BSH: HK Protests and Blues

As the protests continue to rumble on in Hong Kong, the economy there shows signs of further weakening. While the Hong Kong stock market is as yet to be affected, various financial news outlets have spoken of potential investor flight from the former colony as long-term prospects grow increasingly bleak. What could this mean for Birmingham Sports Holdings and by extension its subsidiary Birmingham City FC?

Hong Kong

It’s very possible that you have already seen imagery online from the protests in Hong Kong. Starting as huge peaceful rallies back in June, they have turned into ever darker, ever more violent actions as the Hong Kong Government holds firm against the protestor’s demands.

I don’t want to get into the ins and outs of the protest but if you would like to understand more the excellent Hong Kong Free Press have English language coverage at this link.

The Current Stock Market Situation

As it stands, shares in Birmingham Sports Holdings have held their value throughout the process, much as the Hang Seng Index has in the last few months. The stock market has continued to trade as usual throughout the whole crisis.

Share trading on the stock exchange has been insulated somewhat from the troubles affecting Hong Kong by the fact that most businesses listed on the main board of the stock market don’t actually trade in Hong Kong.

Many, like Birmingham Sports Holdings, are holding companies operating subsidiaries around the world.

However, cracks in that insulation are starting to show.

The South China Morning Post reported that the stock exchange took a pounding on expectations that President Trump will sign a bill into US law supporting the protestors.

Bloomberg have reported that the forex markets in Hong Kong are starting to crack too, with interest rates climbing and liquidity tightening.

Hong Kong investor David Webb, who runs the incredibly useful webb-site.com, talked of how foreign capital is observing the situation and how a pivotal moment (for example the imposition of martial law or similar) could cause everything to fall apart.

From my own conversations with people in the former colony, there is agreement that the longer that the protests go on and the more violent they get, the more likely it would be that something will happen that completely cracks investor confidence.

The effect this could have on Blues

Birmingham City are reliant on their Hong Kong parent – and to be more accurate, investors in that parent company – for money to keep the club running.

As long as investors keep putting money into the holding company, then the wheels keep churning and everyone is happy.

However, this means that any kind of investor panic which stops money coming into the holding company would have a huge effect on the club.

As it stands, there are two groups of people who Blues depend on.

The first group of people is Trillion Trophy Asia, which is owned by Paul Suen Cho Hung. TTA are the largest shareholder in BSH, and as such it’s their name above the door.

I’ll be honest that I’m not exactly sure if Suen can actually decide to bail on BSH due to the onerous conditions placed upon him when shares in BSH were relisted on the stock exchange.

However, if Suen did decide to pull out, it could be catastrophic as BSH would very quickly need someone to step in and right the ship.

That person could be the second group of people, who are all linked to the elusive “Mr King”, better known as Wang Yaohui.

However, matters on the pitch affect Mr King’s continued involvement in the club.

Despite protestations to the contrary by Blues head of communications Colin Tattum at the Supporters Forum a couple of weeks ago, I’m still led to believe that the expectation from Mr King is the playoffs at a minimum.

It’s my estimate that groups linked to Mr King have invested as much as £70million into Birmingham Sports Holdings (and thus into Birmingham City).

Should Blues look unable to make a firm go of promotion to the top flight, there is every chance Mr King could cut his losses and walk away.

The question would then be, who else would put the money in?

So it’s all doom and gloom then?

That depends on the way you look at things.

While I think there would be no doubt some short-term pain should either one of both of Suen and King walk away, I also strongly believe that they could be quickly replaced.

There is always the possibility that someone else from Hong Kong / China would pick up the holding company – after all, the stock listing itself will in all probability remain valuable no matter what happens in Hong Kong.

Failing that, I have reason to believe that would be more than enough interest from this side of the world to take the club on.

The only thing I think we know for certain is that there is no certainty.

I’m of the belief that the talk of long term plans from the board isn’t worth much right now; simply because I don’t think anyone knows how the situation in Hong Kong is going to play out.

As someone with somewhat personal connection to Hong Kong, I’m hoping for a peaceful resolution to the current period of trouble.

As a Birmingham City fan, I’m starting to believe it’s important for the club that happens – because the uncertainty will only grow if things continue to get worse.

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