Peking casting a lengthening shadow

Stephen Vines reports from Hong Kong on the problems facing Jardine Matheson, the trading giant that is bidding for Northern Electric, as it tussles with a hostile China

Hong Kong's so called "princely house", the Jardine Group, , looks as though it has every reason to celebrate. But much of the recent news is overshadowed by profound longer-term problems.

Jardine's main listed companies recently reported healthy earnings for 1994. Hongkong Land, the blue-chip owner of prime properties in Hong Kong's central district, reported a 19 per cent increase in earnings. It holds a controlling 25 per cent stake in Trafalgar House, which is bidding for Northern Electric.

Dairy Farm, the food distribution and retailing arm, also scored well with a 13 per cent increase. The parent, Jardine Matheson Holdings, turned in a better-than-expected 16.5 per cent profits rise after tax .

The good news from Hong Kong was echoed in Singapore, where Jardine's main companies have transferred their listing.

On Monday, Hongkong Land, Dairy Farm and the Mandarin Oriental hotel group made a respectable dbut on the Singapore exchange while the shares in Jardine Strategic and Jardine Matheson Holdings, which had already made the move, were achieving prices arguably higher than they might have achieved on the Hong Kong exchange.

However, the volume of trading in these two shares is down, indirectly confirming some of the fears of those who forecast liquidity difficulties for Jardine shares away from home base. Jardine went to Singapore after it lost an acrimonious battle with the Hong Kong regulatory authorities about preserving certain privileges for the group following the transfer of the primary listing to London.

Jardine is also involved in a far more profound battle with China, Hong Kong's impending sovereign power, which has singled out the group as a legacy of colonial rule and made it clear that it can expect no favours from the incoming administration.

Other companies in the colony have been quick to pick up the signals from Peking and are steering clear of Jardine as a business partner in large projects, greatly reducing the prospects for new business.

Peking sees Jardine, and the Keswick family that controls it, as supporters of Governor Chris Patten's democratic reform plans, which China bitterly opposes. It also holds the Princely House responsible for starting the exodus of companies moving their place of domicile to offshore locations.

Although Jardine stoutly denies having a lack of confidence in the new regime, it is clear that it does. More galling for Peking, it is clear that most listed companies in Hong Kong feel the same way but only found the courage to change their place of domicile in the wake of Jardine's example.

In an attempt to defuse the high level of tension between the group and the Chinese authorities, Alisdair Morrison, the managing director of Jardine Matheson Holdings, said in a speech at the beginning of the year that "plainly some of Jardine's actions have caused offence in China in recent years" - effectively an apology. The apology was not accepted. A foreign ministry spokesman came back within two days to say that Jardine would need to do more to demonstrate its sincerity.

Despite all the talk of Jardine quitting Hong Kong, the reality is that it generates over 60 per cent of its profits from Hong Kong and China.

Jardine has an US$8bn (£5bn) property portfolio in Hong Kong and is the largest private sector employer in the colony.

Like it or not, Jardine cannot simply up sticks. Companies that are equally worried about the colony's future under Chinese rule have managed to move a far higher proportion of their assets overseas with far less attention.

As the current battle for Northern Electric shows, it has never been easy for Jardine to operate outside the Far East. Jardine's control of Trafalgar House is just one example of disappointment from foreign investments.

Also in Britain, Jardine gained control over the Kwik- Save supermarket chain, through Dairy Farm, but it has proved less profitable than the Wellcome supermarket chain, one of two that dominate the grocery business in Hong Kong.

However, none of the overseas investments have proved to be as disastrous as the acquisition of a 20 per cent stake in the Bear Sterns brokerage of the US eight years ago. The bid was made as the market crashed and litigation followed in spades. Put simply, Jardine is not so sure-footed when it ventures out of Asia.

Even back home, Hongkong Land, its prime asset, is facing the problems of falling prices in the colony's property market, which have become acute in the central district, which is dominated by the company.

A Vickers/Knight-Ridder report issued this week estimates that values have fallen by a third in central since their peak in the second quarter last year. Unusually, by Hong Kong standards, the Keswick family control the Jardine group through a relatively modest holding.

This makes the companies, especially Hongkong Land, vulnerable to takeover. In 1988 a group of the colony's most powerful businessmen, including the ubiquitous Li Ka-shing, made a run at Hongkong Land and had to be bought out at considerable cost.

Part of the agreement with Mr Li and his colleagues involved the imposition of a hands-off period for buying shares.

This has expired and the possibility of another bid cannot be ruled out. Mr Morrison may well have been understating the situation when he said, at the time of the Jardine Matheson results announcement, that "our companies are well placed, but it is difficult to bump the market conditions".

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Sport
Gabriel Agbonlahor, Alexis Sanchez, Alan Pardew and Graziano Pelle
footballAfter QPR draw, follow Villa vs Arsenal, Newcastle vs Hull and Swansea vs Southampton
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
New Articles
i100... with this review
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
New Articles
i100
Arts and Entertainment
musicHow female vocalists are now writing their own hits
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam