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hunger games meets THEwolf ofwall street chinese tourists: exploring new frontiers HOME PRICES FEEL THE CHILL OF cooling measures



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In this issue, we bring you a comprehensive 2013 review of Investment Banking in Asia. Just when investment bankers thought 2012 couldn’t be worse, along came 2013. With the full figures now in for the year, research agency Dealogic reported investment banking revenue in AsiaPac ex Japan was down a bonus-sapping 12% to $8.8b. It’s more the Hunger Games than the Wolf of Wall Street. There may still be some wolves left on Wall Street, but the Asian wolves around Shenton Way and Queens Road Central are looking rather mangy and underfed. We also sifted through over a hundred nominations submitted by founders, investors and industry observers to give you the 20 hottest startups to watch in 2014. The companies selected started operating from 2012 and were able to make their business flourish from initial funding that ranges from $20,000 to $15.5M. Find out how each is shaking up its sector’s norms with innovations. Also, check out who made it to our annual list of the 25 largest law firms. Enjoy the issue!

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CNH: Will Qianhai jeopardize Hong Kong’s position? 6 Sep 2013

Interest rate strategy

CNH: Will Qianhai jeopardize Hong Kong’s position? DBS Group Research

6 Sep 2013

In mid-2012, the China’s State Council approved the development of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone. Four industries were focussed upon: finance, logistics, information services and science & technology services. Particular emphasis was placed on finance, for which the government designated Qianhai to be built into an experimental zone for financial innovation and further opening-up to the outside world. Back then, market watchers found it difficult to associate the mudflat with such bold plans. We, however, have been optimistic about the project. Specifically, we stated in earlier report that the zone’s development would be kicked off by the launch of a cross-border RMB lending scheme (see “CNH: RMB lending set to cross border in pilot plan”, 16 April 2012). In Jan13, only nine months after the approval has been granted, fifteen Hong Kong banks were authorized to offer a combined RMB2 bn of loans for Qianhai companies. More impressively, the first Qianhai land auction was held in July and construction is planned to start by October. It signals that the zone has already entered into an expansion period.

An analogy of Shenzhen SEZ in 1980s While many were previously skeptical about Qianhai’s future, they have now turned to the other extreme of worrying that its rise might jeopardize Hong Kong. Such fears are overblown. In our view, the Qianhai project is similar to the establishment of the Shenzhen Special Economic Zone (SEZ) in the 1980s, which has, in fact, bolstered Hong Kong’s competiveness.

Three decades ago, Hong Kong’s manufacturing industry was seriously hit by soaring costs

Three decades ago, Hong Kong’s manufacturing industry was hit by soaring costs. Factory rents and manufacturing labor wages ballooned 140% and 170% respectively during 1980-90. The city’s international competiveness was being challenged by several lower-cost developing countries in the region. For instance, the manufacturing labor costs in IndoneChart 1: Transformation of HK economic activities sia at the time was only during 1980-2000 one-fourth that of Hong Kong. 30% 90% Shenzhen became an expansion outlet for Hong Kong manufacturers and the timing could not have been better. The availability of abundant inexpensive land and labor in Shenzhen made it possible for Hong Kong manufacturers to move labor-intensive processes across the river. Meanwhile, more skill-inten-

Manufacturing 25%

Service (rhs)


20% 80% 15% 75% 10% 70%

5% 0%

65% 1980






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*If you’re reading the small print you may be missing the big picture    


Find out why 2014 is a tricky

18 year for Hong Kong banks


STORY 20 COVER Hong Kong’s 20 hottest startups

EVENTS High-Flyers 2013

to watch in 2014

FIRST 08 Up to 5% salary increase in sight 08 HK bourse to sustain winning feat

in 2014

09 Home prices feel the chill of

cooling measures


OPINION 46 Tim Hamlett: Case against the defence

48 Ian Perkin: Policy Address short on

vision, big on detail

50 Hemlock: ‘Disputes in HK’, and

other absurd predictions

10 Office rents to drop slightly


10 86% of Hong Kongers say house

prices are overvalued

24 Rankings

26 Legal Briefing

14 OCBC acquisition tests Wing Hang

Bank’s worth

year for Hong Kong banks Withdrawal of liquidity and rising interest rates threaten banks’ stability

32 Chinese tourists: Exploring

new frontiers The Chinese are exploring new locations such as Dubai, France, and Kenya.

16 Financial Insight

12 Check out Hong Kong’s 10 largest shopping centres

18 Find out why 2014 is a tricky

28 CMO Briefing 30 CIO Briefing

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 19/F, Yat Chau Building, 4 262 HONG KONG BUSINESS | MARCHHong 2014 Kong Des Voeux Road Central,

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News from Daily news from Hong Kong most read


Hong Kong banks to benefit from household debt curbs: Fitch Fitch Ratings says new stress testing requirements on personal loans in Hong Kong will protect borrowers from excessive debt accumulation and limit banks’ exposure to a potential interest-rate hike. This adds personal loans to the authorities’ focus on mortgages. The changes, however, do not impact the banks’ China-related lending, which Fitch expects to remain the major asset-quality pressure point.



Hong Kong gives go signal for 3-day paternity leave According to Regus, Hong Kong government introduced legislation that would allow for three days of paternity leave for fathers following the birth of a child. The company says that the long-awaited move will help new parents to juggle their work commitments with the considerable demands of coping with a newborn child. Regus revealed a gap between the work/ life balance of Hong Kong men.

Hong Kong cracks down on unlicensed guesthouses The Home Affairs Department’s Office of the Licensing Authority has stepped up enforcement action against unlicensed guesthouses during the CNY. Since January 27, the office has made surprise inspections, sent undercover officers in as tourists to crackdown on such guesthouses throughout the city. Among 90 premises inspected, six were suspected to have unlicensed guesthouse activities.

How Hong Kong SMEs can tackle cloud computing woes BY APPLETON YUEN When SMEs in Hong Kong take a look at the past year and a step forward in 2014 along with the trends of cloud computing, they understand that deploying cloud computing becomes the crucial element in their development as it offers advantages to overcome today’s challenges of SMEs, including budget constraints, dynamic market demands, skills and resources shortage, and increasingly strict datarelated regulations.

Why flexible working appeals to Hong Kong job applicants BY JOHN HENDERSON Flexible working used to be a benefit of salespeople and a few senior managers. But times have changed: new technologies and the need to increase productivity have driven the adoption of flexible working practices significantly, to the point where, at least some of the time, it has come to be regarded as essential. This is particularly true of tech-savvy Generations Y and Z who see it as normal to be constantly online via smartphones, for example.

most read commentary Hong Kong CEOs reveal top HR priorities this year BY ROB ENGLAND In a world of ever changing dynamics, it is up to us to create effective strategies to improve all area of business, including HR. In Hong Kong many CEOs are planning to focus on internal operational strategies and work with the key stakeholders to acquire, integrate and retain the right talent. I have identified three main HR priorities for Hong Kong CEOs when I spoke to CEOs from a variety of industries. These are critical for finding and hiring the right talent.

ear#sthash.7n1G9IR8.dpuf - See more at:

FIRST investors catch the best fundraising opportunities,” Wong notes.

up to 5% salary increase in sight

It appears that 2014 will be a good one for Hong Kong employees, as they are projected to make 5% more this year, according to a recent survey conducted by Michael Page Hong Kong. The report forecasts that average salaries in the country will increase over the next 12 months, with 71% of all surveyed employers expected to offer salary increases of 1-5%. The findings are based on an annual survey of employers in Hong Kong, which includes responses from companies ranging from market leading multinationals to small and medium-sized enterprises. More than 500 employers contributed their views on salary increases, employee retention, bonus payments, and recruitment activity. Industries expected to provide employees with a salary increase of between 6-10% include Procurement & Supply Chain (50%), Secretarial & Office Support (42%) and Legal (33%). Based on survey responses, salary levels will primarily be affected by factors such as global economic conditions (60%), domestic economic conditions (58%), and competition between companies for talent (52%). Retaining talent While Hong Kong is a mature employment market, there is progress to be made with regard to employee benefits offered by organisations. According to survey findings, 88% of employers plan to provide a bonus as part of the remuneration package. However, fewer businesses are offering nonfinancial benefits to retain talent, with 52% of surveyed employers to offer flexible working arrangements.


HK soars from fourth place

HK bourse to sustain winning feat in 2014


he Hong Kong market is set to stay in the limelight amid mega market launches slated for this year. This was after the city accomplished a surprising feat in 2013, stealing the second spot from the NASDAQ and overtaking the Tokyo Stock Exchange. Improving economic performance and market sentiment are anticipated to sustain Hong Kong’s robust business traffic. Hong Kong IPOs in 2013 Companies wishing to be listed in the swelling Hong Kong bourse surged to 104 and generated a whopping HK$168.9 billion last year. The figures are far higher than the previous year’s 62 IPOs and HK$90 billion proceeds. “The Hong Kong IPO market livened up in the second half of 2013, and especially in the fourth quarter. Market uncertainties were being eliminated gradually and this favoured IPO pricing,” according to Benson Wong, PwC Hong Kong Assurance Partner. He adds that the resumption and increased of listing plans of several companies during the period led to steady flow of funds in the market. “This shows the improvement in people’s confidence, as well as the efficiency and dexterity of the market itself, which helps companies and

In 2013, the initial public offering (IPO) market in Hong Kong was touted as the world’s second largest IPO venue.

2014 a better year While others are wary of a possible market overheat, Hong Kong continues to heat up and carry on the roasting action in the bourse. Edward Au, Co-Leader of National Public Offering Group, Deloitte China, pointed to the new sponsor rules that took effect in October 2013 as more fuel that will fire up listing interests. He expects that those unable to make it to the cut in 2013 will list this year. “In the first quarter of 2014, the market is going to be featured with a mega IPO from an energy and resources company that will seek to raise over HK$30 billion,” reveals Au. The Hong Kong market is also waiting for four to five city and agricultural commercial banks, promising further vigour in the H-share listing this year. Stateowned enterprises from energy and resources and pharmaceuticals are also firing up the market as they are expected to contribute to the forecasted 85-100 IPOs and HK$170210 billion proceeds raised in 2014, Au adds. Good numbers are flashing for the Hong Kong bourse, but its radiance is not enough to creep all the way to the top. Au says there is a slim chance that the highly developed city will steal the throne from New York as the top listing hub worldwide. The New York Stock Exchange raised nearly 100% more proceeds with 50% more IPOs in 2013, stresses Au.

Asia Ex Japan ECM Volume $bn

Source: Dealogic



The second half of the year will see the most notable price drops.

Property prices to slide this year

Home prices feel the chill of cooling measures


ood news for buyers and bad news for Hong Kong residential developers: prices are expected to slide this year, as cooling measures coincide with the government’s plan to ramp up supply and release more residential sites in the first quarter. Property consultancy Knight Frank expects mass home prices to drop 10–15% in 2014, while the more resilient luxury residential prices are expected to slip by 5-10%. “The second half of the year will see the most notable price drops, as during the first half of the year, the

market is expected to be supported by the release of previously accumulated purchasing power,” Knight Frank says. Keeping up with the demand The government will release 12 residential sites early this year, providing 5,500 flats– the largest number of sites and the highest estimate of production capacity since 2011, when the government’s quarterly land sale program started. New-home supply from land sales in the financial year ending March 2014 will provide 13,700 flats.

Completions will be a growing trend, as the Hong Kong government commits to its target of providing almost half a million flats in the next decade. “With the government again reiterating its commitment to increasing land and housing supply in its recent Policy Address and its adoption of the Long Term Housing Strategy Steering Committee’s target of providing 470,000 units in the next 10 years, we believe both private and public housing completions are set to rise,” says Paul Louie of Barclays. Louie adds that as landbank replenishment is made easier and potentially cheaper, there is less incentive for developers to hang on to their inventory. “With greater emphasis on volume than margin, we believe the recent price competition (i.e. in the form of incentives and discounts) is likely to continue,” he says.

