A Safe Way to Invest in China... with Asia’s Richest Man

“The building I live in is owned by Li Ka-shing,” my friend Dan told me over dinner in Shanghai earlier this year.

That same morning, I read about Li Ka-shing in the paper over breakfast...

The Shanghai Daily wrote: “Billionaire Li Ka-shing bought HK [Hong Kong Dollars] $516.9 million of shares in Cheung Kong, boosting his stake in Hong Kong’s second-largest property developer to 38.5 percent.”

I’ve known about Li Ka-shing – Asia’s richest man – ever since I started trading Asian stocks a dozen years ago. Hearing his name twice in one day, I figured I ought to have another look at what he’s been up to lately. I liked what I saw...

After visiting Shanghai earlier this year for the first time in over a decade, I am now a believer in China. I wrote about what I saw in DailyWealthwhile in Shanghai... and I still believe Li Ka-shing is the way to play China.

We shouldn’t make this complicated... We simply need to own businesses that do something for China that China can’t do on its own.

Not only does Li Ka-shing have what China needs, he’s actually Chinese. He’s got connections. Specifically, Li Ka-Shing builds what China needs: real estate, ports, infrastructure, telecom, and more. He’s incredibly smart, he’s got access to big money, and he’s got the connections to get the contracts.

The portfolio of assets he’s put together over the last 35 years would be almost impossible to replicate.

Li Ka-shing’s flagship company, Cheung Kong (OTC: CHEUY), is the best way to play China right now. Fortunately, based on its P/E ratio, Cheung Kong is as cheap as it’s been this entire decade.

This business empire is vast... Cheung Kong owns about 50% of a company called Hutchison Whampoa. Hutchison, you may not be aware, controls the Panama Canal. (Yes, a Chinese company controls the Panama Canal – it’s Li Ka-shing’s company.)

As I told subscribers to my letter Sjuggerud Confidential early this year, I think our upside potential here is 75% or more, in a relatively short period of time.

A company called Cheung Kong Infrastructure, which is basically 40%+ owned by Cheung Kong, has built power plants, bridges, and expressways all across China.

Li Ka-shing’s presence in Shanghai alone is towering. He controls the ports. He’s built all kinds of real estate - commercial, residential, office space, you name it... Li is building what China needs.

They say about one of every twelve residences in Hong Kong was developed by Li Ka-shing’s Cheung Kong... and now he’s taking his taking his winning formula to the Mainland. We can ride his coattails.

Amazingly, Cheung Kong is trading close to as cheap as it’s been this entire decade based on its price-to-earnings ratio. So we haven’t missed it.

While Li Ka-shing has been pursuing China, his core business is still in Hong Kong.

Hong Kong may be the one major property market in the world that still has plenty of upside potential. According to The Economist, since 1997, Hong Kong property prices have nearly fallen in half, while most developed countries have seen triple-digit percentage increases in property prices. For all of its China activities, Cheung Kong is a really a Hong Kong play, with Chinese overtones.

To better understand my enthusiasm for China, I suggest you go back and read the issues I wrote about the subject while visiting Shanghai.

In short, Li Ka-shing makes the things that China needs... and Cheung Kong is the safest and best way to play China. By buying shares of Cheung Kong, our chips are right next to the chips of “The Warren Buffett of Asia.”

How can we do any better? We can’t...

Good investing,

Steve