The more MTR is slammed, the higher its shares climb

March 20, 2019 13:11
MTR shares surged to a one-year high after the company suffered one of its worst accidents in four decades of operation. Photo: MTR Corp/Reuters

Name a blue-chip company that has generated so much bad news in recent months yet has seen its shares continue to rise. MTR Corp (00066.HK), the teflon company. Its investors – don't they read the papers or watch the news?

In fact, the more bad news it generates, the better its share price gets. That's bad news for short-sellers.

On Monday, MTR shares surged to a one-year high after the company suffered one of its worst accidents in four decades of operation, forcing the rail operator to partially suspend service on one of its lines for two days.

The government-controlled railway is simply invincible. It remains a mystery to me why this company, which has been denounced for the long delays and cost overruns in the completion of the cross-border Express Rail Link and the construction scandals at the Shatin-Central Link, is one of the top-performing large-cap stocks in Hong Kong.

And true to its reputation, the company appears unrepentant even after the SAR government disposed of its top management team and repeatedly asked it for a detailed explanation of all the shoddy work and missing documents.

Not so long ago, Hong Kong was known for the efficiency of its public transport, and MTR was the torchbearer. Then things started going awry one after another.

I must admit that none of the MTR top honchos that guided the rail operator in the past – Raymond Ch'ien Kuo-fung , Jack So Chak-kwong and Sir Chow Chun-kwong – had experienced more tough luck than outgoing chairman Frederick Ma Si-hang.

The media-friendly Ma has emerged from so many tight spots, such as his involvement in the "penny stocks" fiasco, in which he made a careless remark about whether it's a good idea to remove the low-valued shares from the stock exchange, and for which his scalp was sought. He rebounded from that dark episode and eventually became one of the senior government officials with the highest ratings before his departure.

Then at the height of the problems facing the high-speed rail project, amid relentless queries from reporters, Ma blurted out: “When we tell you that it is okay, it is okay. You don’t need to worry.”

Then more shoddy construction work surfaced, proving that MTR management was not a very good handler of contractors such as Leighton and China State Construction.

Ma fell back to his OK Theory, complaining to reporters: “The entire world – except Hong Kong people who scolded MTR – praises us.”

Well, he might be right. That is the only sensible explanation I can gather as to why MTR shares have continued to rise for such a long stretch.

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EJ Insight writer