Author Topic: George Soro's betting on Chinese gold - Wall Street Journal  (Read 1324 times)

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George Soro's betting on Chinese gold - Wall Street Journal
« on: December 01, 2011, 02:35:45 PM »
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"What, if anything, can an investor glean from George Soros’s decision to buy into a big jeweler’s IPO in Hong Kong?

As Dow Jones Newswires reported Wednesday, Mr. Soros is buying $40 million worth of shares in the up to $2.8 billion IPO of Chow Tai Fook Jewellery Group Ltd.

Though it’s small change for Mr. Soros, it’s making us take notice for a couple of reasons. First, it’s the most high profile investment his hedge fund has made in a Hong Kong company since it set up shop in the city last year. According to the Securities and Futures Commission, Soros Fund Management Hong Kong Ltd. now has 21 licensed representatives on staff, including Mr. Soros’s son Robert. The fund also invested in the Hong Kong IPO of automaker China Zhengtong Corp. last year.

Mr. Soros is, of course, also the man who famously said gold was the “ultimate asset bubble” nearly two years ago. After selling off 99% of his holdings in SPDR Gold Trust (GLD), a gold-backed ETF in May, Mr. Soros appears to be making a bet on Chinese demand for gold. High gold prices contributed a lot to Chow Tai Fook’s success—the company marks up its gold jewelry a set percentage above the gold price. The higher the gold price, the bigger the markup, in absolute dollars, that is earned by Chow Tai Fook.

According to a regulatory filing to the Securities and Exchange Commission for the third quarter, Mr. Soros added $22.9 million worth of call and $19 million worth of put options in SPDR Gold Trust. Not very helpful.

No doubt Mr. Soros’ investment in Chow Tai Fook is adding a bit more shine to the IPO, which, with its rich valuation of between 18 and 25 times forecast 2013 earnings compared with its cheaper peers, could be deterring smaller investors. But anybody hoping to take investment cues from sophisticated billionaires would do well to remember that $40 million is but a drop in the bucket for Mr. Soros. He’s being sued by his ex-girlfriend for $50 million".


« Last Edit: December 01, 2011, 02:43:32 PM by exchange »