Housing completions (units)

Source: Transport & Housing Bureau, Barclays Research

The Chartist: hong kong property Just when everybody thought Hong Kong’s property market was keeping well despite new measures, along came a massive drop in foreign buying came along. According to Barclays, after the Hong Kong Government implemented the 15% Buyer Stamp Duty on foreign and corporate buyers in October 2012, only 719 primary transactions were recorded with non-Hong Kong permanent resident buyers or corporate buyers in 2013. However, in a more general context, BNP Paribas says that rising house prices are the key drivers of the fall in national savings and this is is supported by the HKMA’s findings that net housing wealth contributed more than 50% of consumption growth during 2009-2011.

Hong Kong Property– primary market weekend transactions

Source: Various Chinese-language Hong Kong press, Barclays Research

Bubbly property prices

Source: Reuters Ecowin Pro, BNP Paribas



Office rents to drop slightly


Digital bookworms


ffice property developers in Hong Kong are not likely to consider 2013 as a particularly rewarding year for business, after the government’s cooling measures prompted sales to free fall by as much as 74% in the first 10 months of the year. This year, however, sales are expected to either stabilise or drop slightly. Weak demand and an ongoing cost-consciousness are still going to be there, but at least developers can expect modest take-ups. “We expect Grade A office rents and prices to remain stable or record slight drops in 2014. The office sales sector could start to warm up as capital accumulates and the market absorbs the effects of the government’s cooling measures,” says property consultancy Knight Frank. “Office values have always been extremely volatile and driven by speculative and end-user interest rather than yield considerations but we believe that exceptionally low cap rates combined with some economic uncertainty, could result in declines in prices this year,” Savills adds. It’s not all bad news “The US Federal Reserve’s

About 1m sq. ft. of Grade A offices underway

announcement to cut the purchase of mortgage-backed and treasury securities could have positive implications for Asian real estate markets, as it clears a number of uncertainties and allows firms to make business decisions,” Knight Frank says. Savills says landlords are also in for some good news in 2014, as there is little new supply expected– a total of 353,000 square feet net. Knight Frank reports that this year, about a million square feet of new Grade A offices is scheduled for completion.

We expect Grade A office rents and prices to remain stable or record slight drops in 2014.


86% of Hong Kongers say house prices are overvalued Hong Kong just won’t let go of its crown as the place with the most expensive properties in Asia. Owning a 100sqm house in Hong Kong would mean paying it off for a dragging 40 years. That’s why it’s no surprise that 86% of property and non-property owners feel properties in the country are overpriced, according to a survey conducted by Ironically, the survey reports an increase in the number of respondents (36%) who expect prices will fall in 1H2014. In terms of purchase interest, 31% of respondents would consider purchasing property in 1H2014. The government’s series of stamp duty measures are supported by 43% of the respondents.


Disturbed by how the publishing industry was stuck in the analogue age, where most companies invest in singlepurpose black-and-white eReader devices, bookworms Tiffany Wong and Minh Truong launched the Aldiko eBook reader mobile app in 2009. Wong is from Hong Kong while Truong is from France. The app now has 19m users globally and bills itself as a universal eBook app. It’s unlike most eBook apps where consumers are locked in into buying eBooks from the app provider’s eBook store only. “We use an open architecture where consumers not only can buy books within our app, they can also bring in their own books and buy books from other places,” said Wong. Aldiko currently has $HKD 100,000 from Cyberport Creative-Micro Funding.

Slicify your cloud

Frustrated by costly existing cloud solutions, tech geek Steve Cook founded Slicify. According to Cook, renting a server from large providers like Amazon or Google can cost 10 times what it would to build the machine yourself. Slicify uses a purely software solution that allows anyone with a PC to connect to the marketplace and sell their spare computer. At the same time, buyers can access faster performing computers at a lower cost in more locations. According to Cook, since December 2013, within the first two months of receiving payment for service, over 100,000 hours of computer time has been traded on their platform. Additionally, they already have over 400 machines in over 45 countries available for rent. Cook was able to raise US$150,000 from private angel funding.


Travel predictions for 2014 Where are Hong Kongers headed to this year?

Domain Mall level 2 small retail zone

Check out Hong Kong’s 10 largest shopping centres


omain Mall, which commenced operation in late 2012 is Hong Kong’s largest shopping centre, with net lettable land area of 23,000 square metres (sqm). This data is obtained from the Hong Kong Housing Authority. The eight-storey shopping mall managed by Hong Yip Service boasts an extensive list of restaurants, including Sushi Express, Big Big Chick, Kaffe’nation, Spade by Lassana, and many more. Domain, located in Kowloon East, also features a rooftop garden, and entertainment facilities including a digital playground and an open air multi-function ball court. 30-year-old Skep Kip Mei Shopping Centre in Kowloon West is ranked next with net lettable area of 9,070 sqm. The mall, managed by Synergis Management Services, compromises nearly 500 shops. Top 4 below Two malls situated in New Territories West follow. Landing in third place is Lei Muk Shue Shopping Centre with 6,900 sqm retail space. The nine-year-old centrally air-conditioned mall managed by Sunbase International Properties Management is designed to cater to the daily shopping needs of the residents of Lei Muk Shue Estate and the surrounding area. A 980 sqm marketstall area is on the lower ground floor offering wet and dry goods. Fourth in line is Kwai Chung Shopping Centre with 5,862 net lettable area. This three-storey shopping centre managed by Synergis Management Services is part of the 12 HONG KONG BUSINESS | MARCH 2014

Kwai Chung Estate Redevelopment Project Phase 3. The single-operator market on the ground floor has a total lettable stall area of approximately 800 sqm. The 45-year old Wah Fu (I) Shopping Centre is ranked fifth with total retail space of 5,803 sqm. The mall, which is the oldest in Hong Kong, started operating in 1968. It is currently managed by Wah Fu (I) Estate Office. Rounding out the list of Hong Kong’s largest shopping stores are Siu Hong Commercial Complex (4700 sqm); Wah Fu (II) Commercial Complex (4,500 sqm); On Kay Court Commercial Centre (4,300 sqm); Choi Tak Shopping Centre (4,200 sqm); and Nam Shan Shopping Centre (3,900 sqm). Important statistics Based on data obtained from the Housing Authority, the total net lettable area of the 29 shopping centres in Hong Kong is 111,872 sqm, 65% of which is made up of the 10 largest. Sunbase International Properties Management manages the highest number of shopping centres. Five shopping centers situated mostly in New Territories East are under its management. In terms of combined net lettable area of shopping centres under management however, Hong Yip Services with only 3 malls dominates with 26,805 sqm. Sunbase has 14,782 sqm– even lower than Synergis Management Services’ 15,570 sqm for three malls.

1. Seoul 2. Taipei 3. Tokyo 4. Bangkok 5. Singapore 6. Osaka 7. London 8. Taichung 9. Kaohsiung 10. Okinawa

1. Hong Kong 2. Beijing 3. Shanghai 4. Chengdu 5. Lijiang

1. Bangkok 2. Hong Kong 3. Jakarta 4. Taipei 5. Manila

6. Bali 7. Kuala Lumpur 8. Phuket 9. Seoul 10. Penang

Source: Wego

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FIRST The Analysts’ call

Why is OCBC buying WHB?

WHB in Gloucester Road, Wan Chai

OCBC acquisition tests Wing Hang Bank’s worth


hen it was revealed OCBC was looking to buy a 45% stake in Wing Hang Bank (WHB), the biggest question on everyone’s mind was: for how much? Sure, there was a chance WHB could be bought for twice its price-to-book ratio but pessimistic analysts scoffed at such an expensive, and largely unwarranted, price. “WHB is a moderate-sized asset in an unattractive market,” says Kenneth Ng, analyst at CIMB. “We think OCBC should

OCBC may raise WHB’s loan-to-deposit ratio from 71.5% to about 90% in 2014. be well aware of this and not bid aggressively just for a better position to capture future Asian trade business. If speculations are correct, the fact that three other bidders have baulked and left WHB with a single suitor is an indication that the dowry demanded is not low,” adds Ng. Lim & Tan Securities also note that, looking at it on a historical basis, “buyers of banks in Hong Kong have struggled to make good returns on their capital due to the “extremely competitive environment there as well as low return profiles.” He gives as an example WHB, whose return on equity (ROE) is 9-10% versus Singapore bank’s average of 12-13% but its price to book of 1.8x is at a significant premium to the sector average of 1.3x. 14 HONG KONG BUSINESS | MARCH 2014

The cost of funding for OCBC’s WHB acquisition could reach HK$3.4 billion compared with the HK$2.1 billion forecast net profit for WHB, resulting in a HK$1.3 billion shortfall, according to Maybank Kim Eng estimates. Some fear this could lead to earnings per share (EPS) and return on equity (ROE) dilution. Credit Suisse research analyst Sanjay Jain predicts OCBC would face EPS dilution of 8-9% and ROE impact of 150 basis points, given its current 2014 forecast of 11.4% and assuming a likely scenario where the acquisition is funded by equity. But WHB stands to gain potential revenue and cost synergies from the OCBC acquisition that should narrow the downsides from this deficit, believes Steven Chan, analyst at Maybank Kim Eng. OCBC may raise WHB’s loan-to-deposit ratio from 71.5% to about 90% in 2014, which will effectively improve WHB’s net interest income by HK$0.8 billion. Also, OCBC can increase WHB’s non-interest income contribution from 20% to 30% in 2014, which will enhance WHB’s total revenue by HK$0.5 billion. A third cost synergy resulting from the acquisition is that both Patrick Fung and Michael Fung will step down from WHB management, which will lead to annual cost savings of HK$40 million. “All told, due to potential revenue and cost synergies, we believe there should be limited EPS and ROE dilution to OCBC,” notes Chan.

Mikho Irawady – Fitch Ratings If the proposed acquisition is successful, OCBC’s exposure to greater China should rise significantly – from 15% of total loans to around 25%. The overseas expansion strategy of Singaporean banks is not a new phenomenon, and has been ongoing for the last decade. The Singaporean banking system is saturated, increasingly leveraged, and characterised by thin margins, so a greater reliance on regional markets for growth has become integral to Singaporean banks’ operating strategies. Sanjay Jain – Credit Suisse If the WHB deal goes through, it would be the second Singaporean bank (after DBS’s acquisition of Dao-Heng in 2000) to buy a bank in Hong Kong. The WHB deal would provide OCBC with a bigger footprint into Greater China corporates and would capture the flows from their Association of Southeast Asian Nations (ASEAN) customers into China. It would also enable OCBC to gain a foothold in the offshore-RMB market in Hong Kong. We believe that OCBC potentially might require fresh equity to fund a 100% acquisition. Assuming a scenario with a deal size of US$5 bn (for 100% of WHB), we estimate capital impact of approx. 3.5-4.0% on OCBC’s current fully loaded Basel 3 CET1 ratio of 10.7%. OCBC’s 2014E EPS would be diluted by 8-9% and ROEs by ~150 bp. Kenneth Ng – CIMB OCBC’s interest in having a Hong Kong presence stems more from the possibility that Singapore will not develop into as complete a renminbi (RMB) hub as Hong Kong. Hence, the main objective for OCBC in making a bid for Wing Hang Bank (WHB) is to ensure that it remains relevant in the world of Asian trade in future, when the RMB becomes increasingly dominant.


Some wolves in Asia are looking rather mangy and underfed

Hunger Games meets the Wolf of Wall Street

Find out why the wolves around Shenton Way and Queens Road Central are looking rather mangy and underfed.


ust when investment bankers thought 2012 couldn’t be worse, along came 2013. With the full figures now in for the year, research agency Dealogic reported investment banking revenue in AsiaPac ex Japan was down a bonus-sapping 12% to $8.8bn. It was even worse for the bond issuers, with the amount of debt issued in Asia down 14% to $944.3bn for the year, the region’s first yearly decline since 2010. It’s more the Hunger Games than the Wolf of Wall Street and some formerly well-fed denizens of Exchange Square and the Marina Bay Financial Centre are looking a tad mangy and underfed. Ho Kok Yong, Financial Services Industry Leader at Deloitte Southeast Asia, concurs that 2013 was indeed a bad year for the investment banking sector.


Among the losers for 2013 were the Chinese investment banks with CITIC Securities and Bank of China falling out of the top 10.

