We are all reborn, who wants to be the richest man?

Chapter 277 Worried about Hong Kong Island’s economy

The era of picking up money.

This is the topic that Hong Kong media has been hyping up recently, and it is talking about the grand event of Far Eastern companies going public one after another in January and February.

Although the listed valuations of Honor Computer and Far East Chip reached 25 times the price-to-earnings ratio, and Far East Systems set the price at 30 times in accordance with Luo Nianzhong's requirements, they still could not stop the enthusiasm of investors.

The reason why Far East Systems is favored by investors with such a high market value is because Simone, President of Far East Systems, acquired YD Office.

Simeone was a talent poached by the Far East Group from a visual company. Although he agreed with Luo Niangzhong's initial approach of exchanging price for market, this also led to the Far East System's poor revenue capabilities.

Although Far East System has just released a graphical interface system, the current graphical interface system is not exclusive to Far East System.

To be honest, Far East Systems and Apple both borrowed systems from Visual Company, and they are the originators of graphical visual interfaces.

Simone was one of the people in charge of this project when he was at Visual Company, which is why Far East Group recruited him to serve as CEO of Far East Systems.

Since he took office, after knowing that Far East System was going to be launched, he purchased Office software and bundled it with Far East System.

He knew very well that based on Far East System's revenue alone, the final valuation would definitely not satisfy the group and Luo Nianzhong, so increasing revenue was the best way to increase the valuation.

Even though the Far East system only costs US$20 per set, Office is not cheap, costing US$100 per set.

But even so, based on the fact that the shipment volume of these two software is about two million units, it is far from enough to reach the valuation profit of Luo Nian Center.

At this time, Simone's cool move came. He divided word and excel into enterprise version and normal version.

The regular version is very simple and costs $100. It has all the small office software that follows suit on the market.

As for those key developed exclusive functions that are of great help to the enterprise, he put them in the enterprise version.

The enterprise version is not as cheap as the regular version. Basically, the price difference is several times.

However, for many companies, this amount of money is nothing at all. Time and efficiency are what they value most.

In this way, under Simeone's operation, Far East System forced him to achieve a full-year profit of US$82 million in 3.87.

This also allows all investors and investment institutions to see new possibilities.

Electronic office is the future trend, this is the consensus that everyone knows.

As more and more companies begin to work electronically and the popularity of computers becomes higher and higher, Far East Systems has unlimited possibilities.

Moreover, the current price of Far East System is obviously low. It is certain that the price will increase significantly when Far East System fully informs the market.

You must know that Simeone said during the road show that Far East System will increase its price by at least 50% this year.

It is this future that can be expected that has recognized the high valuation of Far East Systems.

From the beginning of the road show, the oversubscription multiple of several hundred times fueled the enthusiasm of investors. It is said that if you grab it, you will make money.

This price-to-earnings ratio valuation can be oversubscribed hundreds of times, which is also regarded as a recovery of the stock market in Europe and the United States.

Especially the U.S. stock market, affected by the great economic stagflation, the average price-to-earnings ratio of U.S. stocks fell below 10 times for the third time in history when it was at its worst. You must know that the first two times were due to world wars.

The listed companies of the Far East Group not only have high valuations, but also have such high price-to-earnings multiples that even when the U.S. stock market was booming, there were very few companies with such high price-to-earnings ratios. There are no listed companies that can reach this price-to-earnings ratio that are not in the top 20 in market capitalization.

Regarding this, Luo Nian said in the center that this is the technology industry. In the future, Nasdaq's P/E ratio of 30 to 50 times will be the norm. During the bubble, P/E ratios of 100 times were all over the sky. I am just giving you a good start so that you can adapt. one time.

Far East Group headquarters, Luo Nianzhong's office.

In the office at this moment, in addition to Luo Nianzhong himself, there was Welch and Far East Bank President Du Huilian. The three of them were discussing the preparations for the various changes of Far East Bank that would start three days later, that is, January 1st.

The settlement bank was okay, but as the Hong Kong government's financial treasury and foreign exchange reserve fund contained huge funds, Luo Nianzhong could not let them just sit there and ignore them.

