In his first interview with international media since 2012, Hong Kong’s richest man Li Ka-shing spoke to Bloomberg Television’s Angie Lau about Brexit and China’s economic outlook.
Li Ka-shing says:
- “If Brexit happens, it will be detrimental to the U.K. and it will have a negative impact to the whole of Europe. Of course I hope that the U.K. doesn’t leave the EU.”
- “The long-term outlook for the mainland is good.”
- “People only see the debt in the state-owned enterprises and in households, when they need to recognize that China is a big exporter.”
- “China’s long-term outlook is good as the country has a trade surplus, the services industry generates income and foreign money is flowing in.”
NOTE: Li is one of the U.K.’s biggest foreign investors.
NOTE: Li’s comments on China come amid signs of stabilization thanks to government stimulus measures.
Hong Kong’s Richest Man, Li Ka-shing, Warns Against Brexit as Vote Looms
As one of the U.K.’s largest investors, Li has much at stake
U.K. accounts for 37 percent of profit at Li’s main company
Hong Kong’s richest man stepped up his calls for Britons to vote in favor of staying in the European Union as the world braces for the outcome of this week’s vote.
“If Brexit happens, it will be detrimental to the U.K. and it will have a negative impact to the whole of Europe,” CK Hutchison Holding Ltd. Chairman Li Ka-shing told Bloomberg Television’s Angie Lau in a wide-ranging interview, his first with international media since 2012. “Of course I hope that the U.K. doesn’t leave the EU.”
As one of the U.K.’s biggest investors, Li has much at stake in the June 23 referendum and his concerns echo those voiced by business and market leaders worldwide as they prepare for the possible fallout from Britain leaving the 28-nation bloc. Executives at Toyota Motor Corp. to General Electric Co. have warned that future spending in the country could be undermined if voters choose to leave the EU.
Li said three months ago he would scale back investments in the U.K. in the unlikely event that Britain were to vote to exit the EU. In Thursday’s interview, where he also talked up the long-term outlook of China’s economy, the 87-year-old billionaire stressed that his businesses in the U.K. and Europe would continue regardless of the results as polls indicate the outcome is too close to call.
Though various surveys last week indicated the Brexit camp would win, polls from Survation taken June 17-18 for the Mail on Sunday newspaper gave the “Remain” camp a three percentage point lead over those preferring to leave, reversing positions from Survation’s previous survey.
Li has amassed a fortune of $28.6 billion, third largest in Asia after Alibaba Group Holding Ltd.’s Jack Ma and Dalian Wanda Group Co.’s Wang Jianlin on the Bloomberg Billionaires Index. Yet he’s often been atop of the list, ranking as the region’s wealthiest tycoon as recently as three months ago.
Though he’s known by local media as “Superman” for his business acumen, Li has been facing some setbacks lately, most recently in the U.K.
European regulators last month blocked Li, the man behind the Three phone service, from creating the U.K.’s largest wireless carrier after vetoing his plans to buy O2 for as much as $15 billion on concerns it would hinder competition and inflate prices. European authorities are also examining whether to approve a proposed merger of his telecom business in Italy with VimpelCom Ltd.’s Wind Telecomunicazioni.
Setbacks
Days after the O2 decision, which came about six months after minority shareholders rejected a $12.4 billion buyout offer for one of his units in Hong Kong, the tycoon’s eldest son and heir said at CK Hutchison’s annual general meeting that the O2 setback may not be a bad thing in light of the growing possibility of Brexit and that the company would consider its next move after the referendum.
Li missed that shareholder’s meeting — his first absence in years — because of a stomach bug. Though the ailment caused Li to lose weight, he said his health is fine.
With the referendum days away, Li’s attention is back on the U.K., where he operates Superdrug and Savers stores, ports, the Three phone service, as well as gas and electricity distribution. His Hong Kong-based flagship CK Hutchison generated 37 percent of its total earnings — before interest and taxes — from the country last year.