“We see low investor confidence, less risk taking and funds flowing from cash or fixed income to equities. We also see equity and fixed income underwriting performing weakly with few landmark transactions announced in 2013,” he adds. However, he predicts mergers and acquisitions activities will improve in 2014. 2013 revenue rankings The natural order of the top 3 investment banks was maintained for the year, with the packleading UBS raking in $536m in fees from investment banking deals, followed by Credit Suisse and JPMorgan with $434m and $382m respectively, according to Dealogic. Keith Pogson, Financial Services Partner with Ernst & Young, attributes UBS’ favourable ranking to significant leveraged

finance deals. One such deal was the purchase of a sizeable stake in Ping An by a Thai billionaire from HSBC. Among the losers for 2013 were the Chinese investment banks with CITIC Securities and Bank of China falling out of the top 10. Ho explains that the Asian investment banking relies heavily on equity capital markets (ECM), making it especially vulnerable- not to mention it is far too focused on China. The ECM business, he adds, makes up about 75% of the capital markets business in Asia and China makes up 50% of that ECM business. “It is not especially healthy to have such a concentration on one country. State-owned enterprises and private enterprises form the IPO market and, since most start with 25% free floats, offer ample opportunity for secondaries when they need more capital. Widespread debt issuance, and M&A activity, tend to follow later, eventually shifting revenue composition. Equity business is attractive, but expensive to run,” says Ho.

FINANCIAL INSIGHT It was a dogfight for some banks to even remain in the top 10. Citi only brought in $305m in 2013, compared to $343m in 2013, causing it to drop from 5th spot to 8th. Deutsche Bank and HSBC both fell one spot from the 2012 rankings with revenues of $334m and $314m in 2013. Two investment banks clawed their way into the top ten. Jumping two spots and three spots to rank 9 and 10 was Bank of America Merrill Lynch and Standard Chartered Bank, respectively, with $217m and $219m in revenue. Equally upping their game last year was Morgan Stanley, springing three spots up to 6th with $331m in revenue. Leaping to the top 4 from 7th was Goldman Sachs with $363m in revenue. Pogson is not surprised that Standard Chartered worked its way up the rankings, being more geographically diverse and less China-focused. “It is the only house beefing up in the region,” he adds. Deloitte’s Ho notes that all these changes can be attributed to 2013 being a subdued year for deals such as M&A’s. Also, there were too many banks competing for fewer deals, pushing fees lower. He adds that banks aggressively expanded their Asia operations after the global financial crisis and hired for an expected increase in stock and bond underwriting and advice on M&A, which didn’t happen. “Based on public data available to Dealogic, certain banks look particularly reliant on ECM. In terms of revenue mix, some banks were less exposed to the equity business last year than some other firms,” adds Ho. M&A deals If there was a bright spot for the hard working bankers in Singapore and Hong Kong it was in Mergers & Acquisitions, which saw transaction volumes up 17% to $546.5b. Despite the political instability, Thailand was the most targeted nation in South East Asia for the first time with a record $18.2bn via 191 deals

in 2013, more than double the $7.2bn announced in 2012. The $6.6bn acquisition of Siam Makro by CP All was the largest Thai targeted deal in 2013. Another key deal in this market was The Bank of Tokyo Mitsubishi UFJ’s US$5.31bn acquisition of a 72% stake in Thailand’s Bank of Ayudhya which made it the largest acquisition in Asia by a Japanese bank to date. Tim Bednall, Managing Partner for Corporate M&A and Tax Australia at King & Wood Mallesons, a firm which ranked third for M&A deals in 2013 according to Thomson Reuters, says, “We saw a very strong flow of M&A transactions across the region in the last 6 months of 2013, especially in China where the firm achieved the #1 position in the M&A league tables. We expect that level of deal flow to continue for the first half of 2014.” M&A vs joint ventures According to Elaine Tan, Senior Analyst for Deals Intelligence at Thomson Reuters, corporate decision-makers are expecting a 17% increase in worldwide M&A during 2014, bolstered by increased confidence in the financial and real estate, media and telecom, and healthcare sectors. She adds that, according to the survey, 63% of respondents in Asia are looking to penetrate new markets in 2014. “Asia Pacific respondents also demonstrated a marked preference for exploring M&A as opposed to organic expansion or joint ventures,” Tan says. Manish Nigam, a research analyst with Credit Suisse, says one of the key reasons for this expected acceleration in M&A and corporate net buying is that the corporate sector has US$2.3tn of ‘firepower’ to return leverage to average levels in Europe and the US, and private equity has nearly US$1.1tn available to spend. Nigam notes that given the fragmented nature of competition in various markets in Asia and the challenging business environment,

Elaine Tan

Ho Kok Yong

Manish Nigam

Tim Bednall

Benson Wong

one common area for M&A is that of larger companies buying out smaller companies. “At the sector level, banks and insurance are likely to remain an active area of consolidation and we expect the larger Internet companies to further expand their presence through acquisitions,” he adds. EY’s Pogson concurs and believes 2014 will be a good year for M&A. He adds that China will be a better source of revenue given the re-opening of the capital markets. ECM market The ECM market also paints a better picture with volume in Asia Pacific up 4% to $194.1bn via 2,037 deals in 2013. IPO volume was also up 20% to $47.2bn. PwC reports that the Hong Kong IPO market is poised to continue being in the top three of listing hubs for this year. Dealogic reported that 94% of IPO volume from Chinese issuers in 2013 listed in Hong Kong, the highest proportion on record. HK Electric Investments’ $3.1bn IPO leads the top global IPOs for 2014 YTD, the world’s largest IPO since Royal Mail’s $3.2bn listing in October 2013. But even that deal disappointed bankers, raising much less than the $6bn that had been bandied about, and was priced at the bottom end of the range. “The Hong Kong IPO market livened up in the second half of 2013, and especially in the fourth quarter. Market uncertainties were being eliminated gradually and this favoured IPO pricing. There were also adequate funds in the market,” says Benson Wong, PwC Hong Kong Assurance Partner.

Asia-Pacific IB Revenue - Full Year $bn


Source: Dealogic



HSBC headquarters in Hong Kong

Find out why 2014 is a tricky year for Hong Kong banks Withdrawal of liquidity and rising interest rates threaten banks’ stability


eadwinds greet Hong Kong banks in 2014 with an economy hingeing on the delicate pace of the global economic recovery. The enduring effects of the global financial meltdown and a slowdown in economic giant China, has battered most Asian economies in 2013, with Hong Kong yielding a few surprises. The economy is expected to improve in the near-term, driven mostly by robust domestic demand, supported by a stable job market and a vibrant tourism industry. Private consumption rose by 4.4% in the first three quarters of the previous year, an improvement on 3% in 2012. Meanwhile, retail sales rose by 11.6% in the first 11 months of 2013, a jump from 9.8% in 2012. Capital formation increased by 1.96% in the first three quarters, plunging from the distinctly high growth of 9.5% the previous year. “The slowdown in capital spending


As the pace of tapering is still uncertain, we feel it is still too early to sound the alarm in terms of lower asset prices and a corresponding increase in credit costs.

was partly due to a high base in 2012 but also reflected concerns about how Fed’s tapering may reduce the degree of monetary policy accommodation,” OCBC says in its Global Outlook 2014 report. External demand was the weakest link in 2013, with net exports pulling Hong Kong’s economy down by 0.84% on average in the first three quarters. Fund outflows Fund outflows are in the offing with the United States Federal Reserve announcing a reduction on its monthly asset purchases in January from $85 billion to $75 billion. Higher interest rates in the US are seen to tighten system liquidity leading to higher funding costs as deposit competition increases, says Adam Chan of CCB International Securities. While banks should be able to increase pricing owing to higher rates to maintain margins, there will be

a time lag as loan repricing takes a while longer to reflect tighter market liquidity, Chan says. “As the pace of tapering is still uncertain, we feel it is still too early to sound the alarm in terms of lower asset prices and a corresponding increase in credit costs,” he adds. Given that Hong Kong’s monetary policy is pegged to that of the US, OCBC says the less accommodating monetary policy is likely to take centre stage this year as a result of Fed tapering. “Should US economy recover more strongly than expected, the swifter withdrawal of liquidity and rising interest rate expectation may result in high volatility in Hong Kong’s financial and property markets. As a result, this could pose the systemic risk to Hong Kong’s economy in 2014,” OCBC says. For its part, Barclays says HSBC and Standard Chartered, two banking giants in the region, are poised to withstand the effects of Fed tapering despite being prone to the risks of liquidity tightening. “We find both banks defensive due to their disciplined management of loan and deposit growth and loan-to-deposit ratios which are well below average across its footprint,” Barclays says.

ANALYSIS: banks Across Asia, Barclays reports that LDRs rose to 87% in October 2013 from 78% in 2009. Hong Kong and Singapore, where HSBC and Standard Chartered have a substantial presence, saw LDRs shooting to record highs not seen in more than a decade. With both banks having a dominant deposit franchise in Hong Kong, Barclays says the two will be less affected by an increase in deposit competition when liquidity tightens. Hong Kong accounts for the bulk of HSBC and Standard Chartered’s Asia deposit base (26% and 24% of 1H13 group deposits respectively), and both banks have a large low cost CASA deposit base (CASA mix of 79% and 62%, respectively, far higher than the system average 53% in 1H13). “Both banks are price leaders in Hong Kong and can pass on any increase in funding cost via loan repricing, in our view,” Barclays says. Profitability trends Both banks have weathered headwinds in the past year, but a difference is seen in their respective profitability trends. Standard Chartered’s tight control on costs is seen as insufficient to offset the pressure on revenue returns with provisions broadly flat as a proportion of risk-weighted assets. Barclays expects a 30bp decline in pre-tax RoRWAs in 2013. On the other hand, HSBC has seen stable to slightly positive returns across the profit and loss on a risk-weighted basis, although return on nominal assets has been nominally impacted by the 2012 disposal of the US cards business. Focusing on their competitive advantage, both banks have increasingly concentrated on corporate and investment banking, which currently consumes three quarters of capital. “We see both banks’ competitive advantage in corporate or wholesale banking rather than on the consumer side as this is the area that benefits particularly from their international footprint. This is also reflected in capital allocation, which has been increasingly wholesale focused at both banks,” Barclays says.

The strategy has resulted in sustained market share gains for both banks since the onset of the financial crisis, but Barclays notes an emerging difference in the corporate and investment banking mix and return trends of both banks. Standard Chartered now stands just outside the top 10 compared with consistently ranking just inside the top 20 before 2008. Meanwhile, HSBC has moved from just outside the top 10 to 6th ranking globally. However, with industry returns and arguably revenue pools under pressure, an increased presence in corporate and investment banking could prove less of a good thing looking forward, Barclays says. Core commercial banking activity is greater at HSBC where it contributes 60% of CIB revenues compared with 40% at Standard Chartered. Revenue returns Revenue returns have been under pressure at Standard Chartered since 2010 but Barclays expect a significant step down in 2013. “We believe that the 2013 deterioration is due to a combination of the company’s decision to chase transaction banking volumes at significantly lower margin as well as spread compression in the rates business,” it says. It adds that Standard Chartered has recognized this problem and plans to be more disciplined in allocating capital to clients where they are expected to be able to cross-sell higher-return products. However, Barclays says Standard Chartered’s attempt to move up the value pyramid is not an easy task. Moreover, while transaction banking margins appear to have stabilized, they will still likely have a negative year-on-year impact in 2014, resulting to further decline in revenue returns. With a tougher revenue environment, the company has successfully managed costs in the wholesale bank, down from a peak of 2.7% of risk-weighted assets in 2010 to 2.1% in 2013, according to Barclays forecasts. “We expect this to fall a little further in 2014 but even this tight cost control hasn’t been enough to offset the revenue drag. Whilst there are

External demand was the weakest link in 2013.

clearly areas of credit risk and credit quality is particularly benign in much of Standard Chartered’s footprint outside of a couple of ‘problem’ geographies, we are not anticipating a significant deterioration,” Barclays says, suggesting a relatively static return from the wholesale business at the new lower level. HSBC, on the other hand, has shown greater focus on returns over growth in the past year, particularly in its competitive stance on lower-margin trade finance business. As a result, Barclays expects little pressure on returns. A diverging performance between the two banks in terms of capital build can also be seen, with the fully loaded Basel III core Tier 1 ratio forecast to fall 50bp to 10.2% at Standard Chartered compared with a 180bp increase to 10.8% for HSBC. “We expect the contribution of retained earnings to capital to be slightly better at HSBC than Standard Chartered in 2013 but the bigger difference comes from balance sheet reduction and disposals which we estimate add 100bp to HSBC’s core Tier 1 ratio in 2013 compared to 110bp capital consumption for Standard Chartered,” Barclays says.

