When I was a stockbroker I used to go to Hong Kong every few months. I'd fly in from Tokyo and spend two days having a series of excruciatingly dull meetings.
I can't say I ever liked it much. Not only did the days drag (Hong Kong looks nice at first but the view soon palls), but the evenings weren't up to much either. They were spent in a series of expat bars buying drinks for the same clients I'd already spent much of the day wishing I wasn't with.
Occasionally, I'd stay longer. I spent a weekend in the New Territories, which were quite nice in the same way that the Japanese countryside is quite nice if the alternative is another weekend dodging traffic in Tokyo.
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However, one thing I never did was take the hour-long boat trip to the former Portuguese colony of Macao: never having been much into gambling or prostitution, I couldn't really see the point.
Now I wish I'd made the effort for comparison purposes if nothing else. In the decade since I returned from Asia, Macao has changed beyond recognition.
The leisure pursuits of its visitors remain much the same, but since the liberalisation of the gaming industry five years ago, everything has started to grow on a different scale.
Last year 22m people visited Macao to gamble and its gambling revenues are now higher than those of Las Vegas $6.9 billion (£3.5 billion) last year. There are 25 casinos including a few whoppers from the glo-bal industry's mega names Wynn Resorts and Las Vegas Sands with more to come. The population is up from 460,000 a few years ago to 520,000.
Gross domestic product per head in Macao is beginning to close on Hong Kong at about $24,300, there is no unemployment to speak of and earnings are rising by about 20% a year. The result? Residential property prices have doubled in the past few years and the speculators jostling to get into the market reckon they'll double or triple again in the next few.
Regular readers will know that it isn't easy to make me bullish on property markets but on this occasion I think I'm with the bulls.
Right now, Tom Ashworth of Hong Kong-based Sniper Capital tells me, Macao is in effect "a slum". But it isn't going to stay that way. As they get richer, the Macanese are going to want to upgrade their homes, and they can certainly afford to do so given how fast earnings are rising: 70% of them already own their houses and 70% of those have no mortgage at all.
Furthermore, the average Macanese spends only 25% of his income on housing, whereas in Hong Kong that number is more like 65%. Better still, houses in Macao are still cheap. A high-end flat costs about £385 a square foot. In Hong Kong it would cost four times as much.
According to Floris Van Dij-kum, chief investment officer of Speymill Group: "Prices could double again and still be cheap; it's not inconceivable they could triple given the strong demand and tight supply situation." There is also scope for commercial property to do well. Casinos tend to go hand in hand with conventions (having a convention business means you can keep your hotel rooms full midweek). And people who like conventions like shopping. Retail sales rose 28% last year and that's a trend likely to continue: the convention business is only just starting in Macao.
Most of its revenues still come from gaming, but if it heads even slightly in the direction Las Vegas has taken (less than 50% of its revenues are from the casinos) it will soon find itself selling a lot more handbags and watches. The Venetian Macao complex, which opens in August, will have 3,000 rooms, 1.3m sq ft of convention space and 1m sq ft of retail space.
Add it all up and it tells us two things. First, that Macao is now more my idea of hell than ever, and second, that there is money to be made there. The more the Chinese earn, the more they gamble and the more they shop. And the better Macao will do.
So how can you place your bets on Macao? In the UK there are two funds listed on AIM. The Speymill Macao Property fund raised £80m before listing last year and another £70m a month ago. The first lot is fully invested in residential developments and the second tranche should be invested in a few months.
The Macao Property Opportunities fund (MPO), run by Sniper Capital, is looking to invest in residential and commercial property. The fund raised £105m last year and has managed to invest 80% of that in three projects.
The rest should be invested by the end of the year.
Right now, the Speymill fund looks slightly more attractive. It will have all its money in the market sooner and, while shares in MPO are trading at about a 20% premium to their net asset value, those in Speymill are not.
First published in The Sunday Times 24/6/07
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