What's up at Li & Fung, the last of Hong Kong's big comprador companies? Its shares suffered a massive slump after the company recently announced its operating profit was down by 22 per cent. Once regarded as a safe and steady investment L&F now suffers the ignominy of seeing about half of its broker ratings recommending a "sell". This is far worse than the rating on practically any other major Asian counter.
Investors appear to have been unnerved by Li & Fung's attempts to move away from its comprador role and go on a spree to buy firms in the supply chain that lie at the core of its business.
Comprador is not a term that is used much these days; it sounds rather old-fashioned. It originally meant a household steward but in colonial times was also used for the often wily individuals who provided a vital link between local businesses and the big hongs or conglomerates.
Most of these were owned by foreigners, who, no doubt rightly, felt that they could only operate effectively in the local economy with insider assistance.
As Hong Kong's economy developed and became more linked to the Chinese mainland a new breed of companies came into being, acting as go-betweens for overseas buyers and suppliers in China. Some actively subverted international trade embargoes put on China during the Maoist era.
The fancy title of "sourcing company", which L&F uses, is nothing more or less than the old comprador business (minus the sanction busting). The company finds suppliers, arranges shipment of goods and sees to a host of other things required to get the goods from China to markets overseas.