Annual Report 2019

166 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED Notes to the Consolidated Financial Statements For the year ended 31 December 2019 3. FINANCIAL RISK MANAGEMENT (CONTINUED) 3.3 Fair value estimation (continued) (i) Fair value of financial instruments that are measured at fair value on a recurring basis (continued) The unlisted equity instruments of a listed entity as at 31 December 2018 were transferred from level 3 to level 2 as the equity instruments have been listed during the year, and the shares held by the Group are restricted for sale upon listing and as at 31 December 2019. As at 31 December 2018, the fair value of the unlisted equity instruments of a listed entity that were accounted for as financial assets at FVTPL has valued based on the quoted price of the same listed entity in active market and adjusted for the factor of discount for lack of marketability. If the factor of discount for lack of marketability was 5% higher/lower while all the other variables were held constant, the increase/decrease in fair value of the unlisted equity instruments of a listed entity would be HK$24 million. The fair value of other unlisted equity instruments as at 31 December 2019 that are accounted for as financial assets at FVTPL or equity instruments at FVTOCI is valued based on Guideline Publicly Traded Company (the “GPTC”) method whereas the key inputs to the valuation models include the market multiples, share prices, volatilities and dividend yields of similar companies that are traded in a public market, discount of lack of marketability with reference to the share prices of listed enterprises in similar industries. At 31 December 2019, if any of the significant unobservable input above was 5% higher/lower while all the other variables were held constant, the change in fair value of these unlisted equity instruments would be insignificant. The fair value of the liabilities arising from the concession arrangements (see note 35) that are accounted for as financial liabilities at FVTPL is valued at the present value of the expected future economic benefits that will flow out of the Group arising from such obligation by using discounted cash flow method. The significant unobservable inputs are the factor of inflation and probability-adjusted business volume. As at 31 December 2019, if factor of inflation was 5% (2018: 5%) higher/lower while all the other variables were held constant, the changes in fair value of the liabilities arising from the concession arrangements would be HK$95 million (2018: insignificant). As at 31 December 2019, if the probability-adjusted business volume was 5% (2018: 5%) higher/lower while all the other variables were held constant, the increase/decrease in fair value of the liabilities arising from the concession arrangements would be HK$143 million (2018: HK$147 million). The fair value of the Put Option Liability (as defined in note 35) that is accounted for as a financial liability at FVTPL is valued using Black-Scholes option model and the significant unobservable inputs used in the fair value measurement are the exercise price, the risk-free rate, the expected dividend yield, the expected volatility and the time-to-maturity. As at 31 December 2019, if the exercise price was 5% (2018: 5%) higher/lower while all the other variables was held constant, the increase/decrease in fair value of the put option would be insignificant (2018: HK$15 million and HK$13 million respectively). As at 31 December 2019, if any of the significant unobservable inputs, other than the exercise price, was 5% (2018: 5%) higher/lower while all the other variables were held constant, the change in fair value of the put option would be insignificant (2018: insignificant). There were no significant changes in the business or economic circumstances that affect the fair value of the Group’s financial assets or any reclassification of financial assets in the year.