Date
20 September 2017
Li Ka-shing (center) is flanked by elder son Victor Li (left) and Canning Fok at the announcement of a sweeping revamp of his business empire. Photo: NSA
Li Ka-shing (center) is flanked by elder son Victor Li (left) and Canning Fok at the announcement of a sweeping revamp of his business empire. Photo: NSA

The best time to buy merged Li stock

There are different theories about the landmark restructuring of the business empire of Hong Kong tycoon Li Ka-shing.

However, whatever the thinking, investors should look for buying opportunities.

The Li family has invested more than HK$100 billion (US$12.9 billion) in overseas utilities since the 2008 financial crisis.

By contrast, the company only bid for rebuilding projects in Sham Shui Po in 2014 after snapping up a plot in Ma On Shan in 2012.

The group made a record HK$37 billion in property sales last year.

The biggest threat to the Hong Kong property market is slower economic growth in the mainland rather than an interest rate hike in the United States.

And the biggest headwind in the real estate sector in the mainland is coming from the government crackdown on corruption, Wang Shi, chairman and founder of China Vanke Co. (02202.HK), said.

Oil prices have been on a freefall while the US dollar keeps strengthening.

Given these concerns, what impact will a negative market environment have on Hong Kong housing prices?

Investors should find buying opportunities if some institutional investors sell Cheung Kong or Hutchison shares after the restructuring.

Li’s plan calls for all non-property assets of Cheung Kong to be folded into the newly established CKH Holdings, which will be listed on the Hong Kong stock exchange by way of introduction.

However, it could take several months before CKH Holdings can become a Hang Seng Index constituent.

The waiting period for companies outside the top five by market capitalization is six months or more against three months for those in the magic circle.

A number of index funds may have to sell related stocks to comply with listing regulations, opening up some bargain-hunting opportunities for investors.

Also, all Hutchison shares in issue, other than those held by Cheung Kong Group, will be canceled, and Hutchison will be delisted and become a wholly owned subsidiary of CKH Holdings.

At present, Hutchison accounts for 3 percent of the Hang Seng Index.

Index funds may have to sell Hutchison and switch to other bets until CKH Holdings becomes an index constituent.

That would be a perfect moment to buy related plays.

– Contact us at [email protected]

JZ/JP/RA

Columnist at the Hong Kong Economic Journal

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