(Source: The Wall Street Journal | November 29, 2015)
SM Investments is adding malls in his native China to tap consumer demand
China’s sputtering economy has spooked some foreign investors into fleeing, but not the Philippines’ richest man, Henry Sy: He’s ramping up plans to build more malls in the country of his birth.
Mr. Sy, a retail-to-banking tycoon who made his fortune in the Philippines after leaving China almost 80 years ago, is doubling down on his bet on China’s consumer class. His conglomerate, SM Investments Corp., plans to open three malls in China by 2017, to add to the six it already has. One of the new projects, in the northeastern city of Tianjin, will be the world’s largest free-standing mall when it opens next year, SM says.
SM has decided to target China as its only foreign investment destination even as domestic rivals Ayala Corp. and San Miguel Corp. focus more on opportunities within Southeast Asia. Mr. Sy’s family-run company believes it knows how to tap into China’s burgeoning middle class, and is chasing higher returns offered by its malls there compared with the Philippines, where SM dominates the retail landscape.
SM is a minnow compared with some of its Chinese competitors. Its 2014 group sales were $7.7 billion, a fraction of the $39.1 billion posted by China’s property and retail giant, Dalian Wanda Co. Yet, while billionaire Wang Jianlin’s Wandais shuttering stores amid weak consumer confidence, SM will spend about $450 million a year to build new malls in second-tier Chinese cities.
The expansion is a homecoming of sorts for the SM patriarch, who in the 1930s left Fujian for Manila to join his father, who already had a business in the city. He later set up a shoe store that he parlayed into a nationwide chain of Shoe Marts before also moving into banking and real estate.
Teresita Sy-Coson, the daughter of 90-year-old Mr. Sy, and the eldest of six siblings who now jointly run the Manila-based conglomerate, says sentiment isn’t driving the China strategy.
“We’re in China more for business reasons than for emotional reasons,” she said. “But we do have a Chinese background, and we understand the culture. In China, like the Philippines, we see this emerging middle class enjoying the same things—dining out, buying things their new income can buy them.”
— By Trefor Moss