Asian tycoons are looking to snap up assets pummeled by the COVID-19 pandemic at bargain prices, but they are also facing hurdles as more governments seek to deter foreign takeovers of local firms.
Top executives of companies based in China, Hong Kong and Singapore have over the past three months told investors that they are looking for acquisitions.
These executives include Victor Li (李澤鉅), who took over Hong Kong’s CK Group from his father, Li Ka-shing (李嘉誠), two years ago, and billionaire Guo Guangchang (郭廣昌), founder of the predatory Chinese conglomerate Fosun Group (復星集團).
Major stock indices in the US, Europe and the Asia-Pacific region all plunged about 20 percent in the first quarter — their worst rout since the 2008-2009 global financial crisis — making everything from retail chains to hotels and property developers attractive to suitors.
Cash-rich conglomerates such as Victor Li’s CK Group are in a position to invest as others struggle to survive the pandemic, said Jonathan Galligan, group deputy head of research at securities brokerage CLSA Ltd.
“This is a tremendous opportunity for any company with cash,” Galligan said. “If you look at what’s happened in the global market, right now cash is king.”
Victor Li, 55, now chairman of CK Hutchison Holdings Ltd (長和集團), CK Asset Holdings Ltd (長江實業) and Cheung Kong Infrastructure Holdings Ltd (長江基建), on March 19 told analysts that the group’s cash flow and balance sheet are strong, and that the effects of the coronavirus offers “opportunities to look at new acquisitions.”
He did not elaborate.
The market rout has come as Victor Li’s biggest test since his father passed on the baton in May 2018. Li Ka-shing, 91, went to Hong Kong as a refugee, but went on to transform a plastic flower business into a telecommunications-to-ports global empire.
CK Hutchison — the main flagship, whose stock has tumbled 22 percent this year — said that it had as of December last year HK$145 billion (US$18.7 billion at the current exchange rate) in cash and liquid investments.
That is 3.6 times its short-term debt and 1.7 times its debt maturing over this year and next year, S&P Global Ratings said.
The group last year spent US$5.5 billion acquiring assets, including British pub operator Greene King PLC, following about US$15.2 billion of purchases the previous year, data compiled by Bloomberg showed.
The chaos triggered by the coronavirus poses another challenge for prospective buyers. Governments are pre-emptively trying to ward off predatory buying, with policymakers from Australia to Spain, Italy and Germany introducing or considering stricter rules to help shield strategically important domestic companies.
The regulatory barriers could make some acquisitions more difficult, far from the days when Chinese conglomerates such as HNA Group Co (海航集團) loaded up on debt and paid top dollar for assets such as US technology firms and European aviation businesses.
“For companies like [Victor] Li’s, they depend very much on acquisitions to grow, and that could be a big challenge in the long term,” University of Hong Kong management and strategy professor Jackie Yan said.
However, Victor Li is no stranger to being rejected by overseas regulators.
Australia in 2018 rejected CK Group’s bid to buy APA Group, an operator of gas pipelines, for A$13 billion (US$8.18 billion at the current exchange rate) on national security concerns.
Had it been successful, that would have been CK Group’s biggest overseas purchase.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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