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ALL EYES ON ASIAN ART See Asia’s art market shine









BUSINESS Established 1982 Editorial Enquiries: Charlton Media Group 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166 Publisher & EDITOR-IN-CHIEF Associate Publisher Assistant Editor Art Director

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Louis Shek +852 60999768 Laarni Salazar-Navida Rochelle Romero



deals in Asia. These companies are on the prowl for strategic and bargain acquisitions in North America and Europe. Find out what the twofold reason for this attitude shift is. In this issue we also explore Asia’s lively art scene especially after Art Basel’s purchase of a well established art fair that adds world significance to an already exuberant art market.

Take a sneak peek as well at Hong Kong’s untapped private healthcare potential. We found out that hospitals only have five beds per thousand population due to underdeveloped private healthcare.

Lovelyn Labrador

There are also updates on the most prominent industry players in Hong Kong like Cathay Pacific and Standard Chartered. Find out which ones are in trouble and which ones are in a safe haven. Advertising

Interestingly, we found out that for the first time in history, 2012 marked the first year since numbers were kept that Asian firms did more outbound M&As than western firms did

Louis Shek

Jonn Martin Herman Editorial Assistant

This issue of Hong Kong Business brings you coverage of the latest issues across different sectors in Hong Kong - be it power industry, real estate, consumer, healthcare, or M&A.

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12 FIRST StanChart: Where angels fear to tread


18 ANALYSIS More Asian companies march

FIRST Golden Years coming to an end

west to go global

FIRST 10 Money isn’t everything 11 Asia Pacific’s M&A activity dwindles down

COVER STORY 30 Hong Kong’s Lively Art

11 The Chartist 12 Is Standard Chartered the laggard in Hong Kong?


REGULAR 36 Legal Briefing: Hong Kong govern

ment issues new guidance on

direct marketing

Scene Explodes Art Basel’s purchase of Hong Kong’s homegrown art fair adds world significance to an already exuberant art market

26 A peek at Hong Kong’s

untapped private healthcare potential Hospitals only have five beds per thousand population, no thanks to underdeveloped private healthcare

38 China’s shale revolution and

14 Keeping the status quo 22 Money will take you far, but not far enough

50 Numbers


its Asian aftershock China is making a big push for shale gas, which could help stabi lise energy prices for importheavy Asia

48 The insurmountable horrors of standard working hours and Occupy Central

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 19/F, Yat Chau Building, 4 HONG KONG BUSINESS | APRIL 2013 262 Des Voeux Road Central, Hong Kong

For the latest business news from Hong Kong visit the website


News from Daily news from Hong Kong Victoria’s Secret seduces HK most read RETAIL

Victoria’s Secret to open two Hong Kong stores World famous lingerie brand goes east to meet surging demand. Each of the two stores will have an area of 1,500 square feet or 139 square meters. One will be located at the International Finance Centre in the Central Business District and the other at New Town Plaza, a favorite of mainland Chinese shoppers. HOTELS & TOURISM

We are not the cause of Hong Kong’s problems: China Senior Chinese government official says Hong Kong should be grateful to mainland tourists. “After the 2008 financial crisis, Hong Kong experienced some difficulties, and hoped that mainland compatriots would continue to go to Hong Kong to increase tourist revenue,” said Lu Xinhua, spokesman for the Chinese People’s Political Consultative Conference. Lu’s comments follow persistent complaints by Hong Kong residents that the unremitting flood of mainland Chinese visitors was inundating Hong Kong.

Peek into Victoria’s Secret

know about China’s macro targets for 2013 7.5% GDP target has been penciled in. According to BBVA Research, the start of the 12-day National People’s Congress began with the release of official 2013 macro targets, contained in outgoing Premier Wen Jiabao’s Government Work Report. Among the key targets are GDP growth (7.5%), average inflation (3.5%), M2 growth (13.0%), and the fiscal deficit (2.0% of GDP). ECONOMY

Hong Kong trade with


What you need to

Increase in minimum wage


Russia booming It has risen 150% since 2007. In 2012 alone, twoway trade amounted to $3 billion or 50% higher than the $2 billion in 2011. The increase in trade with Hong Kong is being driven by Russia’s growing economic ties with Asia, especially China. Trade between China and Russia is expected to reach $90 billion this year. ECONOMY

Hong Kong should help in China’s development Doing this will help

Graying population

boost Hong Kong’s economy, said Chief Executive CY Leung. It can also resolve deep-seated housing and poverty problems through mutual prosperity. Doing all these will result in higher incomes, upward mobility for young people, and solutions for housing and poverty problems, said CY Leung. ECONOMY

Graying population will slow future growth Rise in the number of elderly citizen forces government to husband public finances. Hong Kong has a measure in its 2013-14 budget to form a working group that will study ways to make more comprehensive long-term planning for public financing. Financial Secretary John Tsang said the increase in the number of elderly

citizens will result in a surge of expenditure on healthcare and welfare. Current demographic trends suggest economic growth will continue to taper off in the 2020s and the growth rate will be much lower than the 4.5% growth rate over the past decade. FINANCIAL SERVICES

Hong Kong nailed 3rd spot in world’s top billionaires list 54 individuals raked in more than $1.5 billion each. According to the Hurun Global Rich List 2013, Asia is home to the highest number of billionaires this year with most of them operating in the real estate sector. The total wealth of the 1,453 Asian billionaires amounted to a staggering US$5.5 trillion, the equivalent of China’s GDP.


News from Daily news from Hong Kong HK property prices still soaring most read RESIDENTIAL PROPERTY

More bad news for Hong Kong property buyers Property prices to keep increasing for the rest of the year. Property consultancy firm Colliers International also said potential buyers will bear greater transaction costs to enter the market as the expectation of returns is sustained by positive economic news. MARKETS & INVESTING

Charles Li says China to allow renminbi to float in five years The CEO of Hong Kong Exchanges & Clearing Ltd also said China will open its markets further. Li said China has to reform its interest rate system. He noted that the value of the renminbi is limited by the government and is only allowed to rise or fall within a narrow range. Li said that system can’t last forever.

Hong Kong properties

and diesel engines, was more than 20 times oversubscribed, triggering a clawback that boosted this portion to 30% of the deal from the initial plan of 10%. HR & EDUCATION

Hong Kong’s unemployment rate stands pat at 3.4% Weak job growth seen in transportation and construction sectors. According to a report by the Census & Statistics Department, the seasonally adjusted unemployment rate stood at 3.4% in December-February, the same as the November-January


Xinchen China’s Hong Kong IPO does well It has raised $90 million on strong demand from retail investors. The Hong Kong public tranche of Xinchen China Power Holdings, a maker of light-duty gasoline

figure. Announcing the latest labour force statistics, the department said the underemployment rate decreased from 1.6% to 1.5%. FINANCIAL SERVICES

Hong Kong’s composite interest rate dropped to 0.25% Blame it on lower weighted funding costs. According to a report, the composite interest rate was 0.25% at the end of February, down three basis points on January’s figure. The Monetary Authority announced

Hang Seng Bank home loan

the figure, saying the decrease reflected a decline in the weighted funding costs for both deposits and interbank funds. AVIATION

Cathay Pacific, Dragonair passenger traffic surged 10.5% to 2.34m Call it the Chinese New Year effect. In a release, Cathay Pacific Airways reported combined Cathay Pacific and Dragonair traffic figures for February 2013 that show a sharp increase in the number of passengers carried compared to the same month in 2012, alongside a significant year-onyear decrease in cargo and mail tonnage.  ECONOMY

Cathay Pacific


Only 2 in 10 Hong Kong bosses expect business conditions to improve Domestic outlook

remains cautious. According to Michael Page’s Hong Kong Employment Index Report, 54% of Hong Kong employers expect domestic business conditions will remain stable in the first half of 2013, and only 12% expect them to improve. FINANCIAL SERVICES

Hang Seng Bank raises home loan rates Becomes third Hong Kong bank to do so. The new mortgage rates are between prime minus 2.6% and 2%, which translates to 2.4% and 3%. HSBC and Standard Chartered have added 0.25 percentage points to their newly approved home loans. These three mortgage lenders, who belong to the “Big Four,” were responsible for almost half of all home loans issued in 2012.


FIRST Sha Tsui – is projected to increase by 8% year-on-year during the coming 12 months.“Hong Kong is well-known as a shopping mecca, with numerous international brands opening shops here. However, ever-rising and eyewateringly expensive shop rental levels have forced some longestablished and distinctive local retailers and restaurants out of prime shopping districts. This is creating a potential risk for the Hong Kong retail market that will materialise if the shopping style of Chinese visitors changes, which is not inconceivable,” says Colliers’ Helen Mak. But the “golden period” of Hong Kong retail is under threat, both from higher-end customers who now prefer to shop in Paris or London, and from online outlets that offer convenience in China.

