A Hong Kong infrastructure company’s recent secondary listing under more relaxed London Stock Exchange rules is attracting the attention of Hong Kongers since it may signal a change in investment trends.
CK Infrastructure Holdings Limited, the infrastructure flagship company of Hong Kong tycoon Li Ka-shing’s family, has been trading on the LSE since 19 August 2024 under secondary listing status. CKI is the first company to be admitted under the new UK secondary listing rules. Previously, non-UK companies could pursue secondary LSE listings but faced more complex eligibility criteria.
Secondary listing for better fundraising
CKI has investments in energy, transport and water infrastructure, and generated nearly half of its revenue from its UK businesses in 2023, including UK Power Networks Holdings. The rest of its revenue came from Australia, continental Europe, Hong Kong, (e.g., Green Island Cement), Mainland China (e.g., Shen-Shan Highway (Eastern Section), Shantou Bay Bridge, and Panyu Beidou Bridge), Canada and New Zealand.
Over the past decades, CKI’s geographical focus has shifted from Mainland China to other countries, in particular the UK. Its UK investments include UK Power Networks, Northumbrian Water, Northern Gas Networks, Wales & West Gas Networks, Seabank Power, and Eversholt UK Rails. In 1996, when CKI listed in Hong Kong, 86.3% of its turnover came from Hong Kong, and the rest from Mainland China. However, in 2016 – 20 years after its Hong Kong listing – its UK assets already contributed 64.9% of its turnover. In 2023, they contributed 47.3%.
CKI says its reasons for the secondary listing are to benefit its geographically diverse shareholder base, assist in building its profile and provide a greater market for trading in its shares.
This approach is justified for two reasons: Since 29 July 2024, the UK has enabled overseas-listed non-UK-incorporated companies to more easily pursue a secondary listing on the LSE and, since CKI’s businesses are substantially in the UK, listing here will attract significantly more investors from the country in which it operates (i.e., the UK).
Furthermore, according to Preqin, Europe is the second-largest market for infrastructure capital raising, accounting for 38% of global private infrastructure capital raised in 2022 (after North America’s 53%, and much higher than Asia’s 5%). For CKI, the fundraising potential of London is much greater than Hong Kong’s.
But Hong Kong companies generally prefer investing in Mainland China
However, CKI’s geographical appetite is not popular among Hong Kong companies.
Among the global top infrastructure stocks, only three are Hong Kong companies. They are CKI at No. 21, CK Hutchison Holdings at No. 20 (and holding 76% of shares in CKI), and NWS Holdings at No. 59 (61% owned by Hong Kong company New World Development). While CKI allocated 35% of its assets to the UK in 2023, NWS allocated only 0.1% outside of Hong Kong (38.4%) and Mainland China (61.5%). Hence, top Hong Kong infrastructure stocks do not look like they have similar geographical allocation strategies.
In fact, CKI’s annual reports indicate that investment return on Mainland China (return on assets* of 18.2% in 2006, and 76.1% in 2016) was higher than that of the UK (15.5% in 2016, and 5.7% in 2023). Hence, for the sake of profit maximisation, without considering risks and other factors, it is natural that NWS focuses more on the Mainland China market.
Hong Kong’s overall outward direct investment also shows a strong investment appetite for China. Furthermore, the market share of investment in China has risen significantly, from 40.6% in 2018 to 49.4% in 2022. However, the share of investment in the British Virgin Islands – the second most popular destination after Mainland China – fell from 43.4% in 2012 to 30.3% in 2022. Investment in the UK also saw its share fall from 4.8% in 2004 to 1.6% in 2022.
More in line with global investor appetite
Preqin’s data, however, shows that the largest destinations for global private infrastructure investment are in Europe (41% of the global amount), which is more in line with CKI than other Hong Kong companies.
Percentage of private infrastructure capital invested by funds, by region (2022)
| Europe | North America | Asia | Latin America | Multi-region |
| 41 | 37 | 14 | 2 | 3 |
Source: Preqin
Global Infrastructure Investor Association 2022/23 data further pinpoints the importance of the UK market, with global infrastructure investment assets (US$1.1 trillion) concentrating on the United States (37% of market share), the EU (35%) and the UK (25%). These three markets together accounted for 97% of the global market.
Global trend of reducing China investment exposure
Furthermore, United Nations reports** in 2024 indicate a trend of reducing investment exposure to China. The investments of the top 100 multinational manufacturing enterprises are moving closer to home regions. The number of cross-border greenfield investments in China and Hong Kong was relatively stable in the 2000s, but then headed downwards, from about 15% in the 2000s to about 3% currently.
For instance, since 2019, some of the largest manufacturing investors in China have halved their greenfield investment in the country – including electronics company Hon Hai Precision Industry (Taiwan), chemicals company BASF (Germany), as well as car manufacturers Toyota (Japan), Volkswagen and BMW (both Germany) and Samsung Electronics (South Korea). Hon Hai cut its greenfield projects in China from 23 to 6, while Samsung cut its from 9 to 1. They have been investing more in home markets and other countries e.g., Vietnam, India and Mexico. Hon Hai even tripled the number of production projects in Vietnam.
China’s declining trend is due to multiple factors, such as recent trade and geopolitical tensions, rising labour and production costs, and the country’s economic transition towards the services sector.
However, China’s share of global merchandise exports remains at its highest levels, above 14%, and it remains the largest global exporter. This suggests that China is currently managing to maintain its role as the global factory, despite global manufacturers’ diversification from China to other countries.
Market share of global merchandise exports (%)
* Calculated by profit to year-end asset ratio.
** World Investment Report 2024 and Global economic fracturing and shifting investment patterns.
Disclaimer: This is an analysis of economies and financial markets. Nothing in this article constitutes professional and/or financial advice. The reader assumes the sole responsibility of evaluating the merits and risks associated with the use of any information.
