Li clan’s Panama problem epitomises a discount

China Merchants Port Holdings

10/02/2025 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Afiq Fitri Alias
       LONDON, Feb 10 (Reuters Breakingviews) - History rarely
repeats itself, but it often rhymes. Li Ka-shing’s Hong
Kong-based infrastructure conglomerate encountered intense
scrutiny in Washington over two decades ago after it won rights
to operate ports on both ends of the Panama Canal, a critical
artery for American trade. Now U.S. President Donald Trump is
putting pressure on Panama to cancel those contracts. In doing
so, he is shining a spotlight on the struggle by Li’s son,
Victor who took over in 2018, to shore up the value of the $19
billion CK Hutchison  0001.HK .
    In a Sino-American conflict, policymakers in Washington
worry that China could pressure pliant port operators to
sabotage the shipment of American military equipment and
supplies. Approximately 40% of all U.S. container traffic passes
through the Panama Canal annually. Such fears, whether grounded
in reality or not, wouldn’t be a headache for the Hong Kong
company if the concern was isolated: Panama’s Balboa and
Cristobal harbours are just two of 53 ports that contribute to
the 9% of revenue the group generates from ports and related
services.
    Western officials are showing increasing signs of anxiety
about CK Hutchison's ties to China, however. The European
Parliament detailed the potential risks from Chinese strategic
interests in the region’s ports, noting its investments in the
Netherlands, Spain, Sweden and Poland. It mentioned the
second-largest port terminal operator in the world alongside
state enterprises COSCO and China Merchants Port  0144.HK .
    Nonetheless, any attempt to forcibly unwind the 25-year
Panama concession, renewed in 2021, would probably trigger a
protracted legal fight and represent a significant ramping up of
the conglomerate’s problems. These will come on top of the
business pain that Trump’s tariffs on imports could inflict by
reducing throughput at ports CK Hutchison's unit operates in
Mexico and elsewhere.
    The Li family were once welcomed around the world as Hong
Kong’s pre-eminent capitalists and endured much criticism in
China for building an infrastructure portfolio overseas spanning
telecoms to power assets. Now they are viewed by the United
States as a Chinese threat. The worse this perception gets, the
harder it will be for Victor Li to deal his way out of a value
trap.
    A deep valuation discount has prompted the group to consider
a second and additional listing on an overseas exchange such as
London but it is unclear how much that will help: CK Hutchison
has lost over 40% of its market value over the past five years,
underperforming the Hong Kong benchmark Hang Seng Index  .HSI 
by a stunning 21 percentage points and it trades at one quarter
of its book value, per LSEG data.
    One solution may be to sell port assets or hand off
concessions to non-Chinese operators for more than they are
valued at within the Hong Kong listed entity. Possible bidders
could, in theory, include Adani Ports  APSE.NS  or the Gulf
giant DP World, which own ports across South America. Yet it’s
unclear what type of buyer the White House would accept, and
whether those companies would be comfortable with the whims of
the new U.S. administration. For now, perhaps, the best thing
the Li clan can do is lie low.    
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    CONTEXT NEWS
Panama is considering cancelling contracts with a subsidiary of
Hong Kong-based CK Hutchison to operate ports near the Panama
Canal, Bloomberg reported on February 5, citing sources.
    The U.S. State Department said on February 2 that Secretary
of State Marco Rubio delivered a message from U.S. President
Donald Trump to Panamanian President Jose Raul Mulino that
China's presence in the canal was a threat to the waterway and a
violation of the U.S.-Panama treaty.
    Hutchison Ports has run two ports adjacent to the canal
under a concession since 1997.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: CK Hutchison has underperformed Hong Kong's Hang Seng
Index    https://reut.rs/4gC13Au
Graphic: Hutchison Ports’ global footprint    https://reut.rs/3CJUz4F
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Una Galani and Aditya Srivastav)
 ((For previous columns by the author, Reuters customers can
click on  ALIAS/ 
afiqfitri.alias@thomsonreuters.com))