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Commentary: Have Hong Kong's bloated property giants had a change of heart?

The widening focus of Hong Kong’s protests highlights the stasis of a sector out of step with the times, says the Financial Times’ Henny Sender.

Commentary: Have Hong Kong's bloated property giants had a change of heart?

Commercial and residential property prices in Hong Kong have been fuelled by an influx of money from wealthy mainland Chinese investors and developers. (Photo: AFP/Anthony Wallace)

HONG KONG: One reason Hong Kong protesters have turned their focus so quickly from a controversial extradition law to income inequality is simmering anger at the cost of housing in the world’s least affordable market by far.

A target of their resentment is the territory’s property tycoons, who with the help of a pliant local government have for years kept housing supply far lower than demand, amassing land holdings but developing them at a rate that ensured rising prices.

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That formula is now at risk, with even Beijing starting to criticise the most prominent developers. 

But while neighbouring Shenzhen gives rise to some of the world’s most innovative companies, helping its economy eclipse that of the former British colony, few of the Hong Kong businesses are trying to adapt to tomorrow’s world.


In seminars on the “Greater Bay Area”, the mega project to create a vast business and innovation hub by linking southern Chinese cities with a combined population of 70 million, they have little more to offer than their capability in providing buildings for incubators – although there are not many Hong Kong start-ups to occupy them.

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File photo of Shenzhen, China's Silicon Valley. (Photo: Mediacorp)

An exception is Nan Fung, which is putting its success on the line by forging an entirely new path for itself.

Property was not always the only route to prosperity in the city. When millions of immigrants arrived in the wake of the 1949 Communist victory in the Chinese civil war, the wealthiest of the new residents were industrialists from the eastern cities of Shanghai and Ningbo.

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These manufacturers transformed the colony’s economy, building the city’s fortunes along with their own. Among them was Chen Din Hwa, who fled to Hong Kong in 1949, established a series of textile mills and five years later founded Nan Fung.

The textile mills were shuttered just over a decade ago, long after they became uneconomic, in part because Mr Chen was reluctant to move his operations to the mainland as costs rose in his adopted home. Some of the buildings that housed the operations have been turned into a museum and a centre to encourage technological innovation in fashion.

And the company is now known primarily as a property group.


Nan Fung is one of a group of developers that has been marginalised over time as the biggest, including Cheung Kong, Henderson Land, New World Development and Sun Hung Kai became ever more dominant.

Now the third generation of the family is trying to change the group’s identity for the third time by using its capital to buy into the entirely new field of life sciences.

“We started thinking about what should be next,” says Vincent Cheung, the Nan Fung managing director and chief operating officer who is spearheading the shift.

High rise private residential buildings are seen in Hong Kong, China on May 21, 2017. (Photo: REUTERS/Bobby Yip)

It initially spent US$1.5 billion acquiring expertise, first investing in funds five years ago and then establishing its own venture capital funds in 2017. Nan Fung has invested in 45 companies and 27 funds to date, as well as its own funds operating out of Shanghai and San Francisco.

The dramatic switch in focus came after the family decided to bring in an outsider as chairman, hiring Antony Leung, whose career has included stints as a banker, finance secretary in the Hong Kong government and, most recently, chairman of Blackstone’s China operations.

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It was Mr Leung who recommended that Nan Fung change course. “China was an entirely clean slate,” Mr Cheung says. “But AI and big data give China a competitive advantage.”


Nan Fung increasingly resembles US private equity firms such as Bain Capital whose founders embrace philanthropy, writing huge cheques to life sciences, but also invest through their family offices and make biotech part of their core buyout businesses.

It helps that the DH Chen foundation, Nan Fung’s largest shareholder, is not listed.

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“Especially in young volatile markets like China, you need long-term, patient capital,” says Peter Bisgaard, who is in charge of the business’s US portfolio. “If the market dips, you need ample reserves.”

Eight of Nan Fung’s portfolio companies have already gone public, he adds. Whether biotech will be as profitable as property remains to be seen – but at least Nan Fung is now focusing on a public good.

Source: Financial Times/el(sl)


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