in the US sub-prime market.            

Though it shunned help from the British government, the bank nevertheless asked shareholders’ support for a $17.8 billion plan to sell shares at HK$28 apiece, or almost half the value of listed shares the day before the planned sale was announced.

A group of HK billionaires have indicated their willingness to shore up HSBC’s balance sheet, with plans to underwrite $1.1 billion of the stock sale. One of them is Li Ka-shing — Hong Kong’s richest man (Forbes reported his net worth at over $16 billion) who plans to pour in $300 million “in his personal capacity.” (A partner of Ricky Razon, the 80-something Li livens up HK’s corporate environment especially with the well-publicized family saga involving his high-flying, playboy son Richard who refused an offer to rescue his telecoms company when he found out that the tycoon was behind the offer.)

Apparently, Li — dubbed “Superman” by colleagues — believes the HSBC rights issue is a great bargain. The same goes for his fellow billionaires that include real estate magnate Lee Shau Kee (HK’s third richest with a $9 billion net worth); HK’s fifth richest man Joseph Lau (net worth: $4 billion) who will pour in $200 million; and Cheng Yu-Tung, another real estate tycoon. The combined wealth of these men could easily reach $33 billion. But like most savvy businessmen, they have an exit plan just in case HSBC’s operations continue to weaken.

Which begs the question: is it really a good time to buy now? Considering the market’s volatility, it’s understandable why investor confidence continues to be shaky especially with news of giant companies struggling with recovery despite government intervention through billions of dollars in bailout packages.

Just take a look at what’s happening in the US and AIG. Even after numerous infusions which have now reached more than $150 billion, the giant insurance company continues to hemorrhage, recently announcing a loss of more than $61 billion in the previous quarter — described as the worst quarterly performance in US history. AIG’s losses are now above $100 billion — and regulators tasked to oversee the bailout are in hot water with US legislators demanding to know how and where all that taxpayer money was spent. Senators are complaining about government’s lack of transparency in handling AIG, which will need even more cash to prop it up.

Despite the downturn in many sectors, analysts say that some industries will show continued growth, among them the telecoms sector. The number of mobile subscribers reached an estimated 4.1 billion last year — roughly 60 percent of the entire global population. As a matter of fact, Mexican telecoms tycoon Carlos Slim Helu has now displaced Bill Gates as the second richest man in the world, with a net worth estimated at $60 billion.

Real estate experts also predict better days for the industry, with Florida’s biggest private real estate services firm disclosing that $12 trillion in capital remains on the sideline simply because “investors don’t know the rules of the game.” In the Philippines, big players like Ramon Ang of San Miguel and Manny Pangilinan of Metro Pacific are venturing into new areas. There is no question that both men are engaged in a stiff competition, but they are also astute businessmen who know where the opportunities are. In 1999 when MVP bought PLDT at a premium of P1,600 per share, a lot of people were surprised at the enormous price Manny paid. Now he is riding the crest and has enough cash reserves to venture into many other investments.

One thing is certain though: no one knows just when the global crisis will end. Nevertheless, there are those who continue to look at the crisis positively, like the Hong Kong billionaires who see the HSBC offer as a once-in-a-lifetime opportunity.

This sentiment is apparently shared by entrepreneurs who see a “silver lining of investment opportunities.” Analysts also say that while the rest of the herd is panicking and getting paralyzed with fear at the thought of their losses, there are those who will ride out the crisis simply because they look at the long-term, believing that “the time to buy is when everyone else is selling, and that time is probably now.” 

As a friend of mine aptly said, whenever there is an opportunity to buy or sell, there’s an old saying that goes, “When the duck quacks, feed it.”

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