Hong Kong’s Richest Man Brexit Warning

By Prudence Ho - Bloomberg Jun 21, 2016, 10:07 AM 

  • 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.

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.

Bloomberg News

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