Money isn’t everything

According to the 2013 Randstad Award survey, Hong Kong employees (65%) most often select long-term job security as the most important factor when choosing to work for a specific company. Pipping salary (63%), pleasant working environment (53%), good work-life balance (45%), and career progression opportunities (44%) followed in the list. The survey covers 4,000 respondents of working age and measures the employer attractiveness of the 75 largest employers (by workforce size) in Hong Kong. The survey is unique in the market, as it allows top employers to benchmark themselves against competitors. Bosses must take heed “Interestingly, Hong Kong was the only place in Asia where employees most frequently put long-term job security ahead of salary as the prime reason for joining a particular company,” said Brien Keegan, Director, Randstad Hong Kong. “Employers need to take heed of this when looking to recruit, as the commonly held belief that employees, in Hong Kong at least, are just interested in money has proven untrue.” Interestingly, over two fifths of Hong Kong employees (42%) were also more likely to choose to work for an employer if they were conveniently located, above and beyond financial health (40%), interesting job content (31%), or good training (25%). The survey also revealed some telling gender differences in what men and women seek when working for a specific company. 10 HONG KONG BUSINESS | APRIL 2013

Consumption pattern changes Mak thinks the changes in the consumption patterns of mainland Ryan Lam Joanne Yim Chinese may happen at a faster Economist Chief Economist pace than people currently expect. International brands and flagship April 2013 t is hard to believe that in the ten Rents in stores have been a strong focus  and years since SARS struck Hong Queen’s Road Recovery Butdriving Momentum Somewhat force Eases in the growth of the Kong, the retail industry has CentralContinues and local retail market over the past ten seen sales more than double, from Russell Street years. just HK$12.7 billion to $41.4 billion. in Causeway Latest data, after removing distortions creatednow by the of the Lunar However, istiming the right timeNew to Year, remain Joanne Lee, manager of research at Bay grew by a supportive to the trend of a mild recovery of the Hong Kong economy, while suggesting that a response futureonchanges in purchasing the growth momentum eased somewhat. to Reports employment, Colliers, calls this a “golden period.” staggering more hasplan managers’ survey and retail sales were mostly positive, reflecting domestic consumer shopping styles inthat order to demand is Two out of three dollars spent in than on track 400%. for a healthy gain in the first quarter. keep the retail market competitive. Hong Kong shops is now spent by In contrast, external demand was weak. The eurozone’s debt crisis resurfaced, with Cyprus reckons the andbe seen as a new a mainland Chinese tourist, whose requiring a bailout. The realMak bone of contention is government whether Cyprus can template for resolving banking crisescould in other Europeanways countries, whereby depositors public consider to numbers have also doubled, from absorb losses ahead of taxpayers. Renewed concerns of financial instability in Europe support and preserve characteristic highlights it may not be a smooth ride for the Hong Kong economy in 2013. 16.6 million in 2002 to 48.6 million local shops and restaurants, and last year. While we see the tough treatment of Cyprus opens another tense chapter, it is equally important not to lose sight ofdiversify some positive thedevelopments elements inofother the major localeconomies. A bill passed by both houses of the US Congress will allow the government to continue its daily retail so Hong Kong’s reputation as a a shutdown operations through September and hence remove the fiscal uncertainty about Game changers of government departments and suspension of government services. The near-term shopping paradise remains solid in Catering for the interests of the prospects in Japan have also improved considerably, since the effects of fiscal stimulus plan and sharp depreciation of theshort-term. yen have been unfolding. the new and rapidly growing numbers All things considered, we judge that the global recovery would persist and Hong Kong of mainland China consumers stands to benefit. We retain our forecast of a 3% GDP growth for the local economy for has fundamentally changed Hong 2013. Retail sales value and volume (% YoY) Kong’s retail sector. This explains the skyrocketing rents, particularly on Exhibit 1: Hong Kong’s Economic Forecast some prime shopping streets. (% YoY) 4Q12 2012 2013F 2014F For example, according to Real GDP 2.5 1.4 3.0 4.0 Retail sales value 7.5 9.8 13.0 15.0 Colliers International’s Hong Kong Total exports 7.0 2.9 6.0 8.0 retail rental index, rents in Queen’s Total imports 8.1 3.9 7.0 9.0 Consumer prices 3.7 4.1 4.3 4.0 Road Central and Russell Street in Unemployment rate* 3.4 3.3 3.6 4.0 Causeway Bay grew by a staggering Note: (F) Forecast; * Average for the period Sources: Census & Statistics Department of HKSAR, Hang Seng Bank more than 400% between the end of 2002 and 2012.  The average rent of ground-level shops in the Source: Census & Statistics Department of HKSAR, Reuters EcoWin, Hang key shopping districts – Central, Seng Bank Causeway Bay, Mong Kok, and Tsim

Golden Years coming to an end


FIRST Chinese companies continued to be the preferred target by both domestic and foreign acquirors.

Asia Pacific’s M&A activity dwindles down


t has been the slowest start to M&A in Asia Pacific since the gloom and doom days of 2009. Asia Pacific companies’ deals were down 26.6% to just US$79.5 billion over the first 3 months of the year. Thomson Reuters notes that completed M&A activity involving Asia Pacific amounted to US$84.1 billion thus far, a 17.2% decline from the first quarter of 2012 (US$101.6 billion) as the number of completed deals fell 31.2% to 1,107 deals. Meanwhile, M&A activity in Hong Kong only totaled US$3.6 billion, making it the fifth most targeted nation. India was a close sixth (US$3.5 billion) and Singapore

ranked seventh (US$2.6 billion). While Hong Kong and Singapore have both seen their slowest start to M&A this year, China is enjoying being the most coveted nation for M&As. Chinese companies continued to be the preferred target by both domestic and foreign acquirors with US$31.3 billion, a 12% growth from the first quarter of 2012, and captured 49.8% of Asia Pacifictarget M&A activity. PetroChina’s pending 28.57% stake acquisition in a Maputo-based oil and gas exploration and production company called ENI East Africa SpA is by far the largest announced M&A deal involving Asia Pacific with an estimated value of

US$4.21 But there are still some sectors that manage to weather the seemingly hopeless M&A scene. The Industrials sector, for instance, accounted for the largest portion of acquisitions involving Asia-Pacific companies with US$14.9 billion in deal value, a 40.9% increase from the first quarter of 2012 and captured 18.7% of the M&A activity. This, according to Thomson Reuters, is the strongest first quarter-level for the sector since 2011 (US$17.0 billion). “Meanwhile, the deal-making activity in the Energy & Power sector declined 35.1% to US$12.2 billion from the comparative period last year thus making it the slowest start to a year since first quarter of 2009 (US$8.7 billion). M&A activity in the Oil & Gas sector fell 20.5% to US$8.1 billion – the lowest first quarter-level since 2009 when the deal value fell to US$3.9 billion.” For more M&A analysis, see page 18.

Asia Pacific ex. Japan announced M&A* US Billion

Source: Based on target Asia-Pacific M&A Volume

The Chartist Hong Kong has seen a surprising uptick in sales of electronic gadgets like smart phones to mainlanders, made all the more apparent with a surge in iPhone sales over the past few months. UBS notes that if they were to strip these products out, sales would be 6.3%y/y in January. Separately, the fact that sales value and volume grew at similar rate suggests that retail recovery has thus far been a volume story. ”This gels with what we witnessed (that strong sales in smart products were in part a result of discounting) and the observation that consumer demand has shifted in favour of lower ticket price items in the gold, jewellery and watch space,” UBS said.

Retail Sales propelled by smart products

Retail recovery has thus far been a volume story

Sources: CEIC and UBG estimates. Other consumer durable goods mainly consist of smart phone and other related products

Sources: CEIC and UBS estimate


FIRST The Analysts’ call

Is Standard Chartered the laggard in Hong Kong? Alliance Bernstein - Mike Werner

StanChart: Where angels fear to tread These continue to be good times for StanChart as it capitalises on the withdrawal of European financiers from the market to grow its share of the pie. And nowhere is it more important for the group than Hong Kong, where it generates 22% of its profits out if its ‘thinner but taller’ headquarters next to HSBC on Queens Road.

on assets remains mid tier in region compared to peers whereas its return on equity continues to be higher driven by the high levels of leverage. To keep growing at double digits and still hold 15% RoE ambitions in a Basel III world will be exposing the bank to a lot of tail risk. The operating environment for the Hong Kong banks remains challenging with low interest rates making it difficult for banks to make much of a margin and loan demand The operating environment remains weak. There are also fresh reports that Hong Kong for Hong Kong banks remains banks offshore RMB businesses challenging with low interest rates. appear to be under pressure due to high competition for deposits But recent results suggest the bank and weaker demand for RMB loans will struggle to both grow its assets due to the recent appreciation of the and its return on equity at the same RMB. time as the Asian markets remain StanChart is also highly reliant on very competitive. First half results both fee and trading revenue, which for 2012 show that the bank’s return are notoriously fickle.

Standard Chartered Asia margin

Source: Company data, Barclays Research


Standard Chartered was the clear laggard of the major international/regional banks operating in Hong Kong with regards to its 2H12 earnings performance. In terms of the absolute profitability levels, the rank-order for the group’s ROE was similar to that of the banks’ ROAs, with two notable exceptions – StanChart and Dah Sing. While StanChart’s ROA ranked the second from the bottom in the group, it was the second most profitable bank in terms of its ROE, coming in at 16.5% in 2H12. The difference was driven by the high leverage ratios that StanChart maintains in its Hong Kong operations of 20.1x vs. 10.6x, on average, for the other HK banks. The bank with the next highest leverage ratio is BOC(HK), which had a leverage ratio of just 11.8x, well below the level of StanChart. Meanwhile, the smallest two banks we examined, Wing Hang and Dah Sing, also continue to have the lowest reliance on fee income at just 17.3 and 17.9%, respectively.

Barclays - Sharnie Wong

For Standard Chartered we forecast 10% annual RWA growth, implying an acceleration from current footprint weighted volume growth. At the same time we estimate that the company can increase the payout ratio to 40% or a little higher and still build its core Tier 1 ratio to a very healthy 12.3% in 2015. [This] suggests RWA growth of $50bn$160bn and attributable profit of $17bn$20bn over the three years to 2015.

Maybank Kim Eng - Todd Martin

Management expected expense related to regulations will continue to grow. By geography, Hong Kong was still the biggest contributor. Net interest margin in Hong Kong dropped from 1.8% to 1.6% in FY12, a difference from the trends witnessed in some local banks which released FY12 results. Management said it is just mainly because loan grew at a faster pace than deposit. SCB has reported unbroken income profit and growth for 10 years, reflecting the management’s execution ability.

