New | BlackRock urges Hong Kong stock exchange to stop listed companies from hoarding cash

Asset manager urges HK firms to hand cash back to shareholders

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Traders work on the trading floor at the Hong Kong Stock Exchange as BlackRock asked the exchange to force companies to dispose of excess cash. Photo: Sam Tsang

Published: 1:22am, 20 Apr 2016Updated: 1:22am, 20 Apr 2016

BlackRock, the world’s largest money manager, has asked Hong Kong’s regulators to force companies to return excessive cash holdings to their shareholders.

The US asset manager wants Hong Kong Exchanges & Clearing Ltd. to change its listing rules, said Pru Bennett, head of corporate governance in the Asia-Pacific region for BlackRock. Firms that hold more than 50 per cent of their net assets in cash should be compelled to give any funds above that threshold to shareholders.

The exchange’s listing rules do not set a level beyond which a company is defined to be holding excessive cash. BlackRock started its campaign after it failed to prevent a company called G-Resources Group Ltd. from selling its largest asset, a US$775 million gold mine in Indonesia, and keeping the proceeds.

Charles Li, chief executive officer of Hong Kong Exchanges & Clearing Ltd. (HKEx), speaks during a news conference as US asset manager BlackRock urged the exchange to require companies to hand back excess cash to their shareholders. Photp: May Tse

BlackRock is not the only investor in the former British colony to seek greater influence over listed companies. David Webb, a publisher and activist investor, is trying to make firms invest in productive projects, rather than holding lots of cash. He also campaigns against firms where the majority shareholder sells the assets to change the company’s focus to a different industry.

Webb has urged the exchange’s listing committee to compel companies to return excess cash. BlackRock wants Hong Kong’s Securities and Futures Commission to back these efforts. The SFC is responsible for safeguarding the interests of investors in Hong Kong.

HKEx declined to comment on BlackRock’s proposal, saying it welcomes market participants’ feedback. An SFC spokesman didn’t respond to a request for comment.