Hong Kong economy is facing serious challenge with the credit crunch and oil price hike, tycoon Li Ka-shing said yesterday.

He urged investors not to make irrational investment.

The Cheung Kong Holdings chairman told reporters on the sideline of the annual general meeting yesterday that the rising oil price and subprime turmoil still threaten the global economy, which might drag down the local economy and equity market.

"I would neither make any comment in response to the equity forecast of Lee Shau-kee (the chairman of Henderson Land Development), nor express my view on the outlook about the stock market," said Li.

Li Ka-shing

"But I hope investors should be cautious, don't raise any loan to purchase stocks."

About the mainland equity market, Li said the mainland stock index is still lingering at a high level. "The SSE composite index was about 3,600 yesterday, which is far higher than the level a year ago," he said.

Regarding the Hong Kong property market, Li said that the low interest environment could heat up the local property market.

"Given the US is struggling from the economic slowdown, the (US) rate is unlikely to reverse. Together with the shortage of supply, it could buoy the property price."

Cheung Kong Managing Director Victor Li echoed that the purchasing power of local homebuyers in primary market remains strong.

"Our new project Celestial Heights receives enthusiastic response. The first batch of flats have been sold off shortly after release, which reflects the market sentiment is bullish," he said.

When asked on the dispute of Sung Hung Kai Properties' Kowk brothers, Li declined to make any comment.

He, however, said that it is hard to tell whether family-run firms could outperform corporate firms, and the ideal firms should adopt the governance of both format.

Earthquake donation

Having donated 130 million yuan to the victims of the Sichuan earthquake, Li Ka-shing pledged he would do his best to help the casualties and affected people in the disaster.

"I decided last Friday to allocate 100 million yuan from my foundation to subsidize the living expense and school fees for the victims," said Li.

Together with the earlier 30 million yuan donations, Li has contributed 130 million yuan for the earthquake.

He said that a total of HK$9.7 billion from his foundation has been used so far to help the people in need, of which, 80 percent was spent on the mainland.

Li believed the earthquake would not change the economic policy of the central government and the financial muscle of the mainland is strong enough to cope with the estimated 70-billion yuan economic loss from the earthquake.

(HK Edition 05/23/2008 page2)