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Ian Perkin

Keeping the status quo


his year’s close juxtaposition of a delayed Policy Address (January 16) and Government Budget (February 27) offered a unique opportunity for the new Chief Executive, C. Y. Leung, to stamp his authority and vision on his young administration and give greater clarity to Hong Kong’s immediate prospects. It was an opportunity that went begging. Mr Leung’s first policy address provided neither a bold vision nor a solid roadmap for Hong Kong’s future. Instead of a new direction, Hong Kong people got more of the same old platitudes and promises. This left the Financial Secretary, John Tsang’s sixth budget with nowhere to go. Without a more powerful direction from the top, the Financial Secretary could only produce more of the same. Certainly, the Policy Address and Budget slotted nicely together, with the bare bones of the (fairly limited) initiatives raised in the address being given some fiscal flesh in the subsequent budget. But this basic coordination is the least that could be expected. Taken together, the key message from the two most important statements of government policy was that Hong Kong people should not expect too much innovative thinking from their new administration. The 2013-14 budget, delivered to the Legislative Council on February 27 built on these themes and detailed their financing ($60 billion in policy address initiatives alone), and despite increased spending (see table), Hong Kong’s budget remains in robust health. The Financial Secretary is predicting a virtually balanced budget for 2013-14 (a modest deficit of $4.9 billion), but given his normally conservative (“prudent”) forecasts, the end-of-fiscal-year numbers are likely to again produce of surplus. Any slowerthan-expected growth in GDP and earnings would adversely effect the outcome.

“Hong Kong people should not expect too much innovative thinking from their new administration.” Total spending is expected to be $440 billion consisting of operating spending of $352 billion and capital spending of $88 billion. Of the operating spending, $291.3 billion is recurrent spending. Spending is equal to 21.7% of GDP for 2013-14. In his speech to the Legco, the Financial Secretary warned that the budget is reaching a critical point. He said increases in spending would not be able 14 HONG KONG BUSINESS | APRIL 2013

IAN PERKIN Independent Economic Consultant

Hong Kong budget estimates and forecasts

to continue in the near future without additional revenues to match. He indicated that Hong Kong will soon need to choose between bigger government (and new or higher taxes or borrowing) and spending restraint (and maintaining current taxes and rates). “We must not increase expenditure without good cause, or without regard to our low tax regime. Our revenue, now amounting to about 20 per cent of GDP, is unlikely to achieve significant growth. Our public expenditure, on the other hand, has stayed at around the same level in recent years. “As we are obliged to uphold the principle of keeping expenditure within the limits of revenue, the Government would need to increase revenue if we want to increase expenditure. This would mean raising taxes or resorting to borrowing. Both options are controversial. Tax hikes will overhaul our simple and low tax regime, which has been the key to our success, and undermine Hong Kong’s overall competitiveness in the longer run. This will also adversely affect our community and businesses. We must carefully assess the pros and cons in considering any proposal to increase tax.” Hong Kong financial secretary, John Tsang, predicted the local economy (as measured by real gross domestic product or GDP) would grow between 1.5% and 3.5% this calendar year. He also suggested the new measures announced in the budget – increased spending (especially on social programs), continued capital expenditure, and various tax breaks – will add 1.3 percentage points to GDP for the year. That’s a little less than the 1.5 percentage points boost to GDP from budget actions he predicted in last year’s budget for the 2012 year.

HK budget’s penchant for balance




A quick guide to the Hong Kong competition ordinance

BY DANIEL WALKER Founder of Lawyers Without Ties


he doom mongers haven’t long left. Hong Kong has but a few short months left of the free, anything-goes world, that has for decades led businesses to think of Hong Kong as the ‘big market, small government’ state. Sometime between June and December of this year, the long awaited Competition Ordinance will be enacted and with it will be dragged kicking and screaming, onto (arguably) a more level playing field, pretty much anyone or any company that is engaged in economic activity in Hong Kong. So what is all the fuss about? Well, two things really, the First Conduct Rule and the appropriately named Second Conduct Rule. Thankfully for most SMEs in Hong Kong, it is only the First that is likely to be of immediate impact. The First Conduct Rule in essence brings Hong Kong in line with most of the rest of the developed world by outlawing all agreements (informal or otherwise) and groups that attempt to prevent, restrict, or distort competition in Hong Kong. The most heinous offences to be outlawed will include price fixing, allocation of sales or territories, limiting the supply of goods or services, and bid rigging. Naturally most of these practices take place outside of Hong Kong, but taking a leaf out of the US and EU legislative handbooks, the Competition Ordinance awards itself an extraterritorial effect. Any arrangement, wherever it takes place, that ultimately and negatively affects the Hong Kong market is an offence under the Ordinance. The Second Conduct Rule, we mention more in passing than for any particular concern for small business (with a turnover of less than HK$40m). Its aim is to protect markets from the big boys, stopping undertakings with large market share or

and your friends have a plan to corner the broad bean market in Sham Shui Po. The Competition Commission is unlikely to be interested if you (and anyone else in your group) have a worldwide turnover not exceeding HK$200m. This exclusion will not however apply to the most serious offences of price fixing, bid rigging, market allocation, and output control, which are theoretically investigable on any scale. If the Commission does decide to shine its spotlight on a business’ activities, it has, courtesy of the Ordinance, some fairly far-reaching investigative powers, including requiring a company to produce documents or appear before the Commission, as well as the more draconian power to enter and search premises and seize anything reasonably believed to be evidence of contravention of a competition rule. There are still a few months left and time for local companies to familiarise themselves with the provisions of the Competition Ordinance. A prudent board will seek to identify potential areas of risk, in particular “The First Conduct Rule brings Hong relating to agreements and practices Kong in line with most of the rest of the that may breach the Ordinance with a view to devising and implementing developed world” internal policies and procedures to ensure compliance. a high degree of power from engaging in activity As the party ends for Hong Kong, the less which prevents competitiveness. Needless to say prudent may find themselves in contravention that in a market such as Hong Kong, there are and facing a penalty of up to 10% of their Hong certain corners that are particularly interested in Kong turnover which should give a helping hand this pillar of the legislation. to the competition. Don’t worry too much just yet though, if you 16 HONG KONG BUSINESS | APRIL 2013

‘Big market, small government’



More Asian companies march west to go global 2012 marked a high point in mergers and acquisitions with fast-expanding Asia-Pacific firms going on a Western buyout binge.


n what analysts are noting as an aggressive shift in attitude, capital-rich companies in AsiaPacific who have spent the last decade expanding in the region are now on the prowl for strategic and bargain acquisitions in North America and Europe. The reason for hunting outside the region is two-fold: AsiaPacific companies are now looking to establish a Western presence in order to go global, and Asian M&A targets are becoming prohibitively more expensive. Asia-Pacific companies also seem more willing to wield their growing financial clout. Around 36%, or more than a third of Fortune Global 500 companies in 2012, came from Asia-Pacific, the largest from any 18 HONG KONG BUSINESS | APRIL 2013

“Asia-Pacific companies feel they are ready to step up as global players, and M&A activities offer the fastest way to reach their grand growth targets.”

geographical region, ahead of Europe (33%), North America (29%), and Latin America (2%). Compare this to five years ago, in 2006, when only 24% of the Fortune Global 500 companies came from Asia-Pacific. In half a decade the region’s companies, predominantly from China, catapulted to the list and bumped off the stagnant giants from Europe and North America. Why M&A is increasingly preferred Asia-Pacific companies feel they are ready to step up as global players, and M&A activities offer the fastest way to reach their grand growth targets. “More and more, Asia-Pacific multinationals are using M&A to expand, finding top spots on deal

charts and causing a shift in global M&A capital flows,” said Andrew Heard, managing director, Asia Pacific Benefits at Towers Watson. Flush with capital and driven by ambitious global expansion plans, Asia-Pacific companies increasingly prefer to engage in outbound M&A activities rather than in joint ventures or greenfield investments, outside of a combination of the three. Asia-Pacific companies previously preferred greenfield investments, valuing its safer and studied approach of expanding overseas from scratch. But now, these same companies who were averse to risk seem more willing to forge ahead with M&A deals, valuing the quicker results and promise of total control compared to time-consuming greenfield investments or compromise-ridden joint ventures. “In the increasing flood of globalisation, M&A serves as a path of rapid expansion into new markets and operational capacity abroad, and Asia Pacific is no different,” said the Towers Watson report. “With many Asia-Pacific companies having grown organically and sufficiently scaled-up through intra-Asia-Pacific acquisitions, many are now turning outward to non-Asia-Pacific nations in Europe, the Americas, the Middle East, and Africa,” it added. North America is the most popular target market for outbound regional expansion among Asia-Pacific companies, said Towers Watson, citing an Asian Traiblazers survey where 37% of the respondents chose North America as the most important region for their future growth. This was followed by a preference for Latin America (31%), Africa (30%), Central and Eastern Europe (19%), Western Europe (18%), and the Middle East (16%). Rising M&A outbound activity Towers Watson cited data from mergermarket, an M&A intelligence service, which show that outbound M&A volume from Asia-Pacific companies reached an estimated 464 deals in 2012, the highest ever in the past decade, and the third straight year of growth for the region. Companies based in Asia-Pacific

ANALYSIS: ASIAN M&A ramped up M&A activity outside the region by an average of 20% yearover-year between 2003 and 2011, experiencing an annual growth rate of 37% in terms of value over the same period, merger market data also showed. There was a brief decline in outbound M&A activity in 2009 as companies became more cautious following the global financial crisis, but the following year in 2010, deals spiked with a vengeance. Total value grew a whopping 176% year-on-year from 2009 figures, a growth trend which has continued until 2011. 2012 proved to be a watershed year because for the first time on an annual basis, Asia-Pacific has seen more outbound M&A than inbound activity, said Towers Watson. Japan and Australia, in particular, continue to lead the region in outbound M&A deals value, but China has been catching up. “Chinese activity outside of Asia-Pacific has eclipsed Australia’s share of M&A outside the region, as Chinese bidders are pushed abroad by insatiable demand from China’s domestic economy as well as encouragement from the PRC government’s 12th Five-Year Plan to expand abroad,” said Towers Watson. It will take years though for China to overtake Japan in terms of deal value, especially given that Japanese firms now heavily rely on outbound M&A to drive their growth in the face of slowing domestic markets. Chinese bidders also still have a lot to learn on deal negotiations, which has hindered them from clinching more high-

profile deals. Towers Watson highlighted how RBS rejected a bid in 2012 from China Development Bank for RBS Aviation despite posting the highest offer. RBS reasoned that CBD failed to pay enough visits to the RBS Aviation headquarters, which led to the deal ultimately closing in favor of the Japan-based Sumitomo Mitsui Financial Group in June 2012 for $7.3 billion. Favorite targets, notable deals On the whole, acquisitive AsiaPacific companies have been most interested in the Industrials & Chemicals, Energy, Mining & Utilities, and Technology, Media, & Telecommunications (TMT) sectors, according to Towers Watson. But in terms of money spent. They have funneled the most to Energy, Mining & Utilities, with 2011 being a particularly strong year as the sector made up 17% of deal volume and 54% of deal value annual totals. The energy sector also saw the largest deal of 2011 with BHP Billiton’s $15.5 billion acquisition of US-based Petrohawk Energy Corporation in July 2011. The Australia-based global energy and resources giant was looking to enhance its position in the exploration, development, and production of natural gas properties, and so it purchased Petrohawk’s roughly 1 million acres in Texas and Louisiana. Another large deal of 2011

