Swire can afford to be optimistic about China

Swire Properties

15/08/2024 03:35

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Chan Ka Sing
       HONG KONG, Aug 15 (Reuters Breakingviews) - Swire
Pacific  0019.HK  is doubling down in China while others
de-risk. Having survived wars and worse times over the past 200
years, the investment plans of the Anglo-Asian conglomerate are
worth paying attention to. 
The group, led by Chair Guy Bradley, is one of the few remaining
“hongs”, or Hong Kong trading houses. The main family vehicle is
the closely held John Swire & Sons in London, which in turn
controls the $11 billion Swire Pacific. The empire spans Hong
Kong shopping malls to private hospitals and Coca-Cola bottling
plants in China.
Swire's Hong Kong-based airline, Cathay Pacific  0293.HK , last
week outlined plans to spend more than HK$100 billion ($12.8
billion) in the next seven years on its fleet, airport lounges
and more. Having just bought back the remaining preference
shares issued to the Hong Kong government as part of a pandemic
bailout, Cathay appears keen to repay the favour by showing more
commitment in the finance hub, though that outlay is slightly
lower than its annual run rate for capital expenditure in 2019.
 More eye-catching is Swire's commitment to property. Under
another HK$100 billion investment plan announced in 2022, Swire
Properties  1972.HK  will pump most of that into Hong Kong and
China through 2032. That makes Swire arguably the most bullish
foreign developer in the country’s slumping property market. By
2032, its commercial property portfolio in China will almost
double to over 18 million square feet. In comparison, CK Asset
 1113.HK , the property and infrastructure empire founded by
Hong Kong’s richest man Li Ka-shing, operates less than five
million square feet of investment properties in the mainland. 
As written into its company name, Swire focuses on Asia Pacific,
and that leaves it pretty well tied to China. Though from a
stock price perspective, it is also faring better than its
peers, so the group has reason to be optimistic. Swire's
ordinary shares are flat over the past five years, supported by
buybacks, compared to 30%-plus declines from the Hang Seng Index
 .HSI  and for Li's flagship company CK Hutchison  0001.HK . 
Trading houses such as Swire were once seen symbols of British
colonial power and they trailed while local tycoons like the
Li's thrived, but Beijing might now desire to support the
"hongs". China is trying to court foreign investment to spur its
ailing $17 trillion economy amid escalating Sino-American trade
tension. Not many foreign firms dare to think big in China at
this point, but few are better-placed than Swire to size up the
risks and the potential returns. 
     
    CONTEXT NEWS 
Swire Pacific’s Hong Kong-based aviation unit Cathay Pacific
said on Aug. 7 it will invest more than HK$100 billion ($12.8
billion) over the next seven years to improve its fleet and
other facilities.
     
    ($1 = 7.7887 Hong Kong dollars)

(Editing by Una Galani and Katrina Hamlin)
((For previous columns by the author, Reuters customers can
click on  CHAN/  mailto:KaSing.Chan@thomsonreuters.com))