Cathay Pacific owner Swire faces ejection from Hang Seng

Louis Ashworth
·2-min read
Cathay Pacific
Cathay Pacific

One of Hong Kong’s most famous trading houses is facing relegation from the territory's Hang Seng index after half a century as Chinese tech firms muscle in.

Swire Pacific’s share price has fallen 42pc this year and it issued a profit warning in June after being battered by the pandemic.

The firm - which has a range of retail and real estate investments and is the biggest shareholder in airline Cathay Pacific - was a founding member of the blue chip Hang Seng, but is likely to be ejected during a reshuffle after Friday’s close. 

The firm is the quoted arm of the family-owned Swire conglomerate, which has its origins in a Liverpool-based import–export company founded by John Swire in 1816.

Merlin Swire - the company's chairman and great-great-great grandson of John - remained resolute despite unveiling a HK$7.7bn (£750m) first-half net loss prompted by Cathay Pacific’s struggles and a slew of impairment charges as it slashed the value of assets.

He said: “Whether we’re in the index or not, we’re in Hong Kong. We’re not going anywhere,” he said.

The Hong Kong Stock Exchange takes into account both market cap and turnover when it reviews membership of the Hang Seng. 

As well as its own troubles, Swire faces tough outside competition for a slot in the 50-strong index from Chinese tech groups including ecommerce giant Alibaba as rules restricting eligibility are eased.

Only HSBC – which is under pressure over its support for Hong Kong’s new national security law – has performed worse on the index this year. It is also down 42pc.

The lender remains among the largest Hang Seng members and is highly unlikely to face relegation. The index has fallen by 10.5pc overall this year.