Panama Port Sale by True Master of The Art of The Deal

Hong Kong’s CK Hutchison cashes out with a US$20 billion profit

Most of the US media have gone along with “Art of the Deal” Donald Trump’s claim of victory with the agreement for a consortium led by Wall Street giant BlackRock to acquire management of Panama’s ports. Hence it is claimed to have taken them away from China and returned them to US control.

The reality is that the canal was never under Chinese control. The sale was made by a master asset dealer from Hong Kong, Li Ka-shing, one of Asia’s most illustrious capitalists, and the shareholders of Hong Kong-listed CK Hutchison. It anyway was only the operator of two of the ports, not the owner, they remain owned by the Panama government.

News of the transaction sent the price of CK Hutchison, the current operator of the ports, up by 30 percent in Hong Kong trading. The deal includes not only the two Panama operations but a total of 43 ports in 23 countries around the world. It will require approval by the Panamanian government.

All the publicity surrounding the canal and Trump’s ambitions for nationalist victories, however meaningless in practice, thus enable the Hong Kong-based Hutchison (supposedly tainted with being Chinese though its origins are colonial) not only to sell the Panama ports at a very good price but most of the many other ports around the world which it operates, in a single deal. Hutchison will keep only its Hong Kong and China ports, which account for only about 20 percent of its port business.

In return, the conglomerate will collect almost US$20 billion in cash at a time when doubts hang over the growth of the port business in general as trade wars fueled by Trump tariffs begin to escalate, spelling a likely fall in global shipping volumes.

The 30 percent rise in CK Hutchison’s share price has to be seen in the context that its total port business in 2023 (the latest for which full years results are available) accounted for only 10 percent of the group’s revenue and 17 percent of its earnings. Its other major business streams are in retail, infrastructure and telecommunications, essentially operating as a diversified conglomerate with a focus on these areas across multiple markets globally. Trump’s rhetoric thus drove up the value of the ports to the advantage of the non-American owner.

In a business career spanning 70 years, Li has always shown himself a master of timing, and an investor with scant regard for sentiment of nationality. He retired in 2018, passing control of his business empire to his son, Victor Li, but remains a senior adviser. He was born in Guangdong Province and fled with his family to Hong Kong in 1940 as refugees. He was forced to leave school at 15 and famously went to work at a plastics trading company where he worked 16 hours a day, starting his own company, Cheung Kong Industries, when he was 22. Cheung Kong developed into a leading real estate investment company, eventually taking over the venerable 19^th-century British colonial hong, Hutchison Whampoa, as well as Hongkong Electric Holdings.

Regarded as a rapacious capitalist, Li is not much liked in Beijing for this reason. He used cash from his Hong Kong property interests to build a global empire. Instead of seeing Trump’s moves on the Panama Canal as a threat, he saw it as an opportunity to get out of ports generally. Although they historically have offered quite attractive and stable earnings, Trump has complained about the costs of US shipping through Panama, and now the impact of new tariffs could be an added burden on profits.

BlackRock proved eager to ingratiate itself with Trump as well as to expand its direct ownership of assets while its main business was the management of others’ assets. It has about US$12 trillion under management. BlackRock boss Larry Fink is a registered Democrat, but his eagerness to please Trump reflects more general attitudes on Wall Street and in Silicon Valley.

Prior to Trump’s election, BlackRock had been an eager advocate of climate and diversity goals that are now dubbed “woke,” but Fink appears to have abandoned such ideals in the face of Trumpism. The internationalist outlook of the major Wall Street firms in general is now under question as they abandon globalism to become agents of MAGA nationalism, however destructive this could prove of their long-term global interests.