206-year-old Swire bets another HK$120b on China growth

[HONG KONG] Swire Pacific is doubling down on its mainland China expansion and reaffirming its commitment to Hong Kong as the sprawling business empire shows tentative signs of revival following 3 years of political and pandemic-linked turmoil.

The company's real-estate arm will invest HK$100 billion (S$17.4 billion) in the region over the next decade, with more than half going to mainland China and focusing on retail-led, mixed-use property projects in major cities, chairman Guy Bradley said in a statement on Thursday (Mar 10). 1/3 will be used to expand the group's key commercial complexes in Hong Kong. Swire is also seeking opportunities in residential projects in its core markets, he said.

Separately, Swire's investment arm is set to spend HK$20 billion over the next decade in mainland China's health-care sector.

The move by the conglomerate, one of 2 remaining trading houses with roots in Hong Kong's time as a British colony, comes as the Chinese market becomes increasingly challenging for overseas investors amid tensions between Beijing and Western economies and a swelling sense of nationalism that's impacted some foreign brands. Hong Kong is also seeing an exodus of locals and expatriates as it tries to tackle Covid.

"We feel Hong Kong is a great place for business medium to long term," Bradley said at an earnings briefing. "We think that its best days are ahead of it. That's why we're putting so much investments in. We are very confident that whoever leaves Hong Kong will probably be coming back."

About 87 per cent of Swire's assets are in mainland China and Hong Kong, where it is one of the city's largest developers and owns Cathay Pacific Airways. The Swire Coca-Cola beverage business serves some 675 million customers in the mainland.

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Swire has been treading cautiously after some Cathay staff participated in the city's pro-democracy protests in 2019, drawing the ire of Chinese leadership. Then-chairman of Swire, Merlin Swire, flew to Beijing for crisis talks and top Cathay executives - including then-chief executive officer Rupert Hogg - resigned in what was widely viewed as a move to pacify the central government.

Cathay has since been hammered by the Covid-19 pandemic and Hong Kong's travel curbs, which are among the strictest in the world. Cathay said on Wednesday its full-year loss narrowed to HK$5.5 billion from a record HK$21.6 billion in 2020, and it is confident about its longer-term recovery despite the serious short-term challenges.

On Thursday, Swire reported underlying profit of HK$5.3 billion for 2021, compared with a loss of HK$4 billion the year before, as losses at Cathay narrowed and its beverage businesses posted strong growth. 

The group is seeking to offload non-core assets to redirect investment into sectors like health care. It agreed to sell Swire Pacific Offshore Holdings to Tidewater for US$190 million partly in cash and partly in warrants, which will entitle Swire to purchase 8.1 million Tidewater shares at a nominal price, the company announced on Wednesday. BLOOMBERG