Big Spenders are back as Hong Kong emerges from slump - Feature

Hong Kong - As one of Hong Kong's most successful entrepreneurs and a leading figure on the political and social stage, James Tien is not a man given to displays of irrational exuberance. So when the sober-suited former leader of the pro-business Liberal Party decides the time is right to buy a yacht costing millions of US dollars, it tells you something about the state of the economy.

"At the beginning of the year, I wouldn't have done it," Tien said of his new luxury yacht. "In February and March, I was affected by the psychology of the financial situation.

"In common with a lot of my friends, we were not in the mood to go shopping, to buy a new suit or to buy a new car. But people in Hong Kong have short memories. A lot of us are in the buying mood again."

While much of the rest of the world is still feeling the pinch, Hong Kong is enjoying a strong rebound. Property prices have soared and the Hang Seng Index is double the level it was at 12 months ago.

Signs of a return to ostentatious spending abound in the wealthy city of 7 million. When Rolls-Royce offered its new 550,000-US-dollar Ghost model in Hong Kong in the autumn, it got 20 instant orders.

Allan Zeman, founder of Hong Kong's fashionable Lan Kwai Fong entertainment zone, admits that he too adjusted his spending habits in the aftermath of the Lehman Brothers crash last year.

"When the financial crisis first hit, for most people no matter who you were, there were two days when the world just kind of shut down," he said. "It was a very, very scary time.

"People in my position were taking money out of the banks or just spreading the risk over many different banks. Rumors were flying around everywhere. It was like the world was coming to an end.

"It was suddenly unfashionable to be seen to buying a fancy car. All wealthy people were trying to be low key. It went from extravagance to austerity. You totally changed your habits.

"Before, if you went out to a restaurant, you might order the most expensive wine or champagne. Now, you suddenly didn't want to be seen drinking that kind of thing when people were suffering. There was a backlash and you wanted to be low key."

He said: "I am not an extravagant spender but I buy clothes. When it came to a label or a brand, before you would just buy it. Now you would think twice and ask: Do I really need it? Do I really want it?"

The change in spending habits was felt across the traditional refuges for the money of the wealthy. "There was a fairly sharp contraction in the market," said Jonathan Stone, Christie's international business director for Asian Art.

But just one year after the global financial meltdown began, there has been a sharp rebound in the fortunes of the art market and auctions are providing a way for the wealthy to invest without having to make a public display of their wealth, Stone said.

"Auctions are always a less ostentatious way of buying," he said. "If you don't want to be seen sitting in the room you can buy through an agent, over the phone or by internet."

Although spending has rebounded, Zeman believes it will not return to pre-crash levels. "Before, it was like the Wild West," he said. "Money had no value and people were paying any kind of price for paintings and other things. You name it - it had all gone through the roof.

"I don't think it will go back to the way it was before," he said. "But you can never say 'never.' These periods come and go and a new crowd of youngsters - a new crowd of yuppies - comes up and they haven't experienced the downturn."

As he prepares to take his new yacht to the water, Tien says the outlook for Hong Kong is sunny. "Compared to people in Europe and the [United] States, our people are a lot better off. That is probably because of the Chinese mainland factor," he said.

"The reason property prices are going through the roof is because of mainland Chinese investors. These days they are coming here not to buy suits and cosmetics but to buy apartments.

"In London, property prices are going down because most Russians and Saudis are not doing that well. Hong Kong is doing well simply because of the mainland China economy."