Asia-Pacific outbound M&A volume

Source: mergermarket

“2012 proved to be a watershed year because for the first time on an annual basis, Asia-Pacific has seen more outbound M&A than inbound activity.”

involved Hong Kong-based Cheung Kong Group’s successful $7.8 billion bid for the listed UK-based water utility Northumbrian Water Group Plc, a deal which closed in October 2011. In 2012, Asia-Pacific bidders also flocked to the Western European consumer sector. China-based Bright Foods acquired a 60% stake in Weetabix Limited, a UK-based company producing and selling breakfast cereals and bars, for $1.2 billion. Towers Watson said the acquisition will allow Bright Food to expand its business in UK as well as the international market, and will help Weetabix strengthen its business in China. Slowdown in 2013? The brisk pace of 2012 outbound deals could slow down this year, if 1Q 2013 data is any indication. Japan, for instance, saw its outbound volume plummet 69% quarter-on-quarter to $5.8 billion in 1Q 2013, from $19.1 billion, according to Dealogic. This is the lowest quarterly total for Japan outbound M&A since 2Q 2010 ($5.7 billion) with US targeted volume recording the largest decline, down 93% to $654 million compared to $9.5 billion in 1Q 2012. In Singapore as well, overseas acquisitions from Singapore companies remained flat as deal value reached US$3.1 billion to date, slightly lower by 1.4% from the first quarter period in 2012, and witnessing its third quarterly decline since 2Q 2012, according to Thomson Reuters. If it is any consolation for AsiaPacific countries, the sluggishness in M&A deals – both outbound and inbound – seems to affect most other world regions. Dealogic reports that even if Global M&A volume reached $596 billion in 1Q 2013, up 2% on the $584.2 billion recorded in 1Q 2012, it was down 34% on 4Q 2012 ($906.2 billion). The Americas was the only world region to see an increase on 1Q 2012 ($248.1 billion), up 34% to $331.3 billion in 1Q 2013. HONG KONG BUSINESS | APRIL 2013 19

COMPANY FOCUS: CATHAY PACIFIC mainly due to seasonally stronger demand for both passenger and freight, lower fuel prices and reduced maintenance expenses with the retirement of old aircraft,” says Xu. But the second half recovery seemed to have come too late for the airline. Analysts blame two main factors for the huge dip in 2012 net profit: severely weakened cargo markets and spiraling costs. Wong cites how Cathay carried 5.2% lower cargo YoY with load factors slumping by 3.0 ppt YoY, while yields have remained flat YoY. “But this is a function of lower stage length as opposed to real strong performance.”

Cathay Pacific’s worst turbulence may be over The airline’s net profit plummeted last year due to rising costs and feeble cargo demand, but 2013 promises a reprieve.


till, the predicted comeback is not without caveats. Analysts are torn between predicting a full turnaround and a mitigated decline this year. Optimists anticipate fuel rates to ease and cargo volumes to soar, which will boost Cathay Pacific’s earnings significantly. But more pessimistic observers believe existing headwinds will continue to darken its profit horizon. Unfavorable 2012 2012 proved devastating to Cathay Pacific’s bottom line. The company reported a net profit of HK$916 million, down 83.3% YoY. “Higher fuel costs and a horrible cargo market were the main factors,” says Wong Chew Hann, analyst at 20 HONG KONG BUSINESS | APRIL 2013

Cathay Pacific’s revenue rose 1% YoY in 2012.

Maybank Kim Eng, but he also notes that Cathay Pacific’s performance was slightly ahead of its and the market’s consensus. Still-growing passenger loads lifted revenue and profit somewhat, but not enough to offset the decline caused by the cargo market slump. Cathay Pacific’s revenue rose 1% YoY in 2012. Passenger growth clocked in at a higher 5.0% YoY while passenger yield growth also improved to 1.2% YoY. The airline posted rosier earnings in the second half of 2012, a period which saw more passenger travel. It returned to a net profit of HK$1.85 billion after an HK$935 million loss in the first half. “Earnings turned around in 2H,

Rebound in 2013? There were mixed assessments on whether Cathay Pacific will return in the black in 2013. Barclays’ Xu expresses bullishness, saying: “We expect Cathay’s earnings to rebound substantially in 201314E from a very low base in 2012E, as volumes rebound and fuel prices decline. We expect the company’s earnings to rebound by 433% in 2013E.” “We expect demand growth of passenger and freight transport to outpace management’s capacity guidance, driven by economic recovery, resulting in improved load factors,” adds Xu. He also foresees lower average fuel prices after Cathay Pacific hedged around 30% of 2013 fuel consumption at a rate of under $130 per barrel. Tough road ahead But Maybank Kim Eng’s Wong sees a tough road ahead for the airline. While 2013 conditions will likely be more favorable than in 2012, Wong anticipates continued pressure from fuel rates and staff wages, and tighter passenger competition from Mainland China rivals. “2013 will continue to be challenging due to soft yield environment and escalating fuel price. We lower our FY1314 earnings forecast by 6-10% taking into account the Company’s revised fleet growth plan and a slightly higher fuel price assumption of USD126/bbl (from USD125/bbl),” says Wong.



richard branson

Money will take you far, but not far enough

Q “In many cases, it can be better to start with very little money, since the skills you’ll develop as you overcome the challenges of growing your business will be invaluable.”


: Does starting a business always require a big pot of money? A: No. While you will need a few core ingredients to launch a business and then make a success of it, a big pot of money is not one of them. In fact, having substantial financial backing can actually slow or stop you from identifying your business’s problem areas and coming up with ways to fix them. In many cases, it can be better to start with very little money, since the skills you’ll develop as you overcome the challenges of growing your business will be invaluable – you’ll notice your mistakes earlier and adjust more quickly, which will make for a healthier company. Let’s face it: Your first few attempts to start a business are not likely to go according to plan. I have launched my share of businesses that didn’t get off the ground, and looking back, these were useful experiences. Smaller capital means smaller risks. When I was a schoolboy I tried to launch a number of different schemes – for example, when my friend Nik Powell and I tried to grow and sell Christmas trees, but we lost our crop to hungry rabbits. It was disheartening at the time, but had we more capital to begin with, we would probably have made the same mistakes on a bigger scale, and we’d have lost more money. So money can only get you so far. If you’re a beginning entrepreneur launching your first startup, a big pot of money may only mask

problems that will eventually catch up with you. From my first experience of failure I began to understand just how much I didn’t know about starting a business, and that even ideas that I thought couldn’t fail wouldn’t necessarily work out. Passion and cause And gradually, by making mistakes over time and learning from them, I hit on what became my key guiding principles: That you must only launch businesses that will improve people’s lives and that you are passionate about. You must try to create something different that will stand out. When things go wrong (as they often do), don’t give up – be tenacious. Try to be visible – it’s important to get out there and sell your product. Many great ideas fail just because their potential customers don’t hear about them. A perfect example of how far you can go without financial backing can be seen in the Tenner competition held by the business and enterprise education charity Young Enterprise, in which young school kids in Britain are given 10 pounds and challenged to use it to do something enterprising within a month. Children have used the money for everything from helping musicians and artists to promote their work to setting up a course on feeding and grooming horses. It is amazing to see how much some are able to do with their tenner. Help for entrepreneurs With the creativity and spirit

of those kids in mind, I am thankful that my team and I are in a position to help other entrepreneurs find funding these days. Through a public-private partnership including Virgin Money, Virgin Unite, and Project North East, we are helping to manage a government program in the North East of England and in Cumbria that makes small loans available to emerging businesses – up to 25,000 pounds at reasonable rates of interest. The program is only a few months old but we have already seen some wonderful people and ideas, in businesses ranging from pet shops and hardware stores to digital animation studios and dance schools. The StartUp Loans program doesn’t just provide sensible levels of funding but also mentorship and advice for those who are given loans – invaluable insights from people who have been there and done it. In business, the best way of learning is through doing, so I always encourage young people to start a business over going to business school – it’s cheaper and you’ll learn a lot more about what it takes to run a successful company. Entrepreneurship is a great leveler, since having the benefit of a wealthy background or a generous investor isn’t always an advantage. The wonderful thing is that money is not the sole currency when it comes to starting a business; drive, determination, passion, and hard work are all free and more valuable than a pot of cash.

