When Li Ka-shing entertains a restructuring of his corporate empire you can be sure there is a very good reason. Cheung Kong's purchase of property assets from Mr Li's private company, paid for with new shares, resulting in him moving above the 35 per cent general offer threshold, looks to be no exception.
Perhaps it was pure coincidence that his late Wednesday night statement was followed by yesterday's announcement that Cheung Kong was being dumped from the benchmark Morgan Stanley Capital International (MSCI) Hong Kong index. There was an irony that headlines on the same day were lauding his populist endorsement as 'Asia's most powerful man'.
Taken at face value the MSCI move was a blow. Whether he knew it was coming is another matter. Fund managers with investment mandates tied to the MSCI indices will have to sell Cheung Kong stock as shown by yesterday's HK$7 fall in the share price, to HK$72.75.
You can be sure there were long faces around Morgan Stanley Dean Witter's investment banking division yesterday. Certainly investment bankers at other houses were gloating over imagined recriminations when future corporate finance mandates from Li firms come up for grabs.
That said, there were good reasons for the change. Increasingly, Cheung Kong is little more than a holding vehicle for its 49.9 per cent-held Hutchison Whampoa subsidiary. As such moving in pure property play Henderson Land, Li & Fung and a partial representation for Pacific Century CyberWorks - incidentally another Li family company - makes good sense in offering investors a balanced exposure to the SAR.
For Mr Li the question was how to capitalise on the down grading. Perhaps the correct starting point is that Cheung Kong looks awfully cheap compared with Hutchison. Deutsche Securities' fair-value estimate suggests it should trade at an 8.05 per cent discount to Hutchison. By that reckoning it was worth HK$90.50 yesterday. Instead, heavy selling forced its HK$72.75 close.