Singapore’s Straits Times Index kicks out Li Ka-shing’s port trust as US-China trade war crimps stock’s value by 84 per cent
- The market value of Hutchison Port Holdings Trust has plummeted by 84 per cent since its 2011 initial public offering
- That stock’s capitalisation at US$1.4 billion is the lowest among the 30 members of the Straits Times Index
Hutchison Port Holdings Trust will be removed from Singapore’s Straits Times Index after a dramatic fall in its market value amid rising global trade tensions, the index provider said in a statement.
The move marks the end of an era for the Li Ka-shing backed container port trust in Hong Kong, whose initial public offering in 2011 was among the biggest that year.
The market capitalisation has dropped 84 per cent since the IPO to around US$1.4 billion, the lowest among the 30 constituents of the Straits Times Index, according to data compiled by Bloomberg. The decline was accompanied by falling operating income since 2016 due to weakened trade demand.
Hong Kong, once the world’s busiest container port, has lost volumes to its neighbours in the last two decades and slipped in global rankings to seventh place last year, falling behind Shanghai, Singapore, Ningo, Shenzhen, Guangzhou and Busan.
The city has been handling fewer boxes every month since October 2017. A prolonged US-China trade war and one of the worst protests in Hong Kong since the 1997 handover mean the situation could worsen.
Shares in the container port trust fell as much as 1.3 per cent in Singapore on Friday, extending their decline this year to 37 per cent. That compares to a 2.7 per cent gain for the Straits Times Index.
“Albeit the uncertainties in the global trade outlook, we will continue to adhere to cost disciplines and efficiency improvements to face the challenges ahead and improve the competitiveness of our ports,” the firm said in response to a Bloomberg query.
OCBC analyst Chu Peng – who expected the removal of the stock from the index – has reduced his price target on the shares to US$0.17 from US$0.22 while keeping a hold rating given that US-China trade war will result in high volatility in the share price. The stock currently has zero “buy”, four “hold” and two “sell” ratings, according to data compiled by Bloomberg.
Hutchison Port operates container terminals in Hong Kong and Shenzhen, as well as river terminals in Guangdong. Li’s CK Hutchison Holdings owns 30.1 per cent of Hutchison Port through its affiliates and Hutchison Port Group Holdings holds 27.6 per cent, according to the 2018 annual report of the Singapore-listed company. Temasek Holdings holds 14 per cent via subsidiaries and associated companies, such as PSA International.
Aside from the removal of Hutchison Port, Mapletree Commercial Trust will be added to Straits Times Index following a quarterly review in September, FTSE Russell said in a statement on Thursday. The next review will be in December.
Removal from the gauge “could result in further selling pressure as HPHT is increasingly being viewed as a proxy to the US-China trade tensions,” the OCBC analyst said.