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Tim hamlett

Injustice in money laundering


oney laundering is an interesting offence. There is no victim. The perpetrator does what is in normal circumstances considered acceptable, even virtuous. He or she moves money around. It is the essence of money that it should be highly mobile and acceptable by people who do not know the background of the person offering it. This is what makes money socially useful. So it is odd to find rules requiring someone accepting money in the normal way of business to discover where it came from. A bank’s crime The oddity does not stop there. It seems that in most of the world this offence can only be committed by a bank. Banks of great size and respectability admit money laundering, or offer to pay gazillions of dollars not to admit money laundering. Under these circumstances you would suppose that prosecutors would be in a position to prove that money laundering has taken place. And you would suppose, in that case, that they could also prove that some named individual had done the foul deed. Yet somehow the individual concerned never appears in the dock. Even more strangely the boss of the errant bank, with whom you might suppose the buck stopped, carries on with business as usual, including the collection of bonuses for his good conduct and care for the shareholders’ interests. So it is apparently assumed that shareholders in banks have no objection to the organisation they own engaging in illegal conduct, and no objection to the continued employment of the person under whose aegis the crime took place. It is difficult to believe that anything quite like this would happen in other industries. Another oddity: money laundering is usually not prosecuted by the country where it takes place. All the high-profile cases are prosecuted in America. It is not, though, alleged that the foreign banks who are prosecuted have engaged in money laundering in America. The American law against money laundering applies to anyone who needs to be in good odour with the Americans. As this is a rather common requirement in the banking industry, this means that for banks, at least, we already have a World Government. Unfortunately money laundering seems to be the only social evil it is interested in. This is a pity because money laundering does not seem to be of great interest to the rest of the world. In normal boring countries there is not much call for it. Bans on money laundering are usually explained as a way of hampering the operations of organised crime. But criminals are used to this problem and no doubt have well-established ways round it. If your credit card is stolen in Hong Kong, for example, the thief will go immediately to the nearest betting centre, to make wagers which will be charged to credit but paid in cash. Only organised criminals on a very large scale really need the services of banks. Financing organised crime? And you would think that criminals on a large scale would be pursued for their crimes. It is a 24 HONG KONG BUSINESS | APRIL 2013


tim hamlett Former Editor of Sunday Standard and Associate Professor of Journalism

strange admission of defeat to say, as the police sometimes do when explaining their hostility to unofficial gambling, that the proceeds may be used to finance organised crime. Are we so helpless against organised crime that the best we can hope for is to stop the perpetrators from spending their winnings? Of course the Americans offer a rather different explanation, fearing perhaps that organised crime is regarded as their forte anyway. Money launderers are described as having helped drug dealers and terrorists. So the campaign against money laundering is an offshoot of two wars - one which is a failure and one which is a fraud – against drugs and terror. Strange discrepancy This is not the place to go into the dubious merits of the war on drugs, but there is a strange discrepancy here. The drug lords are supposed to be keen on laundering their money so that they can spend it on legitimate pleasures. This is, after all, why criminals collect money. But the terrorists are not making money to spend on legitimate pleasures. Terrorism is a loss-making activity. So they don’t need to spend it and their need for legitimate banking services is, you would think, rather modest. If you just need to move cash around you can do it in a suitcase. There was a charming story about a gentleman who left a cool million in a taxi. The taxi driver took it to the police. They had some difficulty in tracing the owner, who had not reported his loss. He explained that it had never occurred to him that anyone who found a million bucks in a taxi would do anything but keep it. But I digress. The point of this excursion through the philosophical thickets surrounding money laundering is to wonder what on earth was going on in a Hong Kong court when a 61-yearold lady was convicted of money laundering and sentenced to 10 years jail. This sentence seems to me barbaric and indefensible. I know that in the words of the old song it’s the rich what gets the pleasure and the poor what gets the blame. We have to have laws against money laundering. But if it is an offence for which bankers get a bonus while humble housewives get ten years hard, then the law is an ass. Actually it seems the law on this topic does have rather donkeylike characteristics. In their haste to pounce on the proceeds of organized crime the legislators carelessly forgot to include one small requirement in the offence. The prosecution does not have to prove that the money was the proceeds of crime. It does not have to prove, actually, that a crime has taken place, that the original supplier of the money was the criminal or that the person actually moving it knew this was the case. All it has to show is that the launderer “had reason to believe” the money was dirty. As the launderer is frequently a Bear of Little Brain (a similar cruel sentence was handed out to a 22-year-old man who had dropped out of middle school) this does not help him or her very much. It seems we can expect to see a succession of small potatoes copping a decade in the slammer while the maximum sentence for a banker participating – supposing one is ever prosecuted – is seven years.



A peek at Hong Kong’s untapped private healthcare potential

Hospitals only have five beds per thousand population, no thanks to underdeveloped private healthcare.


ong Kong’s healthcare system comprises 38 public hospitals and 12 private hospitals. However, Nomura analyst Jit Soon Lim says that capacity-wise, the private sector accounts for less than 10% of total available hospital beds. To put things in perspective, Lim compares this percentage to Singapore’s private hospital sector which accounts for 20% of capacity, while Malaysia has a number closer to 30%. Hence, there is potentially room for more private healthcare in Hong Kong. Room for improvement Latest data from the government show that as of end December 2011, hospital beds numbered to about 35,500, comprising 26,981 beds in 38 public hospitals under the Hospital 26 HONG KONG BUSINESS | APRIL 2013

The presence of a heavily subsidised public healthcare system has restricted the demand for private healthcare.

Authority, 4,098 beds in 12 private hospitals, 4,190 beds in 46 nursing homes, and 792 beds in correctional institutes. The bed-population ratio was about five beds per thousand population. This ratio is better than Malaysia’s 1.8, Singapore’s 3.0, Britain’s 3.0, and US’ 3.1, but is still well below that of Korea’s 8.8 and Japan’s 13.6. As at end December 2011, there were 12,818 medical practitioners registered with the Hong Kong Medical Council — 11,959 on the resident list and 859 on the nonresident list, equivalent to 1.8 medical practitioners per thousand population. This ratio, however, is relatively low compared with Britain’s 2.8, US’ 3.2, Singapore’s 2.5, Korea’s 2.4, and Japan’s 2.2. It was only able to beat Malaysia’s 1.1.

Bigger role for private healthcare Why has private healthcare not taken on a bigger role in HK? The private hospitals are independent entities except for the Caritas Group and Adventist Health which have a network of two hospitals each in the territory. As most of the private hospitals in Hong Kong are not-forprofit organisations, CIMB explains that any surplus has to be reinvested in the hospital, such as in training or upgrading of equipment. The two largest private hospitals by number of beds are the Hong Kong Baptist Hospital and St. Teresa’s Hospital. One of the reasons is that the presence of a heavily subsidised public healthcare system has restricted the demand for private healthcare, says Nomura, while citing a study from Business Monitor

ANALYSIS: HEALTHCARE International (BMI) showing that the fees charged for public medical services cover only 5% of the cost. Medical cost Hong Kong and China are second to the United States for having the highest medical costs in the world. According to the Information Services Department, treatment at a government general outpatient clinic costs $45 a visit for Hong Kong residents, which includes medicine as well as X-ray examinations, laboratory tests, etc. If the patient requires a specialist’s opinion, he is referred to a specialist clinic for consultation, which costs him $100 for the first attendance, $60 for follow-up, and $10 per drug item. The charge for the emergency treatment at the Accident and Emergency Department is $100. Hong Kong residents staying in the general wards of public hospitals are charged $50 for the admission fee, $100 per day occupying acute beds or $68 per day occupying non-acute beds, for diet, X-ray examinations, laboratory tests, medicine within the scales provided by the hospitals, and any form of special treatment required, including surgery, radiotherapy, physiotherapy, etc. Fees charged by private practitioners in Hong Kong vary, usually from about $150 to $400 or more for a specialist consultation. In some cases, these fees include the cost of medicine, but separate charges are often made. Patients also have to pay extra for laboratory tests, X-ray examinations, etc. Another reason why the private health sector has not taken a bigger role in HK is the prevalence of Chinese medicine. Although Western medicine in both its curative and preventive forms is entirely acceptable to Hong Kong residents, the government says many still consult Chinese medicine practitioners. As at end December 2011, the government reports that there were 6,414 registered Chinese medicine practitioners, 70 Chinese medicine practitioners with limited registration, and 2,746 listed Chinese medicine practitioners. The Chinese Medicine Ordinance was passed by the Legislative Council

in July 1999 to establish a statutory regulatory framework to control the practice, use, manufacture, and trading of Chinese medicine. The regulatory framework enhances public health protection and greatly improves public confidence in the use of Chinese medicine. Under the Chinese Medicine Ordinance, the Chinese Medicine Council of Hong Kong was set up to be responsible for implementing various regulatory measures. As at December 2011, 16 Chinese Medicine Centres for Training and Research have been operated in the tripartite mode of collaboration among the Hospital Authority, nongovernmental organisations, and local universities. Treatment for Chinese Medicine general consultation at these centres costs $120 per visit, including two doses of Chinese herbs.

Fees charged by private practitioners in Hong Kong vary, usually from about $150 to $400 or more for a specialist consultation.

How different is it now? There is arguably room for a private operator catering to the mid-upper income population who are willing to pay for quality healthcare without the long waiting times, says Nomura. “In our view, the dynamics of the HK market is very similar to Singapore. With a rapidly aging population, healthcare demand is expected to grow. In addition, the HK market benefits from China as a hinterland, with operators experiencing an influx of patients

from the mainland. Public capacity is tight and patients experience long waiting times. Couple this with income growth in the higher income brackets and these should support and fuel demand for private healthcare in HK, says Nomura’s Lim. As a case in point, Lim says private bed capacity is growing at a steady clip, implying demand for private healthcare. “According to a paper presented to HK’s Legislative Council, overall private bed occupancy in 2009 stands at 64%. A total of some 700 additional beds were added in the 2006-09 period, representing a ~20% increase in bed capacity. Private bed capacity is expected to grow by ~10% (250 beds) in the 2013–14 period. Hence, despite the presence of heavily subsidised healthcare, we are still seeing strong growth in the private healthcare market.” New hospitals The Hong Kong government has identified four parcels of land in Wong Chuk Hang, Tseung Kwan O, Tai Po, and Lantau Island for the development of private hospitals. According to CIMB, all four identified land sites are attracting many parties that are interested in bidding for the limited offering and could result in an additional four private hospitals in Hong Kong within the next 15 years. Also, IHH Healthcare Berhad’s recent move to add Hong Kong to

