Li Ka-shing’s flagship firms CK Hutchison Holdings (00001.HK) and Cheung Kong Infrastructure Holdings (01038.HK) have taken a big knock on the Hong Kong stock market following Britain’s vote to leave the European Union.
Investors are fretting that Brexit and the subsequent slide in the British pound could dent the earnings of the Hong Kong-based firms which have significant exposure to the United Kingdom.
According to Bloomberg, CK Hutchison and Cheung Kong Infrastructure shares have fallen more than 8 percent after the Brexit vote, making them the biggest losers among the Hang Seng Index constituents.
Among various businesses, Li firms operate Superdrug and Savers stores, ports, the 3 phone service, as well as gas and electricity distribution in the UK.
CK Hutchison generated 37 percent of its total earnings before interest and taxes from the UK last year, according to the report.
“His European exposure will prove to be difficult in the coming years, both from a currency translation perspective, as well as from a fundamental earnings and growth perspective,” Sandy Mehta, CEO of Hong Kong-based advisory firm Value Investment Principals, told Bloomberg.
Sterling has tumbled about 10 percent in the past two days, hitting a three-decade low against the US dollar.
“If Brexit happens, it will be detrimental to the UK and it will have a negative impact to the whole of Europe,” Li told Bloomberg Television last week prior to the Thursday referendum.
Morgan Stanley and Citigroup cut their ratings on CK Hutchison in the wake of the British vote, but there are still 13 buy recommendations on the stock.
Cheung Kong Infrastructure, however, has more neutral calls than buys, the report said.
CK Hutchison said in a statement after the Brexit vote that the group is “confident that our UK businesses — which are strongly focused on providing vital goods and services to UK communities — will continue to thrive.”
– Contact us at [email protected]