Generally speaking, a country's foreign exchange reserves will be invested in low-risk, stable products such as U.S. bonds and gold.

But Far East Bank is different. Although it performs the duties of the Central Bank of Hong Kong Island, it is still subject to the supervision of the Hong Kong government.

There is no problem in using foreign exchange reserves. This is an unspoken rule, but it is not up to you to decide how much to use.

After all, if you have fun, the Hong Kong government will be the one to wipe your butt in the end, right?
Relying on the size of the Far East Group, Luo Nianzhong could afford to lose everything.

But the accounts cannot be settled this way, and the Hong Kong government is unlikely to agree.

In Luo Nianzhong's view, 30% is a critical point.

If we want to buy U.S. bonds and gold, the Hong Kong government will definitely be more liberal on this basis, because this is one of the most valuable and safest investments.

However, Luo Nianzhong does not plan to buy these things. Although the value is stable, the growth rate is a bit unworthy of mention in his opinion.

He plans to switch to an industry that is more stable and profitable, and that is infrastructure.

"I will spend all this money on infrastructure. Rabbit, South Korea and Temasek are the three top choices."

"Infrastructure?" Du Huilian was a little surprised.

Like U.S. bonds and gold, infrastructure is also an industry with a long return cycle.

However, this industry is not as stable as U.S. debt. Even though many tycoons made their fortunes in infrastructure, this industry is very policy-dependent.

For example, there are two cities. City A has a very developed export manufacturing industry, and City B is a port city.

Then the logistics and personnel exchanges between these two cities must be very frequent. At this time, it will definitely be profitable if you build a highway between the two places to collect tolls.

However, if the policy suddenly changes, City C, not far from City B, will also vigorously develop a port, and because of some preferential policies, the cost of exporting to City A will be lower.

How is it possible that the cost-recovery time of the highways in the two cities of AB at this time is as expected?

Build a port directly at the source? Isn’t that still the same truth?

"Isn't it a little too risky? This is a business without capital. Wouldn't it be better to be more prudent?"

There is nothing wrong with Du Huilian's dissuasion. As a decision-maker and leader of Far East Bank, as long as the boss is not a helpless man, choosing Du Huilian's suggestion is the safest and most reliable one.

But his boss is Luo Nianzhong. It's not that he can't support him but he doesn't need to support him.

You can't even use the word "no support". You have to hold on to it at all times, otherwise it will fly away if you are not careful.

"Just listen to me. Even if you lose everything, I can afford it."

This is not Luo Nianzhong's mother's pretense, but a fact.

The current foreign exchange reserves of Hong Kong Island are around US$370 billion. This is due to the economic drive of the Far East Group. Historically, it only reached this figure seven years later.

Even if Luo Nianzhong lost 30% of it, he could still afford it. Wouldn't it be 111 billion US dollars? The market value of a listed company in the Far East exceeds this amount.

However, with the inflow of large amounts of external funds, this amount will soon be significantly increased.

This is Hong Kong Island. The foreign exchange reserves are much higher than the Hong Kong dollars circulating in the market. Otherwise, the Hong Kong government would not have allowed anyone to use the foreign exchange reserves.

Generally speaking, a country can issue the same amount of domestic currency as much as it has foreign exchange. If you issue more, it is equivalent to increasing the amount of domestic currency, which will cause inflation.

Hong Kong Island will soon implement a joint exchange rate system. According to the ratio of 1:7.8, the foreign exchange reserves of 370 billion US dollars can be exchanged for more than 2880 billion Hong Kong dollars circulating in the market.

But you wouldn’t think that the current circulation of Hong Kong dollars is only 290 billion, and part of the credit is due to the Far East Group.

In the original time and space, when Hong Kong Island returned to China, the circulation of Hong Kong dollars was less than 900 billion Hong Kong dollars, and 40 years later it was only about 1700 billion Hong Kong dollars.

You must know one concept: the quantity in circulation and the total amount of money are not the same concept.

Precisely because foreign exchange reserves far exceed the Hong Kong dollars issued, the Hong Kong dollar is one of the most stable currencies in the world and can basically be said to not fluctuate.