Standard Chartered underlying pre tax returns 2005 - 2013E

Source: Company data, Barclays Research

HSBC underlying pre tax returns 2005 - 2013E

Source: Company data, Barclays Research


HONG KONG’s hottest startups

Hong Kong’s 20 hottest startups to watch in 2014

Here’s a look at the city’s biggest up-and-comers offering products and services ranging from an online marketplace to small Unmanned Aerial Systems to managing mobile engagement.


note that mobile engagement is already greater than engagement via the Web. Social media and devices, along with apps and services, they add, are the key ingredients for building and managing mobile engagement.

Founders: Stefan Rust, Cat Purvis Funding: HK$15.5M (US$2M); private investors and Angels Start of operation: 2013 Exicon is an online platform which provides customers with the intelligence, tools and connections, to successfully build and manage mobile engagement. Founders

2. Mobexo Founder: Sopheap Lao Funding: HK$13.95M (US$1.8M); Phileas Investment, Series A investors Start of operation: May 2013 While a mobile payment company at its core, Mobexo aims to connect merchants and its clients with each other through steps that lead to payment and thereafter dubbed “Pre-payment, payment, post-payment”. Mobexo is both an app and a backend portal for merchants to run targeted ads, promotion coupons, discount vouchers, membership and loyalty programs, sales report and other business essential tools. The app handles the payment process using QR codes while the consumer has the benefit of staying connected to their favourite store or brand, receiving special deals which are automatically applied to the transaction at checkout.

ong Kong Business sifted through more than a hundred nominations submitted by founders, investors and industry observers in the hunt for startups worth watching over the next 12 months. The list of 20 hottest startups in Hong Kong is now on its third year and the selection process has become even more extensive. The companies selected started operating from 2012 and were able to make their businesses flourish from initial funding ranging from $20,000 to $15.5M. Startups which made it to the list were arranged based on total funding generated to date. Find out how each is shaking up its sector’s norms with new innovations. 1. EXICON

HONG KONG’s hottest startups 3. SodaCard Founders: Douglas Aitken, Matthew Aitken Funding:HK$7.75M (US$1M); SingTel Innov8, Yuuwa Capital and Pollenizer Start of operation: Jan 2013 SodaCard, a loyalty and marketing platform, focuses on deepening customer engagement by allowing brands to offer personalized loyalty journeys to their customers. According to founders, the universal rewards platform uses emerging tablet technology to engage walk-in customers in retail locations and continue the exchange online. This, they say, effectively creates a closed-loop marketing channel that allows merchants to acquire, understand, and communicate effectively with their audience, and build brand equity over the long-term. SodaCard has a 60,000-strong community of members and over 100 brands on board, including caffe HABITU, Satay King, Eric Kayser and Paul Lafayet. 4. TOSHI Founders: Arjan van der Vlies, Patrick Kosiol, Boris Boege Funding: HK$5.8M (US$750K); S4BB and several private equity, Angels. Start of operation: 2014 According to founders, Toshi is building the largest catalogue of mobile travel apps that serve niche markets on a global scale and help travellers have a great experience on their journey. “Our business is about providing an individual city guide for each of the major cities in the world, similar to how travel guides like the Lonely Planet can be bought as a separate book for each destination,” they say. 5. Snaptee Founders: Wai-Lun Hong, Gary Lee Funding: HK$4.65M (US$600K); seed investors Start of operation: Jan 2013 Snaptee bills itself as the first company in the world to make t-shirt design as easy as clicking few tabs

on your smartphone. “We see it as a start to push forward the makers revolutions on tshirt, and we believe this is the future. We have already got some initial proof by having customers from over 50 countries paying for our products and most of them love it,” say the founders. Founders are confident that with the advancement of design tools, prototyping and manufacturing technologies, product customization will reach its tipping point in five years, if not earlier. Here’s how it works: Just import an image from your photo album or Instagram account, or take one with your camera, to begin. Then choose the template that you like, add a filter if you want, include your rsonal text, change fonts and colors to find the perfect match.

6. Cenique Infotainment Group Founders: Shylesh Karuvath, Bernard Tan Funding:HK$3.88M (US$500K); private investors, Hong Kong Science Park – Incubation Program Financial Aid Package Start of operation: August 2012 Cenique is transforming the retail industry using computer vision and real time anonymous video analytics. It bills itself as a technology leader in audience measurement tools that collect and deliver metrics and analytics from the offline world such as physical retail stores. “We offer technology that enables brand, advertisers, agencies and publishers to deliver highly engaging advertisements powered by computer vision. This offers an automated way for anonymously detecting human presence, as well as providing the analytics and viewership metrics,” say the founders. 7. Glam-it! Founder: Jennifer Cheng Funding: HK$3.88M (US$500K); Angel funds Start of operation: May 2013 Glam-it! is a beauty & fashion startup behind the patent pending invention GlamPact - billed as the first all-in-one customizable refillable light-up and rechargeable compact. In less than a year, Glam-it! has launched e-Commerce, physical retail and several SKUs while pushing GlamPact into 6 countries via luxury distributors and partners within 2 months of its debut. 8. Spottly Founders: Edwyn Chan, Dian Liu, Charlotte Chen Funding: HK$3.49M (US$450K); 500 Startups, Cherubic Ventures, Private Angels Start of operation: Jan 2013 Spottly , dubbed as the “Pinterest for places” aims to become the world’s biggest and most personal travel guide. “We make it easy for people to create and share beautiful notes of their travels,” say the founders. Notes are limited to 400 characters, and users can add hashtags. The app, which supports 12 languages, started on iOS and will be launching a Web version soon. Android will follow next year, add the founders. Apple named Spottly amongst“Best New Apps” in 15 markets across Asia - Hong Kong, Macau, Japan, Korea, Taiwan, Singapore, Thailand, Indonesia, Malaysia, Vietnam, Philippines, Sri Lanka, Brunei, Cambodia, and Laos - for 2 weeks since its launch. The app was developed in January last year and has received its first funding from 500 Startups’ Beijing branch three months after.

HONG KONG’s hottest startups 9. ZAOZAO Founders: Vicky Wu, Xiangling Cai Funding: HK$ 2.5M from private investors; HK$200,000 from Hong Kong Science Park Start of operation: April 2012 ZAOZAO is a web-based platform that allows designers to post projects and garner funds for production through crowd-funding. It bills itself as the ultimate destination for adventurous women to discover and to buy beautifully curated, one-of-a-kind pieces by emerging designers in Asia. ZaoZao targets the Asia market, particularly Hong Kong and Singapore. 10. Life Project Founders: Nishant Kapoor, Michelle Cheng Funding: HK$2.33M (US$300K); private angel investors Start of operation: November 2011 Life Projects bills itself as Asia’s first family focused e-Commerce portal. It launched its first initiative in November 2011. It is an online store for pet food and supplies, carrying a full range of pet products, treats and toys, including natural and organic foods. Life Projects also provides convenient home delivery to all areas in Hong Kong, including the New Territories and all outlying islands. According to the founders, LifeProject. hk, a site for health and wellness, and, a site for babies and children, will be launched this year. 11. Luxify Founders: Alexis Zirah, Florian Martigny Funding: HK$1.55M (US$ 200K); Angel investors from Hong Kong and US Start of operation: July 2013 Luxify bills itself as Hong Kong’s first bi-lingual online marketplace for buying and selling new, vintage and pre-owned luxury goods. According to founders, it is free to list and free to sell at Luxify. There is no commission on sales as well. Within eight pre-selected categories of Motors, Yachting, Fine Wines, Diamonds, Jewellery, Watches, Fashion and Bags, buyers and sellers can seamlessly exchange and trade the world’s most exclusive and prestigious brands on one safe and reliable online platform, claim founders. “Luxify provides an excellent online buying source for purchasers in the market for luxury goods, but also eliminates the hefty marketing expenses smaller operators and sellers need to invest, to advertise their product to reach potential buyers online, providing them with visibility and a platform at zero cost,” said founders. Luxify also hosts quarterly online auctions for unique luxury goods they source independently.

12. BSD Academy Founders: Chris Geary, Constance Ip, Nickey Khemchandani Funding: HK$1.3M; Naveen Khugputh / +1 confidential, equity Start of operation: May 2013 BSD Academy aims to provide the best learning and development environment in Asia for code and graphic design. “Learning code is one of the most important but under-provided needs in all levels of society today. Not only from the perspective of current and future careers, but also from the perspective of future innovation. BSD knows that it is not just about the code but also about the design and how the final product affects those in the environment around you.” say the founders. 13. FoodieQuest Founders: Benjamin Hall Funding: HK$1M; Nest Start of operation: Development of version 1.0 began in September 2013; the app will launch in Q1 2014. FoodieQuest is a food photography app- it’s part ‘Hot or Not’ for food, and part visual food guide. FoodieQuest allows people to compete with friends and strangers around the world, with their favourite food photos for a shot to be the number one foodie. As well as creating a social game, the app puts all the images to good use, allowing users to discover the hottest dishes and restaurants nearby, or even anywhere in the world with a user curated, interactive ‘foodporn’ map. Founder Benjamin all received about $130,000 in seed funding for his “food based” smartphone game. According to the British founder, the app will launch first in Hong Kong, as he believes the city is the ideal launch pad for an app that will translate and scale very easily as it launches in AppStores across the world. 14. Dimcook Founders: Jimmy Lam, Lawrence Shen, David Li, Jackie Yeung Funding: HK$530K from Cyberport’s Incubation Programme; $100,000 from Cyberport’s Creative Micro Fund Scheme Start of operation: 2013 Dimcook bills itself as Hong Kong’s first crowd-sourced recipes sharing and cooking blogging platform, with a growing network of local and overseas food bloggers. While it currently offers customized digital marketing solutions to food and ingredient businesses, it has plans to vertically integrate with vendors of ingredients to provide a one-stop ingredients shopping experience to extend beyond the current functionality of recipe searching, reviews, nutrition calculation, and social sharing.