List of private hospitals in Hong Kong, 2012

Sources: CIMB Research, Hong Kong Private Hospital Association


ANALYSIS: HEALTHCARE its extensive global network has just reinforced optimism to the city’s healthcare sector, says analysts. IHH won a bid to to acquire a 27,500 sqm hotel site with maximum gross floor area of 46,750 sqm at Nam Fung Path, Wong Chuk. The site that IHH has won is expected to be fully developed for hospital use by late 2016 when the hospital is scheduled to begin operations. The hospital will provide a full range of clinical services with more than 15 specialties including general medicine, general surgery, orthopaedics, and gynaecology. It will have a total capacity of 500 beds. System favours private healthcare players? According to CIMB analyst Gary Ng, there are a few factors that now favour new curative healthcare players in the Hong Kong market. 1. Healthcare expenditure First, private healthcare expenditure growth has overtaken that of public. “In 2011, Hong Kong’s healthcare expenditure amounted to HK$103 billion, having grown from HK$75 billion in 2006 or a CAGR of 6.4%. But interestingly, the private sector seems to be outpacing the public sector. Private healthcare expenditure shows a five-year [compound annual growth rate] CAGR of 9.2% (HK$56 billion), outpacing public healthcare expenditure’s five-year CAGR of 3.6%

(HK$46 billion),” says Ng. BMI believes that Hong Kong will continue to attract pharmaceutical investors’ interest due to the population’s affluence and its close proximity to China. It cautions though that the lack of significant development in terms of biopharmaceutical advancement in comparison to regional peers such as Singapore, Taiwan, China, and South Korea means that the attractiveness of the market will dwindle over the longer term, should other developing countries such as Indonesia, Malaysia, and the Philippines succeed in implementing their biotechnology agenda. BMI forecasts pharmaceutical and healthcare expenditures in Hong Kong to grow 8.2% to HK$10.37 billion from HK$9.58 billion, and 5.9% to HK$106.69 billion from HK$100.8 billion, respectively. Expenditure for medical devices, meanwhile, are seen to grow 7% to HK$4.64 billion from HK$4 billion. Reenita Das, Frost & Sullivan’s SVP Healthcare and Life sciences, meanwhile forecasts expenditure to balloon to $20 billion by 2015 with CAGR of 3.2%. 2. Subsidies The second factor involves subsidies in play. Currently, Ng says that due to the high government subsidy on public healthcare, the waiting list for public hospitals is constantly on the

Projected public and private health expenditures up to year 2033

Sources: Hong Kong’s Domestic Health Accounts: Financial projection of Hong Kong’s total expenditure on health from 2004 to 2033


BMI forecasts pharmaceutical and healthcare expenditures in Hong Kong to grow 8.2% to HK$10.37 billion from HK$9.58 billion

rise. Furthermore, public healthcare treatment, he says, is administered to patients on a priority basis. Hence, in public hospitals, patients with slowprogressing illnesses may not be able to get immediate treatment to curb the illness in their early stages. 3. Insurance Insurance comes into play too, says Ng. “The availability of insurance, either through employers or private funding, is giving patients the option to choose more expensive private healthcare as a viable alternative.” According to a recent study by Swiss Re Group, an HK-based insurance provider, preparedness for health and medical expenses in retirement varies considerably across Asia and age groups. Hong Kong stands out with 60% pre-retirees in the city who tend to be better prepared for future health expenses in retirement, at least compared with China’s 50% but still behind Singapore’s 74%. Still, Hong Kong’s preparedness for medical expenses is one of the highest in the region -only around one third of pre-retirees in South Korea (31%) and Japan (34%) are adequately prepared for such expenses. Compared with retirees in the other four markets, however, only 44% of retirees in Hong Kong are prepared for their future health expenses in retirement -- the least prepared in the five-country survey group. Hong Kong also has the lowest percentage of retirees who own insurance -- many retirees do not see the need for insurance, and rely on family support instead. 4. Chinese medical travellers Lastly, Ng says that the HK healthcare sector benefits largely from Chinese medical travellers. “There is a trend of increasing demand from mainland Chinese patients for complex procedures by specialists in Hong Kong.” According to Ng, Chinese nationals are increasingly choosing Hong Kong as a destination for their medical needs as they feel that they are likely to receive a higher quality of service. This is expected to drive the demand for private sector medical services in the territory. Pharmaton.SG

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Hong Kong’s lively art scene explodes Art Basel’s purchase of Hong Kong’s homegrown art fair adds world significance to an already exuberant art market.


RT HK ran for five years, growing every year with runway attendance and art sales under the able direction of Director Magnus Renfrew. More and more international galleries and local and Chinese dealers realised it was the place to be, bringing their best artists and cutting-edge art. Collectors from all around the world thronged the Hong Kong Convention and Exhibition Centre, dashing between the art fair and Christie’s massive spring sale, as well as hundreds of galleries, auctions, special sales, and performances dotted around the territory. Sniffing around the edges of the fair as the profits steadily increased over the years were the organisers of the internationally famous and well-branded Art Basel, an annual art extravaganza started by commercial art dealers in 1970 in Basel, Switzerland. Art Basel Miami debuted in 2002, which immediately became one of the most important art fairs in America. The Art Basel crew had considered Singapore or somewhere in China as a locus in Asia, but censorship and tax issues led them to decide Hong Kong was the perfect place for the major Asian art fair. Upon deciding to stay with the art fair despite the change of ownership, Magnus Renfrew said, “We want to build on the best of ART HK with Art Basel’s 40 years experience and access to a much wider global community, creating together a new show, and a rich


and unique experience for visitors. Art Basel in Hong Kong will be clearly defined by its host city and region; 50 percent of galleries in the show will be from Asia and the Asia-Pacific region. The new sectors are conceived to encourage curatorial focus on the most important developments in the art scene in the last 100 years and today, historical material from Asia, emerging artists, and the most cutting-edge art in Asia and from across the world.” Now Art Basel HK introduces the participation of around 245 of the world’s leading galleries, taking place Thursday, May 23, to Sunday, May 26, 2013 at the Hong Kong Convention and Exhibition Centre (HKCEC). With an emphasis on the highest quality of work and presentation, art pieces by more than 3,000 artists will be showcased, ranging from young stars to the Modern masters of the early 20th century, hailing from both Asia and the West. Fair highlights The fair’s four sections -- Galleries, Insights (a section for Asia-based galleries to feature Asian artists) Discoveries, and Encounters -- plus special events and performances, will keep fair attendees very busy. VIPs and distinguished collectors can expect a warm welcome from main sponsor Deutsche Bank. Just to mention the galleries who will be participating in the fair

ART REPORT could fill a book, but visitors should know that local Hong Kong galleries showing at the HKCEC will be mounting special shows around Hollywood Road and other areas as well. Only a small selection of these galleries can be featured here. Among the younger, smaller Hong Kong galleries who made it through the tough selection process are Sin Sin, Galerie Ora Ora, Grotto (the sole specialist in Hong Kong artists), Blindspot, FEAST, Anna Ning Fine Arts, Platform China, Pekin Fine Arts and Gallery EXIT, and the Pakistani specialist Gandhara Arts. All have rich, strong programs for art collectors to seek out. Gallerist and art consultant Anna Ning is offering a journey through the highest quality Chinese Modern Art rather than Chinese contemporary works. Ning said, “This year we’re pleased to present ‘Faces—Modern Chinese Portraits of Femininity,’ including works by 20th century Chinese artists such as Zao Wouki, Ai Xuan, Wu Guanzhong, Xu Beihong, and Wang Yidong. We’ve selected works from these artists that focus on the central theme of feminine beauty, and the expression of femininity as a cultural and artistic concept. “The range of aesthetic styles from the various artists demonstrates the wide array of perspectives and cross-cultural differences in the portrayal of beauty. This selection not only shows the artistic excellence of these 20th century artists, but also provides insight into the historical development of portraiture and beauty as a cultural ideal within 20th century China.” Ning added, “With the international atmosphere of Art Basel, we wanted to focus on art and artists which exemplified China and the truly exceptional artwork from this period.”

Relative newcomer 2P Contemporary Art Gallery is featured in the “Discoveries” section showing new work by Tang Kwok Hin. Founder Pui Pui To said, “We think that our gallery was chosen because we have always presented a very avant garde program with artists who have been showing their work internationally. Art Basel has raised the bar higher for Hong Kong galleries and we all need stronger gallery programs to be considered by the judges.” Tang’s work, “I Call you Nancy,” an imaginative recreation of artifacts of the sister he never had, was shown at the Mandarin Oriental Hotel last year as part of ARTHK12. He says he works through his process of “symbolic collage”. “People can tell my work from my frequent appropriation of objects. I bring unrelated things together and transform their predefined nature into something else. I use everything. My mixed-media work is conceptually based.” For most of the Hong Kong galleries, ART BASEL HK presents the premier showcase for their artists. Gallery EXIT will feature Chihoi, Lin Xue, Kong Chun Hei, Ivy Ma, Sarah Lai, Christine Ng Mien Yin, Hsu Yinling, Lulu Ngie Lewis Lau, Kwan Sheung Chi, and Angela Su. While not yet bigshots in the international market, the sheer number and variety of the artworks from these artists will surely attract new buyers. Gallery EXIT’s Co-Director Arianna Gellini, said, “Established in 2008, we work closely with and present conceptually grounded artwork that is well made and not afraid to be subjective and even beautiful. The gallery emphasizes new artists of all media who articulate the dynamic contemporary experience of living in East Asia. Although many of these artists are young, we are pleased with the inclusion of Lin Xue’s ink drawings in ‘Phantoms of Asia’, shown in the Asian Art Museum, San Francisco, last year, and this summer in ‘The Encyclopedic Palace’ at the 55th Venice Biennale.” Hong Kong arts specialist gallery Grotto Fine Art is presenting five Hong Kong artists, Danny Lee, Wai Pongyu, Bovey Lee, Koon Waibong, and Joey Leung in the group exhibition. The Ceaseless Lines Each artist’s interpretation of line and linearity opens debates questioning the identity of post-colonial Hong Kong art. Director Henry Au-Yeung explains that the most interesting development came in the first decade of the 21st century. In addition to Hong Kong’s hybrid culture and history, artists were equipped with modern “materials” such as biro, ink pen, paper cuts, and even stainless steel in sculpture; and through their usage a new definition of “line art” was born. This “linear” art form is more descriptive

Hung Keung, Dao x Microcosmic Play and Appreciation, Interactive Video, 2013

Su Xiaobai (b.1949) Overwhelms Men 袭人,2012, Oil, lacquer, linen and wood 油彩、大漆、麻、木板, 120 x 130 cm HONG KONG BUSINESS | APRIL 2013 31


Gao Xingjian, Under the moonlight,2010.

