Apparel Sourcing Intelligence - Worldwide

Li&Fung dropped from stock index of Hong Kong’s leading firms

Li&Fung will be dropped from Hong Kong’s Han Seng index of leading quoted businesses from March 6, the index compilers announced on February 12.

The delisting – which has no immediate direct commercial effect, though it is a blow to the owning family’s prestige – comes after five years of declining share prices.

From a peak of HK$19.86 in March 2012, the share price fell to HK$3.34 (US$0.43) by February 13. They had fallen 55% over the previous two years – more because of falling investor confidence in the company’s future plans than because of falling sales or profit. Though both have been sluggish for the past two years, the real problem is that the market absurdly over-valued L&F in 2012, and is now adjusting its valuation to that of a conventional, but now highly vulnerable, ¬†export & import broker.

The current valuation, in effect, is a sober assessment of a modest operator selling into relatively mature Western markets Рbut  particularly exposed to Chinese exports to the USA, which the US government has vowed to curtail.

Its 2012 valuation reflected the company’s perception of itself as an inspired genius offering a safe way into apparently booming Chinese consumer spending.