HONG KONG’s hottest startups 15.Surround App Founders: Jeffrey Broer, Angelina Yan Funding: HK$504K (US$65K); Telerik AG, Remi Caron, Eric Sminia; angel investment Start of operation: 2012 Surround App allows Weibo user one-click machine translation of any post from someone he follows. A full English UI for the most common Weibo functions, i.e. making retweets and comments is provided. Surround App targets the social interaction and engagement between non-Chinese reading Western companies and Chinese consumers in a growing Chinese consuming economy for brand building and product promotion. 16. Skylab Mobilesystems Founders: Boris Boege, Patrick Kosiol Funding: HK$233K (US$30K) via a Crowdfunding Campaign on Indiegogo and computing-resource funding through the Softlayer Incubation Program

Start of operation: 2012 Skylab develops small Unmanned Aerial Systems (sUAS) - also called drones - for personal and commercial use. “We have the first solution that is fully digital and can provide unlimited range by utilizing existing 4G/LTE networks as a communication channel, providing HD live video to a groundstation app on a tablet,” say the founders. 17. Eight52 International Founders: Adam Whiting, James Beacher, Malcolm Loudon Funding: HK$200K; private investors, family investors Start of operation: January 2013 Eight52 International is behind the brand VenueHub which helps clients find their perfect venue. After just three months of operation, founders said that they have managed to sign up over 150 Hong Kong venues to their portal, including some of HK’s biggest hotels and restaurant groups. “We provide these venues with online exposure and event booking enquiries from our users, who range from big corporate bodies and event managers, to the general public.” VenueHub is also available to view in Traditional Chinese and is 100% free to use. VenueHub has launched operation in Thailand recently and now currently searches for partners in SEA (Singapore, Malaysia, Indonesia), China, Japan, South Korea. VenueHub claims that it has now over 40 signups in Thailand. In its official statement, VenueHub will

provide partners with a fully-functioning platform for a “very minimal investment.” 18. CallTracking Founder: Scott Bowler Funding: Less than HK$200K; private investors Start of operation: September 2013 CallTracking allows you to prove which advertising & marketing campaigns make your company’s phone ring. “I believe it’s going to revolutionise the offline marketing landscape in Hong Kong as it finally allows people to say “yes, I know for sure that this ad in the newspaper was worth it,” says Bowler. Its online platform captures a wide range of data about customers calling you (even if you don’t answer the phone), and allows you to quickly identify which offline and online channels are generating the most calls, recapture lost leads, improve customer service and increase return on advertising spend (by reducing wastage), adds Bowler. It plans to expand across Asia, Africa and South/Central America. It has already started the expansion by entering Singapore. 19. Taxiwise Founders: Jean-Marc Ly, Truong Lam, Lawrence Tse Funding: HK$116K (US$15K); AcceleratorHK Start of operation: App released on November 2013 Taxiwise focuses on international business travellers who wish to use taxi services in major cities in Asia, starting with Hong Kong. It allows them to book a taxi ahead of time, helps with translation of their pickup/destination and seeks quality service. According to the founders, they plan to launch their services throughout major Asian cities. 20. Shopline Founders: Raymond Yip, Tony Wong, Fiona Lau Funding: HK$20K; Prize money from winning at HKCoCoon Pitch Night Start of operation: July, 2013 Shopline offers order management and reporting tools to help merchants run their entire business remotely, as well as customer relations and marketing features to interact directly with consumers. The service also fosters product discovery by shoppers as it aggregates all products from its wide network of shops into a mobile social marketplace. This helps merchants reach new customers even if their online shop isn’t garnering traffic. “Shopline believes in the future of mobile commerce, so much so that our tagline includes the phrase ‘No computer needed’.”

HONG KONG’s 25 largest LAW firms

HK’s largest law firms employed 8% more in 2013 Mayer Brown emerged as the largest law firm in the city.


oreign local firms have once again dominated Hong Kong Business’ second year ranking of largest law firms in the city, based on the number of legal professionals. Only seven local firms made it to the top 25, with Deacons taking the lead. The 2012 list was re-ranked to reflect only the number of employees that are based in Hong Kong and lawyers by profession in the final count. Paralegals, trainees and other non-fee income earners were excluded from the counting. Mayer Brown JSM emerged as the largest law firm for 2013 and 2012. Its number of legal professionals grew 2% to 203 year-on-year. Mayer Brown started only one solicitor back in 1863 and has since grown to employ an elite force of about 300 lawyers in Asia. It has advised HK-listed CITIC Telecom on the acquisition of a 79% stake in Companhia de Telecomunicacoes de Macau, S.A.R.L. (CTM) from UK-based Cable & Wireless Communications Plc, and Portugal Telecom. Local firm Deacons climbed nine notches up to second place after its number grew by nearly 200% to 186 in 2013 from just 63. Deacons claims 24 HONG KONG BUSINESS | MARCH 2014

Mayer Brown started with one solicitor back in 1863 to employ an elite force of about 300 lawyers in Asia.

to be the number one in capital markets in terms of advising on the highest number of announced IPO deals in 2013. It advised a total of 11 announced HK IPO deals and was also involved in 6 takeovers-related transactions involving HK listed companies last year. Baker & Mckenzie is third with its number growing 2% to 181. It is followed by Linklaters and Clifford Chance with 168 and 165 legal professionals, respectively. Outside the Big Five King & Wood Mallesons, (KWM) ranking also slipped two notches down to sixth with its number cut by 6% to 154. Over the past year, KWM was involved in some of the market’s iconic deals and disputes including: China Investment Corporation / Chengdu Tianqi’s privatisation of Talison Lithium; Wisdom Holdings Group’s HKD$844 million HK IPO, CAA Resources HKD$487.5 million HK IPO; debt restructuring of FU JI Food and Catering Services and Holdings and resumption of trading of its shares on HKEx. Rounding out top 10 are Herbert Smith Freehills, Allen & Overy, Reed

Smith Richards Butler and Woo Kwan Lee & Lo. Reed Smith was involved in some significant and high profile cases in 2013. It acted for Hong Kong Electric, the owners of the passenger vessel “Lamma IV” which sank in Hong Kong following a collision with the “Sea Smooth” in October 2012 with substantial loss of life. Hogan Lovells, with 69 legal professionals in 2013, dropped to 11th from 10th. Hogan Lovells advised UBS AG as lead financial adviser and Standard Chartered Bank (HK) as joint financial adviser to China Mengniu Dairy Company on its voluntary general offer for HK-listed Yashili International Holdings worth HK$12.64bn. Together the 25 largest law firms employed 2,114 legal professionals in Hong Kong in 2013; 8% higher than the previous year. The average number of employees was 85, compared with 80 in 2012. The Others Orrick, Herrington & Sutcliffe (OHS) slipped three notches down to 15th after its number of legal professionals was reduced by 13% to 49. It tied with Jones Day. OHS represented IGG Inc, an online games developer and operator based in Singapore, in its US$135.5 million listing by way of placing on the GEM Board of the Hong Kong Stock Exchange. Eversheds, ranked 21st with 39 legal professionals, advised AID Partners on its acquisition of the entire issued share capital of HMV Hong Kong, HMV Singapore (together, “HMV”) and brand rights in Greater China region from HMV Group PLC (in administration) and HMV (IP) Limited (in administration). Harney Westwood & Riegels, in 24th place, revealed that in the past year, it has built on its growth through recruiting experienced lawyers from leading onshore and offshore firms. It welcomed recruits from Allen & Overy Singapore and Hong Kong and has also made hires from offshore firm, Ogier, both in Hong Kong and the Cayman Islands. Holding the last spot is Tanner De Witt, a local firm employing 24 legal professionals in 2013.

HONG KONG’s 25 largest LAW firms

The 25 largest law firms in Hong Kong LAW FIRMS

Ranking 2012

foreign/ local



Managing Partner/ HK HEad


Mayer Brown JSM





Elaine Lo







Keith Cole


Baker & McKenzie





Paul C.Y. Tan







Stuart Salt


Clifford Chance





Peter Charlton


King & Wood Mallesons





Stuart Fuller


Herbert Smith Freehills





Mark Johnson


Allen & Overy





Vicki Liu


Reed Smith Richards Butler





Roger Parker


Woo Kwan Lee & lo





William C.Y. Kwan


Hogan Lovells





Allan Leung





Robin Li



Simmons & Simmons





Davis Wang


Stephenson Harwood





Voon Keat Lai

=15 Orrick, Herrington & Sutcliffe





Xiang Wang

=15 Jones Day





Robert Thomson


Wilkinson & Grist





Chan Chi Kin Raymond


Gallant Y.T. Ho & Co





Amanda Liu


Clyde & Co





Michael Parker


Skadden, Arps, Slate, Meagher & Flom





Alan Schiffman

=21 Cleary Gottlieb Steen & Hamilton





Mark Leddy

=21 Eversheds





Stephen Kitts







Michael Lintern-Smith


Harney Westwood & Riegels





Jonathan Culshaw


Tanner De Witt





Ian De Witt

*The list is based on the information provided by the companies or as shown on their websites.


legal briefing

Unrealized profits spared from taxation CFA upholds lower courts’ rulings on Nice Cheer


axable items from companies’ books shrank after the Court of Final Appeal (CFA) ruled out unrealized gains. In November, the CFA granted its early gift to Nice Cheer Investment Ltd., and probably to the entire Hong Kong corporate sector, after it upheld the rulings of both the Court of First Instance and the Court of Appeal that companies should not be taxed on unrealized profits. Nice Cheer, in this ruling, was spared an additional HK$250 million in profits tax for the years 1999/2000 to 2005/2006. Since there is an existing section in the Inland Revenue Ordinance that allows taxpayers to apply for correction within a certain period, it is possible that other companies may be eligible for refund – a looming episode for the Inland Revenue Department. Taxable or not? “The CFA judgment marks the end of the road for the Commissioner of Inland Revenue in his quest to bring these types of unrealized gains under the umbrella of chargeable profits tax,” Bryan Gilchrist of Clifford Chance says. He explains that the CFA decision ruled on question of whether a given sum is a taxable “profit” under the relevant tax law is a legal question to be decided by the courts.

“Nice Cheer, in this ruling, was spared an additional HK$250 million in profits tax for the years 1999/2000 to 2005/2006.” “[It is] not a factual question by which the amount of a taxpayer’s profits is computed under the accounting principles,” he notes. In determining a taxable profit, Gilchrist says the decision takes on two cardinal principles of tax law: (1) “profits” mean actual or realized, not potential or anticipated profits; and (2) neither profits nor losses may be anticipated or expected. “The two principles are often interchangeable but not identical, and they can only be overturned by clear and express statutory provision, but not by the adoption of new standards of commercial accounting,” he stresses. However, Gilchrist points out that unrealized losses can be used to lower liability for profits tax in proper cases. This is through making provision in the profit and loss account for the reduction in the value of the trading stock, if the reduction in value is considered material and likely to be permanent. 26 HONG KONG BUSINESS | MARCH 2014

Susanne Harris

Travis Benjamin

Susanne Harris of Mayer Brown JSM further explains that an exception on the unrealized losses could be taken advantage of as a provision and not a permanent deductible. “The auditor must confirm the unrealised loss is material and likely to occur, and if it does not, the provision must be reinstated or be subject to challenge by the Commissioner,” she clarifies. Refundable or not? “In light of the controversy taxpayers should, at the very least, review their position and determine the tax impact of filing a section 70A claim in accordance with the principles of the Nice Cheer decision,” Travis Benjamin of Deacons Hong Kong says. He explains that there is a provision in the Inland Revenue Ordinance, section 70A, that allows a taxpayer to apply for a correction to an assessment. Benjamin said the correction could be applied within six years after the end of a year of assessment or within six months after the date on which the relative notice of assessment was served, whichever is later. “By filing a section 70A claim, taxpayers will at least preserve their right to a refund of tax (should they be due one) in light of the statutory time bar,” he concludes. The larger picture Harris notes that the recent ruling ascertained that the accounting standards must be able to expose to interested persons a true and fair view of the company, including its financial health and profitability in the future. She adds that the ruling was not concerned with the future, but with assessing what a company had already accomplished in the past. “More fundamentally, taxation is levied by the legislature and the statutes are to be interpreted by the courts. It would be absurd if accountants could somehow determine the assessable profits for a taxpayer,” Harris says. She further cites Lord Millet NPJ’s statement that it was “clear beyond argument” that accounts drawn up in accordance with principles of accounting must be adjusted for tax purposes if they did not conform to the principles of tax law. Given this, Harris explained that the CFA decision renders the Inland Revenue Department’s Departmental Interpretation and Practice Note No. 42, which states that where a taxpayer adopts an accounting standard in its audited accounts, invalid. “When preparing accounts, the taxpayer should actively adjust those accounts in order to conform to the principles of taxation,” she says.

CMO Briefing investment in the development of ecologically sustainable solutions. “A winning marketing strategy will be to build thought leadership and create awareness in the market about the company’s deep commitment to the cause,” he says.

Here’s how to go green in marketing

CMOs talk about their best practices and share insights on how companies can win by going green.


usinesses in developed economies are starting to embrace environmentally friendly practices in the workplace, making the shift from mindless to mindful consumption. Marketing departments of companies are keen to jump on the green bandwagon, adopting policies that reduce waste and use energy more efficiently. Green IT marketing focuses on two main concerns of the market: how to reduce e-waste and how to improve efficiency, says K.P. Unnikrishnan, Asia Pacific Regional Marketing Director for Palo Alto Networks. The green IT movement has gained momentum in the last 20 to 30 years, and Unnikrishnan believes it is here to stay due to strong market forces that work in its favour. “Whether it’s for the purpose of compliance, a better brand image, demand from the market or pure cost benefits, green IT is only set to grow,” he says. Embracing sustainability Unnikrishnan points out what he regards as a major positive change in how companies adopted environmental sustainability in their practices over the years- earlier efforts were largely seen as more compliance driven, but now companies are more proactive in going green. In turn, this presents a challenge to a company’s marketing team- ensuring that consumers are made aware of the company’s marketing initiatives. “Take a step further to show your brand’s commitment through participation in trade events or social activities that provide a platform to discuss and share ideas on sustainability. These are great forums to enhance your brand presence,” he says. Unnikrishnan believes that a company’s effort to go green should be backed up by long-term


Whether it’s for the purpose of compliance, a better brand image, demand from the market or pure cost benefits, green IT is only set to grow.