That means a weaker pound, which is the world’s worst performer among Group of 10 currencies this year, is bad for CK Hutchison’s profits. Every time the pound moves by 1 percent, the company’s recurring earnings would swing 0.5 percent in the same direction, according to Benjamin Lo, an analyst at Nomura Holdings in Hong Kong.
In addition, if Brexit causes the U.K. economy to slow down — Bank of England Governor Mark Carney has warned it could lead to a recession — CK Hutchison’s port and retail operations in the country would be particularly vulnerable, Lo said. S&P Global Ratings said on Monday that although a U.K. exit could impact CK Hutchison and some of its affiliates, it’s unlikely to affect their credit ratings.
Regardless of the outcome, the Hong Kong tycoon pointed out that his business will go on.
“It’s not the end of the world if Brexit happens,” said Li.
Billionaire Li Ka-Shing Says China’s Economic Outlook Is Bright
Trade surplus, income from services help counter mounting debt
Tycoon was criticised by Chinese state media last year
Hong Kong’s richest man said China’s economic outlook is bright in the long term, casting a vote of confidence in a country that’s growing at its slowest pace in a quarter century.
China continues to have a trade surplus, the services industry is generating income and foreign money is flowing in, billionaire Li Ka-shing told Bloomberg Television’s Angie Lau in his first interview with international media since 2012. He also indicated that investors focusing on the country’s rising debt levels are missing out on the larger picture.
“The long-term outlook for the mainland is good,” the 87-year-old chairman of CK Hutchison Holdings Ltd. said from his office atop the Cheung Kong Center building in downtown Hong Kong. “People only see the debt in the state-owned enterprises and in households, when they need to recognize that China is a big exporter.”
Those export receipts — a “positive for China” according to Li — helped the trade surplus swell to 3.7 trillion yuan ($560 billion) last year, providing a buffer as the weaker yuan spurred capital outflows.
Li’s confidence in the world’s second-largest economy comes amid signs of stabilization thanks to government stimulus measures. Yet skeptics abound, with the International Monetary Fund this month citing rapidly rising credit and excess industrial capacity among risks threatening the nation’s medium-term prospects.
China’s total borrowings surged to 247 percent of economic output last year from 164 percent in 2008. That’s faster than the increase in the U.S. and U.K. during the run-up to the global financial crisis. China has accumulated debt faster than any Group of 20 nation over the past decade, according to Tom Orlik, an economist for Bloomberg Intelligence.
Li, who was born in the southeastern Chinese city of Chaozhou, has much at stake in the mainland. His real-estate unit, Cheung Kong Property Holdings Ltd., counts about half its revenue from there and has dozens of properties in the country spanning thousands of acres. His flagship company, CK Hutchison, generated 14 percent of its earnings before interest and taxes from China, where he operates about 2,500 Watsons and ParknShop stores.
Consumption has remained a prop for China’s slowing economy. Gross domestic product expanded 6.9 percent last year, the weakest pace since 1990, and is forecast by economists to increase 6.5 percent this year.
Rising China
Li, who spoke on Thursday, owes much of his success to China. In the late 1970s, the then-emerging tycoon was asked “to come in” to the Chinese market, even before it was clear that Deng Xiaoping had taken the reins of power, said Li, who forged close ties with the late paramount leader and still refers to him as “Uncle Deng.” Li had a sense that things were about to change, he said.
“At that time, China gave me a very hopeful feeling,” Li said.
China’s ensuing industrialization — on a scale the world had never seen — made Li one of its biggest beneficiaries. Though his $28 billion fortune is currently the third highest in Asia on the Bloomberg Billionaires Index, he’s often been atop of the list, ranking as the region’s wealthiest tycoon as recently as three months ago.
Chinese state media began criticizing Li last year, accusing the Hong Kong tycoon of reducing his investments in the country at a time of slowing growth. The Communist Party’s People’s Daily even posted a commentary saying Li’s diversification away from China cast a shadow over the country.
In September, Li took the rare step of issuing a three-page rebuttal to such criticism, expressing his full confidence in China and its government.
“Of course, when I read the article, I considered it misguided,” Li said. Since starting to invest in China in the late 1970s, “I’ve never stopped,” he said.
