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 (Photo: Bloomberg)
(Photo: Bloomberg)

How Li Ka-shing’s bets shielded his empire from the Hong Kong crisis

  • Li Ka-shing saw the risks of placing all his bets in one place and started diversifying 25 years ago
  • Years of diversification into Europe, North America and Australia have made CK Hutchison the least exposed among Hong Kong conglomerates to the months-long political protests

Hong Kong: As Hong Kong’s fortunes swelled alongside mainland China’s, the city’s richest man was already investing elsewhere. That move has shielded Li Ka-shing’s flagship company from the brunt of the tumult now enveloping the city.

CK Hutchison Holdings Ltd, which encompasses the Li family’s assets including ports, telecommunications and retail, counted on its home base for only 10% of revenue last year. The share was 16% in 2015 following the separation of its property business eventually into CK Asset Holdings Ltd in a reorganization of the group.

Years of diversification into Europe, North America and Australia have made CK Hutchison the least exposed among Hong Kong conglomerates to the months-long political protests against Beijing’s grip over the semi-autonomous city. After tumbling to a seven-year low this month, the shares of the company have pared some of their losses, outperforming local peers in the past week.

Li, 91, saw the risks of placing all his bets in one place and started diversifying 25 years ago to “ensure he’s out of Hong Kong when everything hits the fan," said Richard Harris, chief executive officer of Hong Kong-based Port Shelter Investment Management.

“Li does stand out as easily the smartest of the big guys in Hong Kong."

Representatives for CK Hutchison and CK Asset didn’t respond to requests for comments.

After the Tiananmen Square massacre in 1989, Li—called “Superman" by his admirers for his investment calls—started to look for assets outside China. He bought Canada-based Husky Oil Ltd and expanded his telecommunications business into the UK and Australia. Last year, the energy and telecom businesses accounted for 33% of CK Hutchison’s profit before interest and tax.

The family’s real estate arm is more exposed. With about 73% of CK Asset’s revenue coming from Hong Kong and mainland China, Li’s son and successor, Victor, is following in his father’s footsteps by looking overseas to expand the property business.

Li retired from CK Hutchison and CK Asset last year, with his son Victor taking over the conglomerate. He recently brought in his 23-year-old granddaughter Michelle Li to the board of Chesterfield Realty Inc., a family-controlled unit of CK Hutchison Holdings.

Earlier this month, CK Asset agreed to pay £2.7 billion ($3.3 billion) for Greene King Plc, which operates more than 2,700 British bars, restaurants and hotels. Shaun Tan, an analyst at UOB Kay Hian in Hong Kong, said the group has been looking into “giant acquisitions overseas" for more than a year.

Yet, some of Li’s investments outside China are facing geopolitical risks.

After the UK voted in June 2016 to exit the European Union, Li said the country and Europe would face “considerable challenge" for two-to-three years, an assessment that’s been borne out by events.

CK Hutchison shares have dropped 24% since the June 2016 referendum, compared with a 23% gain in the Hang Seng benchmark as of the 26 August close in Hong Kong.

The elder Li’s early efforts to go global contrasted his peers, who remained relatively local, said Joseph Fan, a professor at the Chinese University of Hong Kong.

“Nobody can predict the long future, but foresight and balancing between diversification and localization is really important," said Fan, a specialist in governance of family-owned businesses in Asia.

He said companies with a substantial stake in Hong Kong and mainland China should “seriously think about what they can do elsewhere."

A call for peace

Li has weighed in on the protests rocking Hong Kong, urging a halt to the unrest “in the name of love."

“Love freedom, love tolerance, love the rule of law," the billionaire said in advertisements placed on the front pages of several local newspapers.

“Love China, love Hong Kong, love yourself. The best cause can lead to the worst result. Stop anger in the name of love," he said.

The message from Li was the latest in a slew of appeals for calm from the city’s tycoons as clashes between police and protesters grow increasingly violent. But unlike some of his peers, Li stopped short of spelling out his support for the Hong Kong government and leader Carrie Lam, who is facing calls from protesters to resign.

Demonstrations that started in early June over a controversial bill easing extraditions to China have morphed into a wider movement against Beijing’s tightening grip over the city.

With no signs of an end to the unrest, speculation has been growing that China will send in its troops after state media showed video footage of paramilitary police gathering in Shenzhen, just across the mainland border.

A spokesman for Li said in a separate statement that the businessman believes Hong Kong’s long-term prosperity depends on the “one country, two systems" principle and that he wants residents to treasure that and stop the violence.

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