Go paperless, lead the pack Alicia Seah, Marketing Communications Director at Dynasty Travel International, takes pride in her company’s decision to go paperless by launching an iPad Mini system in the first quarter of 2014, doing away with the traditional paper-and-pen tour agency norm when making their sales pitch and processing their bookings. Singapore-based Dynasty Travel International claims to be the first travel agency to launch a travel app two years ago, where customers can browse travel package details, flight and country details and redeem their after travel reward points on iDynasty. Customers can also make payments via AXS machines near them instead of visiting the company’s headquarters. “Using technology to provide customers with greater ease and convenience is how Dynasty Travel stays ahead of its competitors,” she says. The company recently won an Enterprise 50 Award, which recognises local, privately held companies that have contributed to economic development in Singapore and abroad. Consumers support going green As companies make proactive efforts to adopt ecofriendly and energy-efficient practices, consumers themselves develop a sense of preference for products and services that are environmentally friendly. “There is a growing interest among consumers in being part of and supporting a community and in knowing where their products are coming from,” says Maneesh Sah, Southeast Asia Marketing Director at Towers Watson. Unnikrishnan agrees, saying that IT buyers today want to reduce their carbon footprint and adopt technology that help them not only enhance their brand image as environmentally friendly but also reduce their energy bill. This, in turn, brings down operating costs. “Consumers want to see measurable gains in their sustainability efforts and a company’s marketing initiatives must focus on building competitive advantage by quantifying the benefits of using its products. In other words, show the ROI,” Unnikrishnan adds. The words ‘sustainable, ‘socially responsible’ and ‘ethical’ have already become buzzwords in marketing, but Sha believes companies should do beyond lip service by finding innovative ways to sell green by focusing on core attributes of sustainability, such as the ability to track the product back to a place and producer of origin and supporting artisans and bringing their stories to life in a creative way, making their products appealing and relevant to their customers.


CIO Briefing Fostering a culture of innovation requires CIOs to constantly engage employees.

Secrets to sustainable innovation revealed

CIOs share their top techniques to keep the innovation ball rolling.


ompanies now consider innovation a key ingredient to beating the competition, with Chief Information Officers (CIOs) trailblazing the way to improvements that unlock value for their firms. But a haphazard or halfhearted approach to innovation will no longer cut it, say CIOs. Those who take this approach run the risk of sparking innovation, then losing grasp of it down the line, leaving the firm with little to show for their substantial innovation-focused investments. Setting an innovation agenda To ensure that innovation is churned out effectively and consistently, CIOs must set an innovation agenda that is aligned with business strategy and with priorities, says Ofir Shalev, CIO Employee Health & Benefits APAC, Mercer. Shalev says CIOs can set the tone by spearheading process innovation techniques such as lean methods, process standardization and predictive analytics, and the rest of the staff should follow. Formulating the innovation agenda requires CIOs to take an extensive sweep of external factors in the industry, says Scott Cassin, Chief Technology Officer Enterprise Services, Asia Pacific and Japan, HP. They must also leverage key innovation assets from their technology and service partners, as well as secure strong backing from top executives. “The innovation agenda in the organization should be both economical and purposeful, clearly aligned to business goals, delivering measurable business value and setting clear expectations. Key to success is belief and support from the senior 30 HONG KONG BUSINESS | MARCH 2014

CIOs must set an innovation agenda that is aligned with business strategy and with priorities.

management and a culture that provides purpose and freedom for employees to be innovative,” said Cassin. CIOs in particular should consider a shift to cloud computing as part of their innovation agenda, said Claus Mortensen, AP Analyst at IDC. This is because when companies offload and outsource the burden of their information technology (IT) maintenance through cloud computing, organizations can devote more manpower and resources to innovation. Mortensen acknowledges though that not all companies can easily transition to cloud computing. But it could be worth the trouble, as the CIO becomes more empowered to drive innovation instead of just managing it. Creating a sustainable innovation process Once the innovation agenda has been laid down, it now falls to CIOs to create a sustainable innovation process to ensure that goals are continually identified, evaluated for feasibility and achieved. Some CIOs even go as far as suggesting that a sustainable innovation culture be put in place for companies to reap the full benefits of their innovation agenda. Companies who adopt a culture of innovation shift their thinking, from ‘this is what we do’ to “this how we do things,” says Cassin. “Innovation is more than a process, it is a ‘state of mind’ and to create sustainable innovation for any organization.” But this is easier said than done, and requires strong business alignment. “For innovation to be sustainable, it cannot be just a one-off effort but rather a disciplined, continuous process supported by senior management and involving the different stakeholders from business, operations and IT,” says Shalev. “Anyone can innovate, but there should be a systematic framework to identify and collect the opportunities, analyze and prioritize them, develop a concept and optionally prototype it. It is important to track the post-implementation phase to make sure the benefits are realized as planned.” Fostering a culture of innovation requires CIOs to constantly engage employees, whether through innovation jams, hackathons or big idea challenges, according to Mortensen. Such an open and encouraging environment generates ideas, and there must be a mechanism that fast-tracks the best ones for evaluation and possible implementation. “Such group activities can send a message to the organization that change is important to the company and that the company is capable of changing.”

REGIONAL ANALYSIS: CHINa TOURISm Chinese departures implies outbound-tourist penetration increasing to 15%, which is in line with penetration seen in Japan and Korea in the early 2000s, but still significantly below that of Taiwan. China is about to enter a sweet spot that will spur J-curve outbound-tourism growth driven by rising disposable incomes. More annual leave, relaxation of visa restrictions, a deteriorating living environment at home, strained domestictourism infrastructure and increased urbanisation will also drive more mainland Chinese to travel abroad.

Mainland Chinese now want to “experience life” by travelling

Chinese tourists: Exploring new frontiers

The Chinese are exploring new locations such as Dubai, France, and Kenya. By Aaron Fischer, Head of Consumer & Gaming Research, CLSA


ou don’t need rocket science to see that China’s outbound tourism is accelerating at a pace that defies gravity, fuelled by a fast-growing, monied middle class eager to explore new frontiers. Departures broke through the 100-million barrier for the first time last year and we expect that to double by 2020. China’s outbound tourism is accelerating at a phenomenal speed. We expect departures to increase from 83 million in 2012 to 200 million by 2020, enjoying an 11% Cagr over the next eight years, which is double the United Nation’s World Tourism Organisation’s estimate of 100m. Outbound-travel penetration is still low and we expect higher incomes, more annual leave and easing visa restrictions to drive J-curve growth. It’s not just tourist 32 HONG KONG BUSINESS | MARCH 2014

Departures broke through the 100-million barrier for the first time last year.

numbers that are growing; travel destinations are also changing as Chinese broaden their horizons and visit more exotic locations. Still early days China witnessed a massive outbound-tourism boom in the 18 years to 2012, with resident departures increasing from six million to 83 million, representing a 16% Cagr over 1994-2012. Despite the impressive growth, it is still early days, with outboundtravel penetration low at 6%, compared with 15% in Japan, 28% in Korea and 45% in Taiwan. China’s outbound-travel penetration is tracking J-curve growth experienced by Japan, Korea and Taiwan in the late 1980s as those countries saw rising incomes help drive increased travel. Our forecast 200 million

J-curve growth Historically, Asian countries such as Japan, Korea and Taiwan experienced similar J-curve outbound tourism growth as per-capita GDP exceeded US$8,000-9,000, which triggered accelerated outbound-tourism growth. Japan’s economy expanded rapidly in the early 1960s, with real per-capita GDP increasing from US$7,100 to US$9,000. But the travel rate was still mild, expanding from 0.08% to 0.1%. Accelerated outboundtourism growth kicked in when per-capita GDP broke through the US$8,000 barrier in 1964. Between 1964-74, we see extended economic prosperity as per-capita GDP doubled from US$9,000 in 1963 to US$18,000 in 1973. Outbound tourism, however, grew at a much faster rate, with the penetration rate increasing from 0.1% to 2.1%. We see a similar trend in Korea during the early 1980s when consistent economic growth translated into moderate outbound-tourist growth. Per-capita GDP increased from US$4,000 in 1978 to US$8,000 in 1988, while overseas travel penetration increased from 0.7% to 1.7%. In 1988, as percapita GDP hit US$8,000, we see J-curve outbound growth, with overseas travel penetration

REGIONAL ANALYSIS: CHINa TOURISm increasing from 1.2% in 1987 to 10% in 1997. Lastly, in Taiwan, outbound tourism was flat over 1984-86, at around 4% despite robust economic growth. Again, penetration started to accelerate from 1988 as per-capita GDP reached US$8,000. Outbound travelers expanded from 5% in 1987 to 29% in 1997 while per capita GDP increased from US$8,000 to US$12,000.

Shopping should continue to rank top on their agenda, but “seeing the world” and “experiencing life” will be an indispensable part of their experience.

Yet to reach the tipping point Historical examples in other Asian countries suggest that per-capita GDP growth beyond US$8,000 triggers explosive outbound travel. We have yet to see this happen in China. Average per-capita GDP over 2008-12 was well below the US$8,000 trigger point and outbound travel expansion has only been in line with that of income growth. Given the vast size of China, it is appropriate to review percapita GDP of various provinces rather than focus on the blended average of the country. As of 2012, only the wealthy states in coastal areas had reached the sweet spot for outbound travel, with Beijing, Tianjin, Zhejiang and Jiangsu having per capita GDP of more than US$10,000 and Guangdong, Fujian, Shandong and Liaoning having a per-capita GDP of over US$8,000. A similar trend has already played out in the luxurygoods sector, with the industry enjoying explosive 135% growth over 2009-12, with income growth triggering J-curve expansion in luxury-goods demand. Price of various travel packages (departing from Beijing)

Source:, CLSA

Seeing the world from a new perspective

Historically, Chinese have travelled solely to shop, which has benefitted tax-free shopping cities such as Hong Kong and Korea. Shopping should continue to rank top on their agenda, but “seeing the world” and “experiencing life” will be an indispensable part of their experience as they move up the “travel learning curve” and explore new locations such as Dubai, the Maldives, France, the USA and Kenya. Rising incomes are a key factor driving mainland Chinese up the travel learning curve, as affordability historically has been a factor limiting them to travel further out. According to, a travel package to neighbouring Asian cities generally costs Rmb5,000-6,000 per person, while cost of travelling to Europe or the USA would be no less than Rmb15,000. Exploring new frontiers The march towards new travel destinations have already commenced, as we see a 62% increase in mainland Chinese visitation to Thailand in 2012. Travel to South Korea, Taiwan and Singapore has also grown strongly by 30-55% in 2012. The Maldives has also been a clear beneficiary of Chinese travelling further abroad, with numbers increasing from 14,000 in 2005 to 220,000 in 2013. Guam is following a similar path, with mainland Chinese tourist arrivals increasing from 1,000 in

2007 to 21,000 in 2013. Hong Kong and Macau should remain mainland Chinese’s top outbound travel destination given their close proximity, lack of language barriers and an attractive tax-free shopping environment. However, growth in mainland Chinese visitation should underperform that of other locations as we forecast resident departures to Hong Kong and Macau to grow by 7-9% Cagr over 2013-20. Slower Chinese inbound-travel growth in Hong Kong and Macau would imply the importance of these two cities gradually declining. While they will continue to be favourite tourist destinations, we expect a decline from 62% of the total in 2012. Chinese are spreading their wings We incorporate shifting travel patterns into our Chinese outbound-tourist estimate and forecast stronger growth in further out locations as travellers look for a more desirable travel experience. Resort destinations such as Guam, the Philippines, Thailand and Singapore are becoming increasingly popular among the Chinese and we expect visits to these countries to enjoy a 1748% Cagr over 2013-20. We also expect strong growth in inbound tourists to the USA and Europe as they have always been Mainland Chinese’s aspired outbound tourist destinations. HONG KONG BUSINESS | MARCH 2014 33

High-Flyers 2013

Outstanding Enterprises and Business Leaders

Hong Kong’s top business leaders and prime movers gathered to celebrate excellence on January 21, 2014 at the Hong Kong Business High-Flyers Awards, now on its 10th year. Publisher Tim Charlton was present to congratulate the winners at a night full of great food and wine followed by cigars and chocolates at Azure Restaurant Slash Bar, LKF Hotel. Congratulations to all the winners.

