The recent resurgence of coronavirus cases in Hong Kong has Asia’s top executives worried.
“We had a good Father’s Day celebration,” Ellis Cheng, chief financial officer of Kerry Logistics, told Institutional Investor from his headquarters in Hong Kong. “But now the cases are coming again. We’re not talking about a handful of cases but 70, 100 cases. Probably the Hong Kong government will apply some sort of restrictions again soon.”
Cheng is among the members of the 2020 All-Asia Executive Team, II’s latest annual ranking of the region’s best CEOs, CFOs, and investor relations professionals. Other top-ranked executives like Jason Lau — No. 1 CFO is the basic materials division — shared his concerns.
“I hope that we can get it under control, otherwise we will have another lockdown in the city,” said Lau, whose firm Xinyi Glass Holdings Limited makes glass for cars and construction for Ford, General Motors, and Volkswagen, among others. “In the last few days we have had 100 new cases per day. They say this is the second or third wave.”
According to Lau, around 60 percent of public servants are still working at home, while many public sector firms are splitting employees into “A” and “B” teams to limit the number of people coming into the office each day.
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The pandemic has required some tricky decisions, as Lau can attest. When cases exploded in China in the aftermath of New Year celebrations, Lau made the tough call to scale back production on his firm’s glass products.
“The whole management team made the decision to stop some machinery and some product lines were scaled down,” he said. “It wasn’t easy, but we have a better position than some of our peers in China. Our cash position is very good. It didn’t take long. We started to resume full-scale at the end of March and we’re back to normal now.”
Hongbin Zhou, chief executive of Ever Sunshine Lifestyle Services Group, made the decision to start collecting immunity statistics from frontline employees as the pandemic worsened. He was especially concerned because Ever Sunshine, a China-based investment company mainly engaged in property management services, had its annual conference in Wuhan just before the outbreak.
“For two weeks, I was so afraid that one person would get Covid-19 and all our companies would be affected,” said Zhou, who was voted the No. 1 CEO in the property sector. He said more than 20 percent of the company’s employees shifted focus from their day-to-day work to help set up a platform to collect and monitor employees’ immunity data. “Once that was in place, I could sleep again,” Zhou said.
For hospitality businesses, the impact of Covid-19 has been drastic. Robert Drake, chief financial officer of Galaxy Entertainment Group and the top-ranking CFO in the gaming and lodging sector, said that maintaining close communication with investors was key as footfall in the company’s Macau resorts and casinos dropped from 100,000 people per day to more like 500 or 600 per day.
“Our numbers are down considerably,” Drake said. “So we have used the time for training staff and ramping up construction.”
Galaxy was originally planning to open “phase three” of its casino resort on Cotai, including two luxury hotels and a conference center, at the beginning of 2021. But the company was forced to slow the build during the pandemic and to suspend some activity at one worksite after three people died and four were injured in an accident in March.
Still, Drake was bullish on the opening date for the Cotai resort. “What we are doing is doubling the size of what we have built here,” he said. “As far as completion targets we are meeting our schedules, hitting budget targets, and we believe in the long term vision of Macau.”
Visitor numbers have returned to around 2,000 a day since a policy requiring travelers to quarantine for 14 days was removed between Macau and neighboring region Guangdong on July 15. However Drake said that visitors would still need a negative NAT test — a throat swab that detects coronavirus — to enter Macau and to enter a casino, and that masks and more regular cleaning schedules had become standard.
It’s not all bad news for Asian businesses: Cheng said that Kerry Logistics’ first half results, due out in August, had already surprised analysts. “We are having double digit growth in terms of bottom line,” Cheng said. “We also benefit from this situation, but we don’t want to say it very loud: ‘Because of this pandemic we have more money!’ That is not right.”
Nonetheless, the pandemic has raised the profile of supply chain logistics as an essential part of the running of society. “Without logistics we cannot have daily life,” Cheng said. The company remains optimistic despite worsening geopolitical tensions with the U.S., with Cheng noting that a trade war with China benefits fringe markets like Thailand and Taiwan, where Kerry Logistics has much greater share of the market.
Still, Cheng said Kerry Logistics is focusing on tightening its balance sheet and holding valuable assets that can be monetized. “If we have a war chest then when there are opportunities we can pay by cash and build up our coverage, enhancing our capabilities,” he said.
“We think the situation may get worse,” he added. “The economy will not turn around in the coming nine to 12 months. I don’t have the guts to spend right now.”