"I know, I will have someone investigate this industry later."

This is Luo Nianzhong. If it were another person, Du Huilian, he would definitely have to fight with reason.

Who knows that his boss has never made a mistake or made a loss-making business?

In addition to these issues, there is another important issue that Du Huilian needs to consult Luo Nianzhong, and that is the issue of currency issuance.

After the Far East Bank has obtained the right to issue currency, it will definitely issue currency, and it will issue no less.

It wasn't that Du Huilian asked Luo Nianzhong how much currency to issue, but what pattern to use for the currency. He wanted to ask, so as not to violate some taboos. The listing of Far Eastern companies will definitely attract a large amount of funds. Although most of these funds are just a number, they will definitely increase the total amount of money in circulation.

In addition, after the listing of three companies this time, Luo Nianzhong transformed into the God of Wealth and spread money within the Far East Group, which will also increase the circulation of money and stimulate consumption.

"How many Hong Kong dollars are we going to issue? What pattern will we use?"

Luo Nianzhong did not answer, but thought of another question.

The printing of Hong Kong dollars has always been the responsibility of De La Rue, the largest printing company in the world. The Hong Kong dollars are printed at De La Rue's printing house in Tai Po.

What Luo Nianzhong was thinking about was whether to buy this printing factory and take it into his own hands.

Banknote printing factories make money, but the prerequisite is that you have a lot of business.

Starting from the implementation of the linked exchange rate between the Hong Kong dollar and the US dollar, the trust of the Hong Kong dollar is certain, because this means that holding Hong Kong dollars is equivalent to holding US dollars.

However, the Hong Kong dollar, which is so trusted, has a very small international share. Why? To put it bluntly, the circulation volume is too small.

Hong Kong Island, like other island countries, must develop an export-oriented economy if it wants to continue to develop.

Although today's light manufacturing industry is the reason for Hong Kong's economic boom since the 80s, it is not a long-term solution.

A large number of manufacturing and textile industry orders have made Hong Kong Island's economy take off and the market is overheating.

At this time, the policy of the monetary authorities should be to raise interest rates to cool down the market and allow it to develop healthily.

But the economy of the beautiful country is not good. Reaganomics is to lower interest rates, and a large amount of hot money flows into the market, allowing the market to develop freely. This is why there was a wave of mergers and acquisitions in the beautiful country in the 80s.

The interest rates on Hong Kong Island that were supposed to increase due to the linked exchange rate can now only be reduced along with it, which has caused too much hot money in the market.

The manufacturing and textile industries obviously could not bear so much hot money, so a large amount of hot money flowed into real estate.

The rise in land prices has led to rising costs, coupled with the continuous inflow of hot money, the final result can be imagined.

Although real estate on Hong Kong Island is very popular now, it has not yet reached the era of universal real estate.

At that time, every company of any size was entering the real estate business, and people with a little savings joined in the real estate speculation.

According to Luo Nianzhong, the current housing prices in Hong Kong Island are just right. Basically, one month's per capita salary is equal to the average housing price of one square meter.

Too high average housing prices are not a good thing for Far East Group. It is a fatal blow to attracting grassroots talents, so suppressing housing prices is beneficial to Luo Nianzhong.

How to suppress housing prices and keep them at a reasonable level of appreciation for one person? That is to let those hot money find a new investment direction.

For example, the Far East Group now strongly supports industries such as electronics and semiconductors, or guides them to invest in Southeast Asia and other places.

Doing so will not only make the economy of Hong Kong Island healthier, but will also increase the per capita economy of Hong Kong Island and allow the Hong Kong dollar to circulate even more.

The Hong Kong dollar is pegged to the U.S. dollar, so for everyone, accepting investments in Hong Kong dollars is the same as accepting U.S. dollars.

As the issuance of Hong Kong dollars increases and the scale of U.S. dollar foreign exchange reserves increases, finance will become more stable.

At the same time, this can also enhance the proportion and status of the Hong Kong dollar in international currency transactions.

With more Hong Kong dollars being printed, buying a banknote printing factory and developing the technology yourself can also save costs, and you can also take orders in the future. Of course, the most important thing is the strategic significance.