List of Honorees Ageas Insurance Company (Asia) Limited AIA International Limited AIG Insurance Hong Kong Limited Altruist Financial Group Arakaki Tsusho Limited Canadian International School of Hong Kong FREYWILLE Fujitsu Hong Kong Limited GODIVA Chocolatier Hästens Jebsen & Co Ltd - Jebsen Marine Noblesse Lifestyle Group Ovolo Hotels Rhombus International Hotels Group Ricoh Hong Kong Limited Shama Sound Concepts Ltd. The Cityview The Mercer The Pacific Cigar Company Limited Thomas Mayer & Associés Wharf T&T Zchron Design

Life Insurance Outstanding Enterprise Award General Insurance Financial Planning Premium Cosmetic Distributer International School Enamel Jewelry Leading ICT Solutions and Services Provider Premium Chocolatier Luxurious Bedding Motor Yacht Luxury Living Lifestyle Hotels The Leading Hotel Management Company Managed Document Services Serviced Apartment AV Consultancy Green City Hotel Boutique Hotel Upmarket Distributor Law Firm Fixed Network and Broadband - Telecommunications Interior Design


AIA International Limited accepts the Outstanding Enterprise Award

High Flyers Awards 2013 Recipients

Canadian International School of Hong Kong bags the International School Award

Altruist Financial Group accepts the Financial Planning Award

Zchron Design receives the Interior Design Award

Rhombus International Hotels Group receives the Leading Hotel Management Company

Fujitsu Hong Kong Limited bags the Leading ICT Solutions and Services Provider Award

Ageas Insurance Company (Asia) Limited accepts the Life Insurance Award

AIG Insurance Hong Kong Limited bags the General Insurance Award

Arakaki Tsusho Limited accepts the Premium Cosmetic Distributer Award

FREYWILLE receives the Enamel Jewelry Award


GODIVA Chocolatier receives the Premium Wharf T&T bags Fixed Network and Broadband - Telecommunications Award Chocolatier Award

Jebsen & Co Ltd - Jebsen Marine accepts the Motor Yacht Award

Noblesse Lifestyle Group accepts the Luxury Living Award

Thomas Mayer & AssociĂŠs accepts the Law Firm Award

Shama accepts the Serviced Apartment Award

The Cityview receives the Green City Hotel Award

The Pacific Cigar Company Limited bags the Upmarket Distributor Award

Hästens receives the Luxurious Bedding Award

Ovolo Hotels receives the Lifestyle Hotels Award

Ricoh Hong Kong Limited receives the Managed Document Services Award

The Mercer accepts the Boutique Hotel Award


Altruist Financial Group team

Tim Charlton, Julie Nunez, Kinki Yeung, Mercy Mejia, and Louis Shek of Hong Kong Business Magazine

Zchron Design team

Ricoh Hong Kong Limited team

Tim Charlton with Tony Kelly of Lighthouse Independent Media

Godiva Chocolatier Team with Louis Shek

Guests enjoying the networking cocktail with their peers

Networking cocktail

The Mercer team

AIG Insurance Hong Kong Limited Team

The Pacific Cigar Company Limited Team

HKB Associate Publisher Louis Shek and guests


Louisa Chan & colleague from FREYWILLE

High Flyers Awards Crystal Trophies

High Flyers Awards guests

High Flyers Awards guests

Guests enjoying the networking cocktail

Guests from Ovolo Hotels

Arakaki Tsusho Limited Guests

Fujitsu Hong Kong Limited Guests

Louis Shek & Dag Holmboe of The Pacific Cigar Company Limited

Louis Shek with HFA delegates

Guests from Noblesse Lifestyle Group

Raffy Wong of Hastens


Co-published corporate profile

A better driving experience with HYUNDAI all new Tucson’s unprecedented refinement Find out how it delivers the same winning combination of practicality, efficiency, and outstanding value with a raft of Euro-style features as its predecessor. nu 2.0 engine with 154hp and 191 Nm of torque. It also has a 6-speed automatic transmission with +/- gearshift. Hyundai Motors always put careful attention to detail to create a better driving experience. The new Tucson was designed and engineered in Hyundai’s Frankfurtbased design and technical centers in Europe. It embodies the “Fluidic Sculpture” design concept, wherein cars are presented as living works of art that convey the flowing dynamism of nature. The energy and movement found in nature’s contours are incorporated into the silhouette of every Hyundai vehicle. This makes the vehicles lighter, more aerodynamic, and more energy efficient.


yundai Motor Company expands the concept of the automobile from the simple means of transportation that it is now, to a new space that connects people to their families, work, and society. Since its establishment in the 1960s, the company has now grown to be the world’s fifth largest automaker and a top 50 Best Global Brands (Interbrand). Over the decades, Hyundai has gained tremendous recognition from international awards all over the globe. Hyundai Motors believes in the philosophy, “Realize the dream of mankind by creating a new future through ingenious thinking and continuously challenging new frontiers.” Hyundai Motors expresses its will to create new possibilities to benefit the world and its people by encouraging and 40 HONG KONG BUSINESS | MARCH 2014

developing new thinking through its brand slogan, “New Thinking. New Possibilities.” Performance and design As a testament to its vision of creating new possibilities, the All New Tucson was introduced. The new Tucson delivers the same winning combination of practicality, efficiency, and outstanding value with a raft of Euro-style features as its predecessor. It is equipped with the new

“The new Tucson was designed and engineered in Hyundai’s Frankfurtbased design and technical centers.”

Safety features The new Tucson also boasts of advanced safety features such as electric chromic mirror with rear camera display, rear parking assist system (RPAS), 6-airbag system, front seat active headrests, and auto cruise control Not only is the vehicle classy and elegant on the outside, it also has a comfortable and enjoyable interior with an engine start/ stop button, bluetooth and smart phone connectivity, seat warmers, USB & AUX ports, automatic dual-zone climate control with auto defog & cluster ionizer, and a panorama sunroof. The All New Tucson is available at Hyundai’s Kowloon Bay Showroom. Selling price starts from HK$218,000. Call 34288288 to book a test drive appointment and visit the showroom to experience the Tucson first hand.

CONTACT Hyundai Kowloon Bay Showroom Shop 4D, G/F, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Hong Kong Business hours: 9:00a.m. – 8:00p.m. Monday to Sunday (including public holidays) Tel: (852) 3428 8288 Facebook: Hyundai HK

Co-published corporate profile

Passion for technical perfection meets state-of-the-art German engineering

Find out how Metz’s craftsmanship enriches the user’s overall AV experience radio sets, Metz is one of the pioneering developers in sound technology.


nparalleled sound quality and German craftsmanship make Metz the virtuoso of audio-visual equipment. Founded by Paul Metz and Helene Metz back in 1938, Metz began producing radio sets in 1947, went into the flashgun business in 1955, and produced black-and-white television sets in 1952. For over 70 years, it has been developing and manufacturing its products at its 86,000-square-meter site in Germany, making it one of the longest-established consumer electronics companies. By combining experience and progress, Metz offers customers products that represent technique perfection of the highest quality, exceptional user-friendliness, and convenient service. While investing in both research and development, Metz TV keeps traditional German craftsmanship in its pursuit of innovative technology. Metz TV stands for quality, reliability and first-class customer service. To live up to these standards, it has always attached greater importance to professional corporate training, responsibility and commitment to employees, sustainable development, professional quality control and environment management. “Metz TV has always strived to deliver a fuller life to our customers by providing premium world-class TV products,” says Mark Anderson, Business Development Executive of Metz TV Hong Kong.

Top-of-the-line additions Metz recently launched the latest LED TV products, including the new Aurus 47” 3D Media twin R and Aurus 42” 3D Media twin R in Hong Kong. “We are confident that the newly launched Aurus range and our flagship models that we showcased during the show, can fulfill the demand of the most discerning audiovisual connoisseur,” shares Anderson. “Featuring the German made advanced technology, cutting-edge design and unmatched quality, the intelligent design of the new Aurus will not only be a welcome addition to the brand’s existing innovative LED TV and premium home theatre system but will also enrich the 3D experience of all users,” he adds. Intensive research and development has created the Primus range in 2009 and 3D TV range at the beginning of 2012. The Metz Primus series is a technological masterpiece of Metz TV and takes center stage with its excellent electronics technology and superior German craftsmanship. an expertly crafted composition of wood and metal, it can produce cinema-like bass sound. To provide a first class viewing experience, Metz television also features Passive 3D polarization in the LED technology, providing a great amount of viewing comfort to the user while keeping the image quality optimized. As a company starting up in making

“Metz TV has always strived to deliver a fuller life to our customers by providing premium world-class TV product.” 42 HONG KONG BUSINESS | MARCH 2014

A solid sound philosophy A new dimension in audio, mecaSoundpro coupled with a high-quality two-way audio system or 2-way bass reflex system and wooden cabinet, indulges the user with the exceptional sound quality giving a sound box and cinema-like bass effect. The signal technology Metz developed is the foundation of the exceptional sound quality of their televisions which optimises the audio signal for an ultra-clear and nuancerich, full sound. “Our models, for example the Taros, feature Metz mecaSoundpro which is a oneof-a-kind sound system with four speakers. With the front-facing speakers and the parametric equaliser, the subtlest of nuances can be clearly heard even at high volumes,” notes Anderson. “All models in the Taros family achieve a brilliant and natural sound quality, leaving the user perfectly satisfied,” he adds. This exceptional sound quality is also achieved by Metz-developed sound processing technology which controls the audio to perfection, ensuring that treble and bass are equally flawless. By sealing the speakers, the sound quality is significantly improved - providing the ultimate solution for a sound system integrated into a flatscreen TV. mecaSoundpro takes television into the realms of premium enjoyment. By combining experience and innovation, they consistently offer customers sophisticated products while utilizing modern technology in such a way that the user can actually feel the benefits.

