RICH PICKINGS: A gloomy start

It's not just Eddy Groves who has had a poor start to the year. Australia's wealthiest investors have had more than $5.5 billion slashed from the value of their portfolios in just two months.

While the spectacular crash of Eddy Groves – whose fortune dropped from $140 million to less than $40 million in a few days – has captivated the business world this week, the fortune of another wealthy Australian entrepreneur has suffered a similarly spectacular decrease.

Shi Zhengrong is the founder of solar power company Suntech Power, which listed on the New York Stock Exchange in December 2005. Shi, who was born in China and remains based there, became an Australian citizen in the 1990s while studying and working at the University of New South Wales. He retains a 40.1 per cent stake in Suntech and became one of China’s richest men late last year when its shares, which listed at $US20, touched $US90. That valued his stake at $US5.5 billion.

But so far this year it’s been all bad news. On February 20, the company’s first quarter and annual revenue forecasts came in about 15 per cent below analysts’ expectations. The fallout was savage, with investors sending Suntech’s shares down 21 per cent in one day. The stock is now sitting at around $US38, the level at which it traded for most of 2007. But since the start of the year, the value of Shi’s stake has fallen a whopping $US2.6 billion and is now worth $US2.4 billion.

The gentle rise in the Australian sharemarket this week would have pleased many of our wealthiest investors. James Packer’s fortune increased $169.2 million over the week, thanks to a jump in the share price of his casino business Crown following its interim profit result last week. A small rise in Westfield shares added $71.8 million to Frank Lowy's portfolio this week, Len Ainsworth made $144.8 million as Aristocrat shares took off and Gerry Harvey’s stake in Harvey Norman is worth $74.8 million more than a week ago.

But boy, did these guys need to have a good run. Including Shi Zhengrong’s loss, Australia’s 30 biggest individual sharemarket investors have seen more than $5.5 billion sliced off the value of their portfolios since the start of 2008.

James Packer’s fortune has fallen $652.7 million since the start of the year to $4.8 billion, thanks in part to a 47.3 per cent fall in the share price of Challenger and 44 per cent slide in uranium miner Wildhorse Energy.

Frank Lowy’s stake in Westfield has fallen by $575 million or 17.1 per cent to $3.2 billion as property stocks have been sold off across the board.

Rising interest rates and falling consumer confidence has weighed on Harvey Norman’s share price, which is down 30.9 per cent since the start of the year. The value of Gerry Harvey’s stake has dropped $579.4 million to $1.5 billion while fellow Harvey Norman director Ian Norman has had $326 million wiped off his shares.

Worley Parsons chief executive John Grill has been another big loser. The value of his stake in the engineering company has fallen $420 million since the start of the year to $1.2 billion.

But while the big boys are struggling, figures from CommSec released earlier this week should provide a bit of cheer to the rest of us. Data from federal Treasury indicates total Australian private wealth grew by 3.3 per cent in the September 2007 quarter to $8.8 trillion. Commsec estimates that the average Australian is now worth $418,000 up $65,000 from a year ago.

While this data does not take into account the slide in equity markets in the first two months of 2008, as CommSec’s Craig James points out it does highlight why the Reserve Bank is having so much trouble slowing the economy.

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