Founded in 1981, Alisan Fine Arts was one of the first professionally run galleries in Hong Kong. Alice King, Director, said, “The gallery focuses on promoting Chinese artists living overseas and in the mainland.  During the past 30 years, it has organized over 100 exhibitions in Hong Kong and abroad, making it a pioneer in introducing Chinese contemporary art to collectors at large. “The focus of Alisan Fine Arts’ show at Art Basel in Hong Kong 2013 is to showcase the contemporary Chinese artworks by eight well-known Chinese artists who are from New York, Paris, Beijing and Shanghai, including Chao Chung-hsiang, Chu Teh-chun, Gao Xingjian, Walasse Ting, Wang Tiande, Wei Ligang, Yang Jiechang and Zao Wou-ki. They are all deeply rooted in Chinese tradition, have been influenced by the West and show a distinct style of their own. Furthermore, we are introducing Yu Youhan’s new series of limited edition original lithographs, as well as exhibiting sculptures by Hong Kong artist Man Fung-yi”. Representing another aspect of the Asian spectrum, 10 Chancery Lane features artists from Southeast Asia, including Vietnam’s Dinh Q. Lê and Bui Cong Khanh, Cambodia’s Sopheap Pich and Thailand’s Tawatchai Puntusawasdi, whose works explore the fast-changing yet culturally rich environments of the region with an emphasis on traditional materials. Katie de Tilly, founder of 10 Chancery Lane Gallery says, “Over the past 12 years, 10 Chancery Lane Gallery has been offering opportunities and a dynamic platform to exceptional young and midcareer talents in rarely profiled regions, while developing discourse through engaging specialists for curated shows and parallel talks.” Director Nicole Schoeni, is very pleased to have been selected to participate this year. She said, “As a native Hong Konger and a Swiss

than calligraphy and more substantial than a sketch. The usage of line has gone beyond conventional application and two-dimensional surfaces. The result is an indigenous style that transmits the innermost feelings of the artist and defines the most current trend in contemporary Hong Kong art. Mimi Chun, Director of Blindspot Gallery has chosen another entry point into Hong Kong art. She says, “We believe the fair will help us bring more international exposure to Asian contemporary photography, our area of primary focus. As a Hong Kong-based gallery, we are extremely excited to see the arrival of the world’s most prestigious art fair in the city. We particularly appreciate the opening of the Insights section, a section for Asia-based galleries to feature Asian artists, as it allows the fair to highlight the uniqueness of the Hong Kong and Asian art scenes, while also presenting international art at large.”  Her gallery is showing another mountainman’s latest project “From Su Shi to Bada Shanren”. Also known as Stanley Wong, this awardwinning artist recreates the popular iconology in classical Chinese painting in a highly original rendition that is inspired by the work of the innovative Northern Song Dynasty titan, Su Shi. The drive to subvert runs through the series, as the photographic work captures the essence of painted objects that closely resemble classical Chinese paintings alluding to the master eccentric, surrealist painter, Bada Shanren from the late Ming and early Qing Dynasty, whose possibly feigned madness perhaps just reflected his grief at the fall of the Ming Dynasty. Well-established galleries Of the older, more well-established fine art galleries participating are 10 Chancery Lane, Pearl Lam Galleries, Hanart TZ, Osage, Schoeni, and Alisan Fine Arts, famous for supporting traditional and modern ink and brush paintings and the Hong Kong Ink Society. 32 HONG KONG BUSINESS | APRIL 2013

Chao Chung-hsiang, Never to Part, c.1980.


From SuShi To Bada Shanren, 2013

LIN Xue, Untitled, (2012-1)

Lewis Lau, Drift on Nile, 2012

descendant, a gallery owner and an art collector, it is thrilling to witness Hong Kong becoming a world renowned art hub; with the presence of Art Basel in Hong Kong this year, we are becoming more than just a financial metropolis or even a gateway to artists from Mainland China. “As one of the longest standing professional art galleries in Hong Kong, I am delighted to be a part of the fair and to present the work of Hung Keung, a Hong Kong-based artist exploring Chinese traditional culture through the prism of new media. He is showing his interactive installation work Dao x Microcosmic Play & Appreciation, the marriage of two of the most complex projects he has developed in the past decade: ‘Dao Gives Birth to One’ (2009-2012) and ‘Microcosmic Play & Appreciation’ (2013). The former is an illustration of how dynamic images digitally convey the concept of time and space, and the idea of ‘three distances’ (san yuan, ) has influenced traditional Chinese landscape paintings (shan shiu hau, )”. Pearl Lam Galleries is presenting a stellar international lineup of Jenny Holzer, Entang Wiharso, Tsang Kin-Wah (with a special installation), Li Xiaojing, Yinghua, Li Huasheng, Jason Martin, Su Xiaobai, and Zhu Jinshi. Pearl Lam said, “Our stand is broken down into two parts: the first part addresses the question of how ideology and information affects the reading of our body, and the second part explores how different artists each deal with materiality through painting, sculpture and installation.” International galleries HK branches of overseas galleries that will put on exhibitions at Art Basel HK include Ben Brown, Galerie Perrotin, deSarthe Gallery, White Cube, Simon Lee, Edouard Malingue Gallery, Lehamnn Maupin and Gagosian, all names well known to Art Basel collectors and art lovers. Their advantage during the May Art Madness is that visitors and collectors can drop in on these galleries and find more art to contemplate buying.

‘West Wind’ from Tawatchain Puntusawasdi courtesy 10 Chancery; Lane Gallery and Tawatchain Puntusawasdi

With room for only one example from the group named above, Emmanuel Perrotin’s Galerie Perrotin is a relative newcomer to Hong Kong. Originating in his native Paris, where he has been a leader in identifying top quality artists from around the world, he will soon open a new gallery in New York. At Art Basel HK, he will be showing new works by Takeshi Murakami, the world-famous Japanese artist who almost single-handedly created contemporary Japanese art as a world force in the international art market as well as in the commercial world with his collaboration with Louis Vuitton and creation of marketable items such as T-shirts and collectible versions of his flower and skull paintings. At the same time, the Murakami exhibition at the gallery in Hong Kong (21 May - 22 June 2013), is the ninth solo show organized by Galerie Perrotin in 20 years of collaboration, that will display in particular a set of new paintings featuring his famous alter-ego Mr. DOB. This small sampling of art at Art Basel HK is not a roadmap but rather a plea for collectors and visitors to broaden their horizons and recognize the importance and value of Hong Kong’s artists and thriving gallery scene. It can only get better. HONG KONG BUSINESS | APRIL 2013 33

Hong Kong’s 20 Largest Licensed Banks

Hong Kong’s largest licensed banks offer a number of firsts New offerings range from smart ticketing service to extended trading hours


oreign banks have topped Hong Kong Business’ inaugural top 25 bank rankings for 2013 based on the number of employees. Multinational Hong Kong and Shanghai Banking Corp. (HSBC) leads the pack with a 26,712-strong workforce beating out Bank of China (BOC) with 10,100 employees. Chosen 9 Only 9 local firms made it to the list, led by Hang Seng Bank which landed on the third spot with an employment strength of 7,732. According to Eric Fu, HSBC’s head of wealth development for Hong Kong, HSBC now bills itself as offering the longest trading hours for FX-linked products among all banks in Hong Kong after it extended October last year the trading hours of Deposit Plus, a foreign currency-linked deposit product, to allow customers to capture investment opportunities in foreign currencies around the clock 34 HONG KONG BUSINESS | APRIL 2013

Only 9 local firms made it to the list, led by Hang Seng Bank which landed on the third spot.

during weekdays. Deposit Plus on HSBC Internet Banking and Mobile Banking runs from Monday 6am to Saturday 5am, except on local public holidays. HSBC also claims to be the first bank in HK to launch a smart ticketing service available at its five HSBC Premier Centres (HPCs). The service , which launched last year, allows customers visiting during peak hours to have the option to leave their mobile phone numbers with the HPC after they obtain their queuing tickets. They will then receive an automated SMS alerting them to go back to the HPC for their turn when a counter will soon be available. BOC claims of maintaining leading positions in offshore renminbi (RMB) business. According to management, BOC successfully arranged the first sizable 100% RMB syndicated loan in HK and introduced the first-ever “Multi-currency Shipping Finance (RMB and USD)” product last year. BOC also bills itself as the first

bank in the market to launch mobile functions for IPO share subscriptions and IPO financing. It also launched a chip-based ATM Card which is said to be a first of its kind in HK aimed at offering greater security with enhanced functions. Leading domestic bank, Hang Seng Bank boasts of launching the first RMB/Hong Kong dollar dualcurrency-linked mortgage account and the first RMB-denominated gold exchange-traded fund (ETF). In August, it also became one of the first banks in Hong Kong to offer personal RMB services to non-Hong Kong residents. Bank of East Asia (BEA), the second biggest local bank came fifth with 5,700 staff. It closely follows fourth-place Standard Chartered Bank’s 6,110 employment strength. BEA’s RMB business BEA continues to strengthen its RMB trade finance business. It just recently entered into a deal with People’s Bank of China to extend its first cross-border RMB loan to an enterprise in Qianhai, Shenzhen. Dr. David K.P. Li, Chairman & Chief Executive of BEA, said, “BEA’s RMB trade finance business has grown rapidly in the past few years. Following the recent announcement of the implementation details on lending to Qianhai enterprises, we will focus on expanding our RMB cross-border lending business. The bank will also dedicate more resources to helping its Mainland corporate customers grow their businesses in Qianhai.” Citi Hong Kong which bills itself as the #1 foreign bank in RMB trade settlement in 2012, came in 6th with 5,000 employees. It remains as the only bank in Hong Kong offering 24-hr manned hotline services with branches opened till 7pm on weekdays. Citi also claims to be the pioneer in the wealth management arena in Hong Kong where it launched the city’s first priority banking – Citigold – in 1982, and revamped to wealth management offerings in 2001.

