A couple of days in Hong
Kong underlined for me just how the city is starting to lose its edge against
Singapore as a place to do business. Right
from the start the airport got a B grade.
Admittedly our plane arrived a couple of minutes early so perhaps it is
unfair to expect the exit stairs to be in place; but the bus ride to the
Terminal was erratic and slow. So it was
nearly 20 minutes after landing before I got to immigration. A small thing but not the best of beginnings.
Getting around the city was
harder and unpredictable due largely to the antics of Occupy Central. This protest made some good points in the
beginning, but has gone on too long and is now disruptive and
counterproductive. Its impact is
adversely affecting the local economy. I
was only able to plan on five meetings a day instead of my usual six. A recent poll showed 73% of residents want an
end to the occupation. Not one person I
spoke to was in favour of continued demonstrations. The sit-in has passed it’s sell by date.
I could see one of the
sites from my hotel room : roughly 40 tents and a rather smaller number of
people closing off the most important road in Central. Taking taxis, usually a reliable route to
meetings, became something of a lottery from my location. The MRT is great if it goes where you want,
and very cheap; but unfortunately it does not go everywhere you want to go.
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| Signs in Hong Kong |
I have been going to Hong
Kong on business for over 20 years. This
time I was struck by just how Chinese the former colony has become. Not only do fewer taxis understand English
but last year for the first time ever I needed an interpreter at one of my
meetings; as I did again on one occasion on this trip. What really made an impact was dinner with
the local head of RHB, a broker good at sniffing out underfollowed and
undervalued stocks. I was the only
Caucasian in a large restaurant. Yes it
was Chinese cuisine, but the venue was the Square in Exchange Square, one of
the main buildings in the financial district.
Over one hundred people enjoying fine food – I recommend the minced
pigeon, really tasty – and I was the odd one out. That has never happened to me before in the
centre of Hong Kong.
Hong Kong is still a good
place to do business and remains the primary centre where China meets the
world; but if it is not very careful that crown could get lifted. I have never felt concerned about its
preeminent position before.
Meetings were a mixed
bag, but several themes recurred even though the businesses I met comprised a
cross section including shoe retail, property, orange plantations, textiles and
TV manufacture. 020 is at the forefront
of the strategic thinking of almost every management team. Prime intangible real estate on the best
platforms will matter every bit as much over the next five years as top city
centre locations. Go where the traffic
is, even if it is in the ether.
The other refrain related
to a complaint we had heard during the interim results season. The Chinese anti-corruption campaign has much
to commend it but is causing officials to slow down approvals for almost
everything. That has to be having an
impact on the wider economy since several companies mentioned delays caused to
their business. No good deed ever goes
unpunished.
President Xi has proven
masterful at gathering power and bringing things under his personal control;
but investigators have touched a lot of people, some of them with powerful
relationships and relatives. He has been
making a lot of enemies and will need to manage the impact of continuing this
campaign carefully.
Back to business and my
one thought is the way different companies are approaching the Internet of Things
and the smart product cycle. As a value
investor I am looking for angles that combine asset protection and some Margin
of Safety with upside from participation in growth areas of the economy. Mobile has been leading the way. We all know e-commerce is exploding. Yet as devices proliferate I wonder how many
of the present models are already obsolete.
Do you really need so many devices to access all that an average Chinese
consumption addict desires : a super smart phone for instant gratification on
the move; but when at home a large screen TV with quasi 3D gives you access and
a whole lot more especially for multiplayer games and multimedia delivery. What is the point of tablets and hybrid
notebooks? A 46” or 55” screen is just
about the max for the average apartment where all the family can participate,
in separate segments simultaneously if that is the way to accommodate all
tastes. Perfect too for older and less
mobile members of society who may be less tech savvy and also may have less
good eyesight.
So is a renaissance for
the TV industry just round the corner?
Active interactive users are expanding at the rate of around 2 million a
month and the community has achieved critical commercial mass. Hisense, Skyworth and TCL are the local
champions and all are exploring ways to monetise this growing captive customer
base. For the record we own shares in
Skyworth.
