China’s largest investment bank ordered a high-profile subsidiary to review its tenancy of premises owned by Swire Group, intensifying pressure on the Hong Kong conglomerate as tensions with Beijing continue to grip Asia’s biggest financial hub.
Senior management at state-owned Citic Securities instructed the brokerage CLSA to seek a move from its offices in One Pacific Place, the flagship property in the heart of Hong Kong that bears the Swire name, according to multiple people with direct knowledge of the situation.
The order from Citic, which acquired CLSA in 2013, follows pressure on Swire’s other holdings including Cathay Pacific, Hong Kong’s flagship airline. Businesses in the territory are closely monitoring their relationship with Beijing, with recent events stoking fears that a wrong step or inopportune comment could lead China to hammer their operations.
Swire has been among the businesses hardest hit during the protests in Hong Kong, which have flared over the past three months.
The Citic order was given in the weeks after an employee at Cathay Pacific was arrested during the protests in July, according to people with direct knowledge of the situation. The airline has been heavily criticised by Beijing over its handling of the protests, with the country’s aviation regulator accusing it of not acting quickly enough to discipline staff who participated or supported the demonstrations. Officials at the regulator told Swire executives that the airline’s top management were “not patriots”.
Two of Cathay’s top executives resigned in the wake of the criticism and the company’s non-executive chairman, John Slosar, quit a few weeks later.
CLSA said the company is not moving out of its current offices but is instead renegotiating its lease at One Pacific Place, whose other tenants include Deloitte and Moody’s.
Multiple CLSA employees have also told the Financial Times they have been advised to avoid flying on Cathay. But the order for the brokerage to review its tenancy of a Swire property dashed hopes that the fallout from the group’s run-in with Beijing would be limited to its airline, said one person close to the situation.
Swire — one of the last of Hong Kong’s hongs, or British trading houses founded in the 19th century — has seen its shares slide almost 20 per cent to HK$76.25 since the arrest of the Cathay employee in July.
Swire Properties declined to comment. Citic did not respond to a request for comment.
Commercial rents in Hong Kong have slumped as 15 consecutive weeks of protests have sown uncertainty among corporate tenants and hit retail sales.
After Prada, the Italian fashion house, opted to vacate its flagship Hong Kong store last month, its landlord Early Light Group told the South China Morning Post it was willing to slash rents by 44 per cent for the next tenant.
Additional reporting by Don Weinland
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