A major listed Hong Kong company has signed a five-year deal to secure a supply of lobster and geoduck from the Pacific.
Vanward, a subsidiary of Inno-tech Holdings Ltd, has signed a contract valid from December 2019 to November 2024 with Kappa Food. The deal has a minimum order from December 2019 to November 2020 of HKD 50 million (USD 6.4 million, EUR 5.8 million) and a commitment to increase the order by 10 percent per year thereafter. The seafood – described as clams and lobster from the Pacific – will be distributed in Hong Kong and mainland China.
Info-tech’s story further illustrates the lure of seafood trading to companies with no apparent background in the industry. The company describes its main business as designing “residential intranet” and related software. The firm also provides “e-property management” services.
In a filing to investors, Vanward said it generated revenue of HKD 60 million (USD 7.7 million, EUR 6.9 million) from sales of seafood supplied by Hong Kong-based Kappa in the period February to December 2019. The figure represents a large share of the company’s overall revenue, according to an investment banker familiar with the company’s shares.
“Companies like this suffer from slowing property markets and increased debt in mainland China and they’re always casting around for new businesses and sources of profit,” said the banker.
There appears to be major mainland involvement in Inno-tech Holdings, judging from its registration (the company was incorporated in Bermuda on 19 November, 2001). The firm has been listed on the Growth Enterprise Market of the Stock Exchange of Hong Kong since 2002.
Protests against China’s presence have dented Hong Kong’s retail and hospitality sector this year with the resultant crash in tax revenues forcing government to run a deficit in 2019 for the first time since 2004. Mainland Chinese companies have crowded into the city since its return to China in 1997, betting on rising real estate prices, but also tapping overseas markets through the city – which, unlike the mainland, maintains a convertible currency and a financial system far more connected to the outside world.
Hong Kong’s economy was 18 percent the size of mainland China’s in 2000, but is now only three percent of China’s GDP. Yet Hong Kong remains a vital economic bridge for the mainland, given its highly liquid stock market and the fact that its banking and legal system are more connected to and trusted by the international economy than China’s own. As one example, Alibaba raised USD 11 billion (EUR 9.9 billion) from its recent listing in Hong Kong.
Photo courtesy of Kapi Ng/Shutterstock