CONTACT Metz TV Store Address: Shop 811-812, Times Square, Causeway Bay Tel: (852) 2481 6238 Schmidt Flagship Store Address: Unit 304 – 306, Star Annex, 3/F, Star House, 3 Salisbury Road, Tsim Sha Tsui, KLN. Tel: (852) 3101 0228


All the clarity, without the clutter

A powerful audio system doesn’t have to take up a lot of space, with the right audio console; oversized speakers and woofers are a thing of the past


f you live in Hong Kong, you’ll be quick to agree there just never seems to be enough space in the home. Organising your household to fit everything often seems to be a more taxing job than solving a Rubik’s cube, and the bundles upon bundles of cables and wires make you wonder if you’ve been living in a grape vineyard. What you gain in crystal clear sound you compromise with endless bundle of cables and an unsightly clutter it creates in the living and entertainment area. But great sound doesn’t necessarily come with a large set of speakers, and delivery system. Bose’s commitment to sound research has served them well having manufactured an array of professional sound systems that continue exceed their customer’s expectations. As a high end audio manufacturer, they have designed professional sound systems for many applications. While this reputation has made them the go-to brand for sound solutions, several of their products are designed for entertainment and home


audio solutions as well. As an integrated HDTV system, Bose’s VideoWave III, delivers a cinematic experience right in the comfort of home. The system’s speaker and woofers can be calibrated in order to deliver optimal sound quality. Ease of use is also an important part of enjoying the home audio experience. An array of buttons and multiple remotes is certainly a hassle and can be frustrating for users. Simple command along with compatibility with other electronic entertainment consoles gives an audio system that added touch of usability and practicality. The VideoWave III system delivers sound well beyond the screen. It captivates the audience instantly, and consistently does

“A frustrating case of cable clutter is a thing of the past – that is if you are savvy enough to pick out the right audio system.”

so. Aimed at producing the best cinematic effects, its PhaseGuide technology combined with a unique seven-element speaker array and advanced digital signal processing help create the realism users desire. Moreover, this system delivers a stunningly natural picture on an LED 1080p HD screen. With a 120Hz refresh rate, sequences are displayed in smooth fashion. While these features are enough to compel AV enthusiasts to buy, this media console can also connect to up to six sources: a Blu-ray Disc player, cable box, video game system, among others. Connected devices can be controlled with ease through the Unify® intelligent integration system. The ADAPTiQ audio calibration system, on the other hand, helps overcome acoustic challenges that are related to room size and shape. This ensures that the entertainment system is highly customized. VideoWave III system’s versatility goes well beyond the thrill of home theater. With the various gaming, audio and entertainment systems such as iPods and video game consoles becoming a permanent fixture in the modern home, VideoWave III’s ability to mingle and adapt is crucial. A frustrating case of cable clutter is a thing of the past – that is if you are savvy enough to pick out the right audio system. For more information, please visit


Tim hamlett

Case against the defence tim hamlett Former Editor of Sunday Standard and Associate Professor of Journalism


aving been writing newspaper columns for a long time I get the occasional irresistible urge to offer fatherly advice to people who came to the game more recently. This advice is ignored, of course, as is only proper. But it makes me feel better. So here we go. If you are a columnist you should not use the space allotted to you to rebut or dispute criticisms made of you elsewhere. There are several good reasons for this. One is that your first duty to your readers is to be entertaining and informative. A recitation of your virtues is likely to be neither. Regular readers have already decided what they think of your opinions and prejudices. They are not going to change views formed over numerous readings of your previous efforts just because you say so. Then there is a temptation to be less than explicit in stating what you are complaining about. I was flattered to find Alex Lo responding to one of my comments about his work, but the reference was carefully anonymised and I suspect a lot of readers did not understand what was going on. As I have maybe 100 readers and the Post, I think, still has about 100,000 it is conceivable that 99,900 readers were neither convinced nor entertained; they were just baffled. Then if you do explain clearly what you are disputing, you may well introduce a lot of people to a criticism which they missed. Michael Chugani was complaining last week that some writers in the Chinese press call him a “Leung fan”. I imagine I was not the only reader to whom this came as a complete surprise. It had not occurred to me that Mr Chugani was a Leung fan, though having got the idea into my head I was not helped to get rid of it by Mr Chugani’s defence, which seemed to be that he is a fearlessly independent thinker who just happens to agree with Mr Leung about everything except television licences. Still Mr Chugani is entitled to his opinions, whatever they are. What bothers me about him is the contrast between the fearless piranha in print, and the fawning sycophant on television. I understand that different employers want different things, but this is not a happy picture for someone who frequently accuses other people of hypocrisy. And he went on to make a catastrophically misguided defence of media owners who curb or slant coverage because they have business interests in China and do not wish to offend the authorities there. Why, Mr Chugani wondered, was it OK to close a loss-making publication “for business reasons” but a source of bitter complaints if you modify coverage “for business reasons”? The answer to this question is simple. Because “business reasons” encompasses a wide range of possible behaviours, some of which may be objectionable while others are not. Someone who closes a loss-making magazine is merely executing a sentence already passed by readers and advertisers. No enterprise can go on losing money for ever. An enterprise which is incorrigibly loss-making has failed. It is like a 46 HONG KONG BUSINESS | MARCH 2014

Don’t recite your virtues in your columns

racehorse with a broken leg, just waiting for the man with the bolt gun and the trip to the dog food factory. The media owner who orders his staff to avoid “sensitive” stories, on the other hand, is responding to business reasons extraneous to the business itself. He is in fact modifying the service presented to the public in an effort to protect his personal financial interests. Journalists are supposed to avoid conflicts of interest. If your savings are invested in Megabucks Corp you will not (or at least should not) be allowed to cover their activities. Clearly if you come across a story which is going to depress the share price you will be tempted to overlook it. Coverage should not be modified to suit the personal interests of the reporter. And it should not be modified to suit the personal interests of the proprietor either. Proprietors have the opportunity (though not all of them take it) to have their pictures in the paper, to encourage policies which they conceive to be in the public interest, to choose people whose instincts they share to run the publication. That does not mean it is acceptable to trim coverage so that your widget factory in Dongguan will not be given a hard time by the locals. Journalism demands some level of honesty. A newspaper which is not making every effort to tell the truth will sooner or later start telling lies. I fear that Mr Chugani sees this coming and is preparing not to notice.

Write to inform, not to rebut criticisms


Ian Perkin

Policy Address short on vision, big on detail


t the Hong Kong General Chamber of Commerce’s annual Business Summit back in November the business community was looking for some answers on where the SAR is headed. Now that the HKSAR government is into its set-piece policy period of the year – the Policy Address on January 15 and the Budget on February 26 – they will be looking for some answers. Judging by the policy address just delivered to the Legislative Council by Chief Executive, C Y Leung, they may feel somewhat short-changed by the end of the process. Like his inaugural policy address twelve months ago this year’s speech by Mr Leung was short on any real vision for the SAR’s future and long on detail of government policies. While there is nothing inherently wrong with this – it is after all a speech about setting the government’s policy priorities and direction – one of the key roles of a leader is to set a vision for the future. One of the big issues up for discussion at the Business Summit, for example, was where Hong Kong will find its place in the region, especially in regard to Shanghai (and its new Free Trade Zone) and Singapore? An ancillary to this question was how Hong might further combine with Guangdong (including Shenzhen) in the Pearl River Delta (PRD) area to leverage its position against its competitors regionally and globally? Mr Leung did his best in his policy speech to highlight the Hong Kong/PRD advantages and the benefits flowing from Hong Kong’s close China links it fell somewhat short of a “vision” of the future. Two other key issues raised at the Business summit were more practical ones – how the HKSAR’s present labour shortage might be tackled and what further convertibility of the Renminbi might mean for the SAR’s financial services sector. The Chief Executive did broach the issue of labour and skills shortages but his remarks were mainly limited to attempts to get more women to enter or return to the workforce. On the RMB his remarks centred on reports from the newly established Financial Services Development Council (FSDC) outlining the way ahead, but without disclosing any detail. “The FSDC has submitted its first set of reports to the Government which analyse the opportunities and challenges for Hong Kong’s financial services industry,” he said. “The reports discuss in detail Hong Kong’s future positioning and strategic development as an international financial centre, and put forward proposals in respect of Renminbi business, asset and wealth management, and real estate investment trusts. “The Government will examine and follow up on these proposals in collaboration with financial regulators,’ he added. Perhaps there will be more to come in the 2014-15 Budget to be delivered to the Legco on February 26, but it is probably expecting too much of a Financial Secretary to deliver a future “vision” where a Chief Executive has not. 48 HONG KONG BUSINESS | MARCH 2014

IAN PERKIN Independent Economic Consultant

Policy Address 2014 - Key Economic Policies • Promote the development of the financial services industry in respect of Renminbi business, asset and wealth management, and real estate investment trusts. • Consider increasing the number of Economic and Trade Offices in Asia, strengthen our liaison work and tap new markets, as well as set up more offices in the Mainland. • Commence formal negotiations for a Hong Kong-ASEAN Free Trade Agreement. • Propose setting up a new statutory maritime body to develop high value-added maritime services. • Promote Hong Kong’s legal and dispute resolution services. • Re-initiate the setting up of an Innovation and Technology Bureau. • Explore ways to further develop the eastern waters off Lantau Island and neighbouring areas with a view to developing an East Lantau Metropolis through a Lantau Development Advisory Committee. • Review the agricultural policy and carry out consultation within this year.

On the other hand the way is certainly open for Financial Secretary, John Tsang to deliver on such issues as the labour market and what greater convertibility of the Renminbi might mean for Hong Kong. For his part, Mr Leung, highlighted the gains likely to come Hong Kong’s way from the Mainland’s new reforms emanating from the Third Plenum session in Beijing late last year. “Over the past 35 years, Hong Kong’s development owes much to our country’s reform and opening up,” he said. “More than two months ago, the Third Plenary Session of the 18th Communist Party of China Central Committee announced that our country would comprehensively deepen reform and open up further. “This will bring new opportunities for Hong Kong. We have to seize these opportunities and properly respond to the changes.” Again there were few specifics but he did emphasise the progress being made in the liberalisation of trade in services between Hong Kong and the Mainland, and more specifically with Guangdong. On the further development of the PRD regional economy he touted the benefits likely to flow from the completion on the Hong Kong-Zhuhai-Macau bridge and migration of Hong Kong development westwards. Disclosure: Ian Perkin is a former Assistant Director and Chief Economist of The Hong Kong General Chamber of Commerce (HKGCC).

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‘Disputes in HK’, and other absurd predictions


t’s hard to imagine, but – if the South China Morning Post’s soothsaying sources are correct – the imminent Horse Year could see Hong Kong people being bad-tempered; Chief Executive CY Lung having problems (or at least he ‘might’); and the city troubled by something called ‘disputes’, whatever they are, but only in April. If feng-shui masters and astrologers stuck their necks out any further, it would be the Year of the Giraffe. What else can we predict? With the international markets suffering US tapering/ Turkish Lira/etc death-spiral mayhem right now, could this be the year the Big Lychee’s property bubble finally pops, or at least starts making a hard-to-ignore hissing sound? It won’t happen in isolation, so the question is: what would set it off? Capital flight from emerging markets as the US recovers? Wealth destruction everywhere as the US recovery is revealed as a hoax and the dollar collapses? Panic following Asian Financial Crisis Part II as the Southeast Asian and Mainland credit bubbles go boom? If I had to guess – there is no point in gracing anything on this subject with the word ‘forecast’ – we will all muddle through. Sit tight, look after what you have, consider ‘buying opportunities’ with great care, and relax while contemplating the gentle hissing in the background. Be thankful for the Gung Hei and don’t get too worked up about the Faat Choi. One interesting thing to watch will be Beijing’s contortions in trying to sort out its shadow banking mess, if only as a metaphor for the Chinese leadership’s entire existential quandary: one-party rule versus the princelings’ stolen wealth. Whither Hong Kong’s constitutional reform? There’s a seriously asymmetric game of chicken going on between the pro-democrats and the Chinese government. The pro-dems’ threats of Occupy Central and vetoing a reform bill are pretty hollow, but paranoid Beijing officials refuse to believe it. The result is a cycle of everhardening positions. One leading establishment figure is (half-) openly and gloomily giving political reform a 70% chance of ultimately failing altogether. More likely, the pro-democrats’ destiny in Horse Year is to split between the Long Hairs who want the guided-democracy package to fail so we can all take to the streets, and the Ansons who proclaim 50 HONG KONG BUSINESS | MARCH 2014

a readiness to reject anything but full universal suffrage, but secretly could be flexible if Beijing makes the right noises. The only thing we can be 100% sure of is that Communist one-party regimes do not accommodate any real, potential or even theoretical independent source of political power, ever. How many more Mainland shoppers can be crammed into Hong Kong before one of the seams bursts, and an ugly great hemorrhage of Yakult, milk powder, pink suitcases on wheels and Mandarin-speaking people with slightly odd hairstyles spews all over passing ships? Since Commerce and Economic Development Secretary Greg So’s recent pronouncement on welcoming a further 50 million visitors a year, everyone has been looking at maps and Google Street View, trying to work out exactly where we can fit them in. So does a very convincing imitation of a complete idiot, essentially promising to accommodate the 50 million extra people by providing the very facilities that will attract them here in the first place – when a five-year-old would know you just nail the damn door shut. An alternative explanation is that So is in fact a cunning genius, spreading panic and disbelief to give the government the ammunition it needs to put up the ‘Full’ sign. OK: whatever else the Horse brings, this will very likely be the year that people’s patience with ‘tourism’ finally snaps, and our visionary leaders get the message.

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What else can we predict?

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Jan-March 2014