Legislators take officials to task for Hutchison listing in Singapore
Enoch Yiu and Keith Wallis
Lawmakers will grill government officials next month on why Hong Kong lost out to Singapore in Hutchison Whampoa's multibillion-dollar trust listing plan.
Hutchison Whampoa, the Hong Kong-listed conglomerate that has businesses ranging from retail and ports to telecommunications, is set to float its container terminal businesses in Hong Kong and Shenzhen through a trust listing in Singapore that could raise at least US$6 billion.
The company chose Singapore because Hong Kong has only regulations covering property-related real-estate investment trusts and not other types of trusts.
Paul Chan Mo-po, legislator for the accountancy sector, said the government had to plug the regulatory gap to prevent the city from losing out to Singapore again. Chan will request that the Legislative Council's Finance Committee debate the matter at its meeting next month and urge the government to change the laws as soon as possible.
Hutchison had said that, while the rules and regulatory regime in Hong Kong did not allow the units to be listed, it would consider an additional listing on the Hong Kong stock exchange later if the regulatory environment changed. 'This shows Hong Kong's securities law has failed to meet with what our companies want,' Chan said.
'The government needs to update the law immediately and the lawmakers would support regulatory change that could enhance our competitiveness.'
He said that, while accounting professionals and investment bankers were familiar with trust listings, local laws had not kept pace.
His view was shared by fellow legislator Chim Pui-chung, who represents the financial services sector.
'The Hong Kong government and the Securities and Futures Commission have moved far too slowly in making changes to our regulatory regime to introduce new types of listings,' Chim said. 'This will endanger the competitiveness of Hong Kong as an international financial centre.'
SFC chairman Eddy Fong said the commission would study new rules allowing companies to list trusts, but did not have any timetable on a law change.
Hutchison saw its share price recover slightly yesterday, a day after the stock dropped 2.4 per cent after its spin-off plan was announced. The firm's counter closed at HK$93.65.
Hutchison's spin-off of its business in Singapore marks the latest battle between the bourses of Hong Kong and Singapore.
The Singapore Exchange announced in October it would merge with its Australian counterpart to vie with Hong Kong for listings of mainland firms. In the same month, it launched a so-called dark-pool platform that would trade overseas stocks, including Hong Kong stocks.
In 2003, the Fortune Real Estate Investment Trust, Li Ka-shing's property fund that owns shopping centres in Hong Kong, listed in Singapore instead of Hong Kong because reit rules were more advanced there. Hong Kong's first reit listing was in 2004.
Analysts took a mixed view of the trust listing. Julian Bu, an analyst for Macquarie Research, thought Hutchison would get a better valuation for its port and logistics assets by listing them as a trust. 'One must believe the valuation Hutchison is getting is a good one,' Bu said.
He said the company traditionally sold when valuations were high and bought when they were low. There was continuing speculation Hutchison would sell its retail assets, he said.
Citigroup was one of the few brokerages to issue a note on the planned listing after it maintained its 'buy' rating on Hutchison stock and raised its target price to HK$106, up from HK$91.50.
The three main ratings agencies said the listing would offer mixed results for the firm and for Hutchison.
Moody's Investor Services, Fitch Ratings and Standard & Poor's Ratings Services all said proceeds from the listing would reduce Hutchison's debt. But future revenue and consolidated profit would be adversely affected.
Elizabeth Allen, a senior credit officer for Moody's, said the drop in cash flow would be offset by stable dividend income from the trust. She said: 'The financial impact of this proposed transaction is uncertain at this point. However, Hutchison Whampoa has a history of monetising its assets at strong valuations.'
Tale of two cities
Past stock market battles between Hong Kong and Singapore
Conglomerate Jardine Matheson Holdings shifted its listing from Hong Kong to Singapore
Just a few months after Hong Kong tightened its futures market regulation, the Singapore International Monetary Exchange launched a Hong Kong index futures contract. Trading was very thin though
Fortune Real Estate Investment Trust, Li Ka-shing's property fund which owns shopping malls in Hong Kong, listed in Singapore. Hong Kong did not have its first reit listing until the following year
Prudential launches a secondary listing in Singapore, after securing a primary listing in Hong Kong
Singapore Exchange launches a dark pool platform that trade overseas stocks, including Hong Kong stocks
Singapore Exchange announced it will merge with the Australia Stock Exchange to compete with Hong Kong for Chinese company listings
Hutchison announced plan to spin off its port business and list it in Singapore instead of Hong Kong