After thinking for a long time, Luo Nianzhong finally weighed the pros and cons and shook his head.

The market on Hong Kong Island is still too small, and because it is not a country, it is difficult to gain the trust of countries that cannot print money.

And isn’t this stealing the country’s jobs? What you pay for is great compared to what you get.

Just take control of the overall policy of Hong Kong Island's economy, and don't get involved in printing money.

After thinking about it, Luo Nianzhong said, "How many Hong Kong dollars to issue is your business, and you should have made strict calculations.

As for the pattern, it could be redbuds, Lantau Island, or iconic landscape architecture."

After explaining this, Luo Nianzhong said, "When I go back, I will make preparations to establish two private equity funds."

"There is no upper limit for the total amount of funds raised by a company, and the minimum amount is HK$1 million. It will be closed for five years and will be closed after six months."

This fund is for the rich, and the minimum amount of one million is not something ordinary people can afford to invest.

The purpose of this fund is to go after the hot money in the market, first absorb a wave of operations to build a reputation, and prepare for the future.

"What about the cost?".

Private equity funds? It’s normal.

However, private placements with such a large minimum amount are still relatively rare on Hong Kong Island, but Du Huilian is not surprised.

"The subscription fee is 1% and the redemption fee is 3%."

The subscription fee is normal, a one-time payment of 1%. That is to say, if you invest HKD 100 million, you will need to remit HKD 101 million in one go.

The redemption fee is not high either, 3% can only be said to be a medium level.

In developed countries, half of the redemption fees range from 2% to 5%, and a redemption fee of 3% is considered to be on the lower side.

Originally, Du Huilian planned to make some suggestions to increase the redemption fee, but then the management fee mentioned by Luo Nianzhong refreshed his understanding again.

“We set a threshold for management fees and changed it to a stage commission system.

年化收益不超过10%不收管理费，超过10%收取盈利的20%的管理费，超过30%的年化率收取盈利的50%的管理费”。

Luo Nianzhong's words made Du Huilian stunned. Even Welch, who was silent at the side, had the same expression.

Not to mention management fees, the annualized rate of funds exceeding 10% will not exceed 2% globally, which is about 1%.

Since Luo Nianzhong can propose an annualized rate of 30%, he must have some ideas. Even if the annualized profit rate of 30% is not achieved, 20% is still very scary.

"Is it a little too high?"

This is an account on the surface, but secretly, do you think those funds really have this income?

But even if all are taken into account, it is impossible to achieve such an effect unless we catch up with a super bull market.

"Don't worry, the annualized profit of 30% may be too low." Luo Nianzhong replied confidently.

His confidence came from the subsequent island nation's stock market. The previous island nation's stock market had increased but slowly. He remembered that from 1983 to 1990, the island nation's stock market rose by an average of more than 20% every year.

Coupled with the various financial crises we know about, an annualized rate of 30% should not be a big problem.
“If there is such a high income, then such an outrageous bonus commission fee would not be a big deal.

Not to mention the wealthy people on Hong Kong Island, funds from all over the world may join in."

Du Huilian's words reminded Luo Nianzhong that his purpose was to gather the hot money in Hong Kong Island to prevent them from entering the real estate industry in large quantities.

But the West, especially the hyenas on Wall Street, will not miss such an opportunity.

If it were other private equity funds, they might sneer at it and think it was a liar.

But Far East Bank, which has Luo Nianzhong's endorsement, is different. Investing tens of millions or hundreds of millions of dollars is not a problem for them.

“Set a maximum limit for a single transaction, which cannot exceed US$100 million.

Moreover, my non-Hong Kong Island capital limit is limited to one billion US dollars, and it will stop when the funds are full.

"OK". Du Huilian wrote it down.

"The other one can be left to Hang Seng, and the total private placement amount should be set at HK$15 billion.

Just follow the normal private equity funds, the threshold can be lower, you decide the specifics."

"no problem".

After explaining the affairs of Far East Bank, Luo Nianzhong asked Du Huilian to go back first, and then it was the matter of Luo Nianzhong and Welch.

(End of this chapter)