To Our Shareholders

In FY2009, NWCL recorded a profit of HK$1,359.4 million, a decrease of 33% from FY2008. In late 2007, the overheated economy with ever-rising commodity prices triggered the implementation of austerity measures by the Central Government. Immediately, the property sector had faced the freezing headwind. Similar to a pendulum, the market swung from one end all the way to the other end. Unlike some peers, which were busy tackling issues of over expansion, tight balance sheet and piling inventory, New World China Land continued its healthy operations with its prudent approach.

In September 2008, a financial tsunami, which swiped the whole world, was induced by the US sub-prime turmoil. Credit crunch and the worry of global economic slowdown hammered every single economy in the world. Without hesitation, the Central Government had timely and decisively adjusted its macroeconomic policies to counter against the cooling effect of the global economic crisis. Arising controversial discussion, the handsome stimulus package turned out to be the best medication for the economy.

Property industry is closely correlated with local economy. In 2007, Mainland China property market experienced rapid development nationwide. Later that year, austerity measures triggered adjustments of individual regional markets based on their own supply-demand dynamics. In late 2008, the global economic volatility further dissipated the stalling momentum of China property market. For the whole year of 2008, the concrete housing demand was suppressed by the weak market sentiment.

China's link to outside world is now more extensive than decades ago. With a sizeable domestic consumption, China is not fully exposed to “infections” of the world. The abundance of liquidity with a reasonable lending rate, plus the easing of control measures, encouraged the resurfacing of concrete user demand in early 2009. Signs of stabilization were first observed in the second and third tier cities which had a balanced market even during those overheated days. In late March 2009, there was a broad base market rebound with transaction volume expansion and price firming across China.

During the hard time, most developers had delayed their construction pipeline with the backdrop of tight liquidity and slow demand. The faster-than-expected market rehabilitation in the second quarter of 2009 induced the supply shortage in certain cities, especially the first- tier ones. On the contrary, the second and third tier cities are generally balanced in the supply and demand landscape even after the quick run in market. Liquidity easing and strong demand pushed the developers re-starting the pending constructions. However, the new supply should not be fast enough to fulfill the growing market. In the short-term, it would not be surprised to see a contraction in transaction volume and a further price increase. In medium and long term, the rapid urbanization and genuine housing demand will cradle the healthy growth and development of the market.

Policy will be a key to market development. Given the export is still weak, the Central Government has to encourage domestic consumption to fuel the economic growth. As a pillar industry, the property sector should maintain a healthy growth in order to sustain the domestic consumption confidence. The Central Government should not have a major shift in policies. Still, there would be minor adjustments to pace the market and economic rhythm.

We will continue a prudent approach in managing our business in China. Overall, we are cautiously optimistic about the China property market. NWCL is monitoring the market closely and developing appropriate product for sale timely. Furthermore, NWCL will continue its selective expansion of our solid recurrent income base from rentals.

Dr Cheng Kar-shun, Henry
Chairman and Managing Director
Hong Kong, 8th October, 2009