David Chin

Australia’s property prices will show a collapse in the year to June 2016, according to Australian Bureau of Statistics (ABS) data to be published today.

Basis Point Consulting, a firm active in the Australia-China investment sector, has been telling its clients that its prediction of a price collapse is a ‘no-brainer’.

David Chin, Managing Director of Basis Point says ‘It’s simply because the June quarter number last year of 8.9% in Sydney was a huge record rise which lifted the annual rise to a near record 9.7%.

Today will see the annual numbers fall off a cliff when the old quarterly data is replaced by the much lower price rises we’ve seen in the market lately. It’s really just mathematics.’

Mr. Chin speculated that the June 2016 quarter growth rate in Sydney will be under 2.0%, given the negative sentiment during that period. This means the annual growth rate to June 2016 will be a mere 2.8%. “Expect a reporting panic,” Mr. Chin said. “The headlines should be interesting.”

This plunge will make buyers and sellers recalibrate their outlook to expect more subdued growth in the year ahead.
David Chin used the same analysis to predict the inflation rate during the high inflation years in the 1990s when he was in the futures industry. ‘ It’s a no-brainer if the quarterly number that falls off the annual calculations was a large number relative to the other quarterly numbers, which is what we’ve seen in the property market in the past year’.

Source: Australian Bureau of Statistics and Basis Point

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David Chin

Asia’s rich will be funding business and investment opportunities in Australia via the government’s Significant Investor Visa (SIV) scheme, according to David Chin, Managing Director and Founder of Basis Point.

18 months after launch by the then Labor government in November 2012, 255 primary SIVs have been granted, equating to $1.275 billion in new capital flowing into complying investments in Australia ($5 million to be invested per primary SIV x 255 SIVs).

Nearly all (90%) SIV applications have been from China.

The Liberal government is also committed to the visa scheme and has ordered an internal review by the Department of Immigration to ‘reboot’ the scheme to quicken the pace of approvals.

1000 SIVs are expected per year when the programme hits its stride in 2014/2015, according to forecasts by David Chin. 1145 invitations have already been issued by the Department for wealthy would-be migrants to formally lodge their applications. (as at 31 May 2014)

David Chin says two areas that could benefit from SIV capital are Australia’s financial services and agri-business industries.

China last month issued new guidelines that encourage its 114 securities brokerages to develop into investment banks. This means expertise will be sought in building asset management, proprietary trading and financial advisory services in China.

For Australian firms that can provide this expertise to a SIV investor, it will be a win-win-win, (triple win), according to Chin. The Australian firm gets a capital boost, the SIV investor gets a visa, and for both, there are opportunities to leverage the Australian IP to create a joint venture business in China.

In agri-business, a new sector is currently developing whereby Australian suppliers of premium foods can leverage the rapidly expanding B2C capabilities of China’s e-commerce platforms (Alibaba’s Tmall and rival JD.com) to take advantage of ‘Brand Australia’s’ clean and green image to sell premium foods to an expanding high-net-worth (HNW) and middle class consumer market worried about local food scandals and curious about Western foods.

Alibaba has already organised country-specific premium food sales in China over recent months. They include Chilean blueberries and king crabs, NZ lamb and kiwifruit, Canadian lobsters, Taiwanese custard apples, and 168 tonnes of US cherries (sold within 2 weeks).

SIV investors can leverage their Chinese connections and businesses to assist their investee Australian agri-business companies to quickly capitalise on this trend, says Chin.

While many of the 255 applicants have indicated investments in Australian bonds or cash, Chin says they will likely expand their investments once they arrive in Australia and can undertake closer due diligence on the range of opportunities available.

The SIV industry could generate $5 billion in new capital annually to Australian businesses and investment products. This is equivalent to nearly half of Australia’s private pension (SMSF) fund contributions each year, says Chin

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Highlights

• 165 hedge and boutique investment management firms control $208.4 billion, equivalent to 17% of the $1.19 trillion managed by all investment managers in Australia.
• The directory identifies 102 independently-owned boutiques (predominantly long-only, benchmark-unaware strategies) with $165.6 billion in assets under management (AUM), and 63 hedge fund firms with $42.8 billion in AUM.
• The industry eclipses Hong Kong’s $37 billion in hedge fund & long-only absolute return assets, and Singapore’s $20 billion sector.
• More than $60 billion (roughly 30% of sector AUM) is deployed by Australian managers into global markets such as global and Asian equities, global fixed income and global macro.
• NSW based managers have combined AUM of $142.2 billion, while Victoria and Queensland based managers have $38 billion and $24.2 billion respectively.  South Australian and West Australian managers have $3.5 billion and $0.4 billion respectively.

The report’s author and publisher, David Chin, Managing Director of Basis Point Consulting, commented, ‘The Australian hedge and boutique universe is much larger than expected and reflects the diverse investor support for the sector.’

‘Investors in hedge funds are evenly split between four categories: direct high-net-worth investors/principals own funds; offshore investors, Australian institutional investors; and Australian wholesale (dealer groups/planners) investors.  For boutiques, Australian institutions and wholesale investors account for 61% and 29% of assets respectively, reflecting the focus by many boutiques on Australian investment markets.’

Now that the size of the sector has been comprehensively reviewed for the first time, David Chin said, ‘Global investors will be more willing to send due-diligence teams to Australia.  Previously, major European and US investors would visit Asia but did not take the additional trip to Australia in the erroneous belief that the local sector was too small.’

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