Money Matters

Li Ka-shing wants his Postal Savings Bank investment heard in Beijing

Money alone cannot explain the billionaire’s HK$10 billion bet

PUBLISHED : Friday, 30 September, 2016, 9:47pm
UPDATED : Friday, 30 September, 2016, 11:06pm

“Are you free after five?” Any veteran editor or assignment head would remember this clue from Li Ka-shing’s public relations officer.

When the question was asked, they would immediately send their reporters to China Building, then the headquarters of Li’s empire, to wait patiently in the lobby.

At about five o’clock, the lift would ding and there would be the richest man in Hong Kong. What a coincidence! The journalists would throw some questions his way, but it wouldn’t take long for them to figure out what the tycoon’s real agenda was.

Next day, the papers would splash with comments made by Li who happened to have “bumped into” some media people in Central. Whatever he said would become the talk of the town.

Whatever [Li Ka-shing] said would become the talk of the town

These were times when the internet didn’t rule. But the Superman of the day was already making good use of the city’s Clarke Kents to his own advantage.

Knowing Li’s deft touch with the media, it would very difficult to see his recent HK$10 billion bet on China Postal Savings Bank as a purely financial move.

I’m not saying that the deal is a bad trade; that couldn’t be tolerated by Li.

Instead of subscribing for shares as a cornerstone investor, he is investing in performance-linked notes.

He enjoys a lower risk this way. A holder of the note would get a decent interest rate if the stock rallies. Or they’d get the shares in the event of a price dive before the expiry of the contract. Any loss would be mitigated by gains happening before the expiry date.

Li should enjoy the most favourable terms, given the size of his bet and the presence of 16 strategic and corporate investors in the bank.Sitting on a total of HK$90 billion, many would be eager to minimise their risk by selling performance-linked notes.

He also enjoys greater flexibility, both in terms of disclosure and exit. The cornerstone investors have to disclose their leverage, if any, and are bound by a lock-up period of six months.

But none of this can explain why he has chosen to invest in a slow-growth bank, which is priced high, and to make sure his investment is widely publicised.

Ever since the listing of China Mobile in 1997, Li and his empire have played the role of strategic investor in the unwelcome listings of various leading state-backed firms in order to boost his money and fame. None has received the kind of spin evident in the publicity around his most recent investment.

On Thursday, the Li Ka Shing Foundation voluntarily put out an announcement that Mr Li, his elder son Victor Li and their three charitable foundations are holding 11.62 per cent interest in the bank.

This was followed by a statement that said: “Mr Li has full confidence in the bank....and he sees it as a long term investment.”

The foundation said they are required by law to file any holding of 5 per cent or above to the stock exchange. True, but the law requires no public announcement by the investor. The statement also came a day before the exchange revealed Li’s holding in the bank.

Unsurprisingly, Li’s investment in Postal Bank has made headlines both in Hong Kong and north of the border.

It will have been a loud vote of confidence, received loud and clear in Beijing

It is not only his biggest IPO bet since 2010, but also his largest in decades. It dwarfed the HK$1.4 billion investment in Bank of China in 2006.

It gave a much-needed boost to the bank which barely managed a full subscription of its shares and is now struggling tokeep its price above the offer price.

It will also have been a loud vote of confidence, received loud and clear in Beijing. The investment comes at a time when the world is questioning China’s ability to survive its worryingly high leverage.

That reminds me of another surprising but well publicised investment recently by Li’s Cheung Kong Holdings in a Hong Kong land plot priced 30 per cent above market consensus.

Whether these investments are sufficient to quell concerns about him moving his empire outside Hong Kong is anybody’s guess. But it would be surprising if Li had been given no welcoming signal before he made the bets.

It won’t take long to find out though. As the Chief Executive election heats up in the coming months, Li will show to whom he is giving his full allegiance.

Is he going to support the candidate blessed by Beijing? Or will he go by his belief? One thing’s for sure: the media-savvy tycoon will certainly pick the right media occasion to tell us.