China’s wealthiest entrepreneurs suffered tens of billions of dollars in losses in the share value of their companies in the past month as the coronavirus pandemic roiled financial markets worldwide and threatened to tip the global economy into a recession.
As of Friday’s close in Hong Kong, seven of the 10 richest billionaires in China and their family trusts collectively lost nearly US$28 billion on paper as their companies’ shares have dropped sharply since February 19 ” the day the S&P 500 hit an all-time high. The benchmark index itself fell 29 per cent in that time frame.
Using the most recent regulatory disclosures of their shareholdings, the South China Morning Post examined how the market turmoil has affected the personal wealth of some of China’s richest people as the share prices of the companies they founded dropped. In some cases, those shares were held in family trusts for the benefit of the executive and their family members.
As an example, Chinese tech giants Alibaba Group Holding, the parent company of this newspaper, and Tencent Holdings, the owner of WeChat, have seen their shares fall 19 per cent and 13 per cent respectively since mid-February. That sharp drop has cost Alibaba founder Jack Ma and Tencent founder Pony Ma Huateng ” the two richest men in China according to Forbes ” a combined US$12.4 billion.
The destruction of wealth as the coronavirus spread to six continents has spared few companies, with airlines, energy producers and bricks-and-mortar retailers among the hardest hit in recent days, as investors shed everything from stocks to bonds in favour of cash.
“In the absence of credible signs that infection numbers in the western world can be controlled, volatility is likely to remain elevated,” Mark Haefele, chief investment officer for UBS’s global wealth management business, said in a research note Thursday. “We believe the [US Federal Reserve’s] actions are working through the system to restore better-functioning markets, but investors could require more monetary policy actions before they are willing to buy stocks with any conviction.”
The coronavirus has infected more than 229,000 people worldwide and led to border closures and business shutdowns from Hong Kong to London to New York. On Friday, California’s governor ordered all 40 million people in the state to stay at home to reduce the spread.
The Institute of International Finance estimated in a report on Tuesday that more than US$55 billion had flowed out of emerging markets stocks and bonds since the pandemic began shaking markets in late January, more than double the amount withdrawn during the global financial crisis in 2008 and dwarfing other stress events, including the Asian financial crisis in 1997-98.
Those outflows have even caught up some of China’s biggest tech names despite analysts’ expectations that they would benefit in the first quarter from people working from home in China and optimism over a declining level of infections in the country in recent weeks.
Jack Ma, China’s richest man and Alibaba’s founder, personally lost as much as US$6.9 billion since February 19 based on the value of company’s American depositary shares and on the number of the company’s shares he reported holding in its most recent regulatory filing in February.
That included a US$2.5 billion decline in the value of his shares on Monday when the Dow Jones Industrial Average suffered its biggest daily point loss. Shares of Alibaba are traded in New York and Hong Kong.
Alibaba did not respond to a request for comment.
Despite the drop in Alibaba’s value, Ma surpassed Indian energy tycoon Mukesh Ambani as Asia’s richest person on Tuesday as oil prices have dropped sharply in recent days, according to the Bloomberg Billionaires Index.
Joseph Tsai, Alibaba’s executive vice-chairman and the owner of the Brooklyn Nets professional basketball team, saw his fortune drop by US$3.7 billion in the past month, based on his stock holdings in the e-commerce giant.
Tencent founder Pony Ma Huateng, the second-richest man in China last year, lost some US$5.5 billion since February 19 based on the value of the technology giant’s Hong Kong shares. While not as broad a decline as American indices, the benchmark Hang Seng Index has dropped 17.5 per cent in that period.
Tencent did not respond to a request for comment.
The operator of China’s biggest social media and video game business said its users in China spent more time online playing games and watching videos during the outbreak, but warned on Wednesday the pandemic had hurt advertising and mobile payments.
Goldman Sachs said on Thursday that its tracker of activity, such as traffic congestion or film box-office revenue, has shown a “modest improvement” in China in recent days, but declined significantly in the US. Goldman is one of several banks that have said this week they believe the global economy has likely slipped into a recession.
Concerns over the economic outlook and disruption to daily lives in many cities also have weighed on the real estate sector.
Hui Ka-yan, the chairman of Chinese real estate developer Evergrande and No. 3 on the Forbes list last year, lost some US$8.5 billion over the past month based on the value of his shares in Evergrande.
Yang Huiyan, co-chairwoman of real estate developer Country Garden Holdings and China’s richest woman; Colin Huang, the founder and CEO of e-commerce company Pinduoduo; and NetEase founder William Ding Lei also have been big losers in terms of the value of their companies’ shares in the past month.
Evergrande and Country Garden did not respond to requests for comment, while Pinduoduo and NetEase declined to comment.
China’s real estate sector produced 139 billionaires in 2019, four times the number of property magnates in the US, the 2020 Hurun Global Real Estate Rich List showed. They had amassed US$586 billion by the end of 2019, 61 per cent of the total wealth of the 256 real estate billionaires around the world, up from US$550 billion a year ago.
Top 10 richest in Greater China in 2019. Source: Hurun Research Institute, SCMP alt=Top 10 richest in Greater China in 2019. Source: Hurun Research Institute, SCMP
On its fourth-quarter results conference call, Huang said Pinduoduo was subsidising the cost of daily necessities and personal protective gear for customers after prices spiked following the health crisis in China and that could affect the company’s profits and its shareholder returns in the short term. The company also raised the pay of the “vast majority” of its staff to help them navigate the financial strain caused by the outbreak.
“As significant shareholders of Pinduoduo, the core management has thought thoroughly about this since the start of the outbreak, and we deeply believe this is something we must do,” Huang said on the March 11 call.
JD.com founder Richard Liu Qiangdong, the 40th richest person in China, lost US$2.7 billion in value of the shares of the e-commerce company, or about a quarter of his estimated wealth, over the past month. Forbes estimated that Liu was worth as much as US$10.8 billion in March of last year.
The e-commerce company said on Tuesday it would buy back as much as US$2 billion of its shares in the next two years, which could boost the value of the company’s shares over time. JD’s shares have fallen 13 per cent in the US since February 19.
JD did not have a comment when reached Thursday.
Francis Lun Sheung-nim, the CEO of Hong Kong-based Geo Securities said he does not believe China’s wealthiest will be bothered by the decline in their companies’ share values and personal holdings given the “heart stopping” volatility in the market.
“It doesn’t mean they will lose sleep over it,” Lun said. “When you have that much money, it is quite meaningless.”
Additional reporting by Pearl Liu
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.