Hong Kong’s 20 Largest Licensed Banks

Largest Licensed Banks BANK


CEO/Country Head


Hongkong and Shanghai Banking Corp.


Anita Fung


Bank of China


He Guangbei


Hang Seng Bank


Rose LEE Wai Mun


Standard Chartered Bank


Benjamin Hung


Bank of East Asia


David K.P. Li




Weber Lo


DBS Bank


Sebastian Paredes


Wing Hang Bank


Fung Yuk Bun Patrick


China Construction Bank (Asia) Corp.

2,000 *

Miranda Kwok


Dah Sing Bank


Gary Wang


Industrial and Commercial Bank of China (Asia)


Chen Aiping


Wing Lung Bank


Zhu Qi


Shanghai Commercial Bank


David Sek-chi Kwok


China CITIC Bank International


Zhang Xiaowei


Fubon Bank


Raymond Wing Hung LEE


Public Bank


Tan Yoke Kong


Chiyu Banking Corp.


Phoebe Tse


Standard Bank of Asia


Tom Chenoweth


Tai Sang Bank


Patrick MA Ching-hang


Tai Yau Bank


Arthur Ko

Data provided by companies *estimates, media reports

**latest annual report Nanyang Commercial Bank declined to give numbers HONG KONG BUSINESS | APRIL 2013 35

legal briefing

Hong Kong government issues new guidance on direct marketing Obtaining valid client consent clarified


t has been more than nine months since the passage of the Personal Data (Privacy) Amendment Ordinance. While most of its provisions have already been implemented, the provisions relating to direct marketing came into effect only on 1 April 2013. In preparation, the Privacy Commissioner for Personal Data published implementing guidance on 15 January which Hogan Lovells partner Gabriela Kennedy says follows the recommendations contained in the Direct Marketing Guidance Note revised in 2012, to a large extent, but with a number of important differences. What are the differences? According to Kennedy, the most significant difference relates to the consent and notification requirements under the new direct marketing provisions. The Amendment Ordinance requires organisations that collect personal data (“data users”) to communicate to individuals from whom they collect such data (“data subjects”) certain information together with an opt-out facility before they use such data for direct marketing. Further, she says the Guidance Note makes it clear that consent must be explicit and cannot be inferred from silence or inaction on the part of the data subject, a change which is set to affect the data collection practices of many data users in Hong Kong,. Mayer Brown partner Tow Lu Lim, meanwhile, highlights two data protection principles when collecting personal data from clients. First, collection of that which is excessive to requirements is not permitted. Lim notes that data users should only collect personal data necessary for a lawful purpose, and only collect additional data for direct marketing that is provided on a voluntary basis. Secondly, Lim says that collection must be by fair and lawful means. The data user, he says, should not use deceptive means to collect personal data. “For example, it is not considered fair means of collection to offer free gifts to passersby to attract them to fill in questionnaires when the true purpose behind persuading them to do so is to collect their personal data for direct marketing,” he says. What should be informed to the data subject? According to Kennedy, amongst things to notify the data subjects are intent to use their personal data for direct marketing purposes; types of personal data they will use (e.g. name, phone number, residential address, email address, etc.); and the categories of goods/ services that will be marketed (e.g. financial services, insurance services, telecommunications services, etc.). How to inform the subject? According to Lim, the new regime requires a data user 36 HONG KONG BUSINESS | APRIL 2013

Gabriella Kennedy

Tow Lu Lim

Michelle Chan

to take all reasonably practicable steps to inform the data subject, at the time of or before the collection of the data, the purposes for which the data may be used, whether it is voluntary or obligatory to provide the data, and the classes of persons to whom the data may be transferred. “It is prudent to provide this information by way of a written notice, which is often called a Personal Information Collection Statement (PICS).” To ensure that the PICS is validly communicated to data subjects, Lim says that it should be written in language that is easy to understand, presented in a conspicuous manner, and printed in a font size that is easy to read with normal eyesight. Lim also cautions that it would be unfair if service application forms were designed in such a way as to force customers to choose between providing their personal data for direct marketing or giving up the service. The application forms, he says, should allow data subjects to indicate separately whether they agree to provide personal data for direct marketing on a voluntary basis. Do the new rules apply as well for personal data collected before April 1? Herbert Smith Freehills partner Michelle Chan explains that under the grandfathering arrangement, the new direct marketing rules would not apply to preexisting data held by a data user before the commencement date of the new regime. However, the grandfathering arrangement, she says, would not apply to the use of preexisting personal data in relation to direct marketing to different classes of marketing subjects, and applies only to the use of personal data by the data user for its own direct marketing.

“There’s a maximum penalty of a HK$500,000 fine and three years’ imprisonment.” What are the penalties for failure to comply with the new rules? According to Kennedy, there’s a maximum penalty of a HK$500,000 fine and three years’ imprisonment. Where the data user sells, or transfers for gain, the personal data to a third party for direct marketing purposes in contravention of the new requirements, the maximum penalty increases to a HK$1 million fine and five years’ imprisonment. This represents a significant increase from the maximum fine of HK$10,000 applicable for breaches under the previous regime.



China’s shale revolution and its Asian aftershock China is making a big push for shale gas, which could help stabilize energy prices for import-heavy Asia.


een as a sleeping giant sitting on huge untapped reserves of shale natural gas, China has the potential to catch up and even overtake the US as the world’s largest producer of shale resources. The Chinese government, keen on easing its growing energy imports, has greenlighted policies to expand shale gas exploration that experts believe will lead to massive annual production in as short as a decade. With China joining the US in championing shale production, world energy prices could start to flatten – and it will be the majority of Asian countries who import their energy that will stand to benefit. Shale revolution China has the largest technically recoverable reserves of shale natural gas in the world at an estimated 1,275 trillion cubic feet (TCF), or 50% more 38 HONG KONG BUSINESS | APRIL 2013

“In 2001, crude oil imports represented just under 30% of total oil demand. That’s grown to about 60% in 2012.”

than the United States who comes in second with 862 TCF reserves, according to data from the US Department of Energy and Deutsche Bank. Taimur Baig, PhD, chief economist at Deutsche Bank, predicts that when China taps heavily into these vast reserves, the global energy landscape could shift “dramatically.” And China has every incentive to do so. Faced with rapid economic expansion that demands tremendous energy resources to sustain, the Chinese government has fast-tracked the exploration of its shale reserves to augment and effectively lessen the country’s dependence on crude oil imports. “China’s energy needs are considerable. Its crude oil imports averaged 5.5mn bbl/day in 2012, up nearly 70% since 2007. Indeed, China started this year by importing

6mn bbl/day, which was about 2mn bbl/day less than what the US imported in January. The US-China crude oil import gap has narrowed dramatically in recent years,” said Baig. Too ambitious target? Baig said there is no lacking in the number of Chinese companies willing to charge into the shale frontier. China has already launched two auctions of shale natural gas blocks that attracted much commercial interest, and has set a bold target of producing 6.5 billion cubic meters of shale per year by 2015. But many experts doubt that China will be able to meet this ambitious production target, said Baig. China is still considered to be technologically deficient in commercially viable methods to extract shale gas. These same skeptics say a more reasonable timeline for China’s emergence as a leading shale gas producer would be in the next decade – enough time in which China could master the technology and knowhow to effectively extract shale gas from its reserves. British oil and gas company BP estimates that shale natural gas

ANALYSIS: CHINA’S SHALE GAS will account for about 20% of total Chinese natural gas production by 2030. Baig said China is allocating substantial funds for infrastructure development and mobilizing its state-run energy companies to tie up with more knowledgeable shale gas partners, particularly in the US. “Large state-owned Chinese energy companies are investing in the US with expectations of picking up shale-related skills and expertise, and they are setting up joint ventures with major global energy companies for the same reason,” he added. In February, the state-owned giant China Petroleum & Chemical Corp (Sinopec), the country’s largest producer and supplier of oil and petrochemical products, invested around $1 billion in Oklahoma-based Chesapeake Energy Corporation, the second-largest producer of natural gas and most active driller of new wells in the US. Baig said that once China applies what it has learned from its Western tie-ups, and adopts reforms for its still-volatile natural gas pricing system, the country could well enter into “a shale revolution.” Asian aftershock Baig stressed that Chinese shale developments could have a big impact on Asia. The emergence of shale should serve as a precursor for energy price stability, which for a region that primarily imports energy save for a few producers, will prove to be economically advantageous. “The structural change that is ongoing may well end the commodity supercycle, thus ushering an era of energy price stability. Most Asian economies are importers of energy, with Australia, Malaysia, and Indonesia three notable exceptions, but all are likely to be profoundly impacted by shale related developments.” Baig cited India and Japan as two big beneficiaries from a possible energy price stability. “For a country like India, which spends nearly 40% of its total import bill on coal and oil, and runs a large current account deficit, energy price stability or decline would bring significant dividends in terms

of external stability and domestic disinflationary dynamic,” said Baig. In 2012, India imports jumped 40% to a record $140 billion, mainly because of skyrocketing oil prices, as imported crude oil increased by as much as $27 per barrel, according to government ministers. “For Japan, lower energy pricing, combined with access to cheaper LNG [liquefied natural gas] imports from the US, could provide a significant boost for an economy that was left increasingly exposed to energy costs following the Fukushima disaster (as imported power fuel has been used to offset the loss of nuclear power),” said Baig. In March 2011, an earthquake and subsequent tsunami devastated the Japanese nuclear plant in Fukushima, which led to nuclear meltdowns and release of radioactive materials in the surrounding areas. The disaster is widely considered to be the largest nuclear disaster in the 21st century, pushing the Japanese public to demand the phase out of nuclear power altogether and the government to explore alternative “safer” sources of energy. Possible rivals With few domestic energy resources and the impairment of its nuclear power production, Japan is now the world’s largest importer of LNG, second largest importer of coal and third largest net importer of oil, based on US Department of Energy’s Energy Information Administration.

“Natural gas will account for about 20% of total Chinese natural gas production by 2030.”

Lower energy pricing will do much to lower the costs of its massive energy import bill, with LNG imports alone hitting a record $6.5 billion, according to Reuters data. While more stabilized energy prices could boost most other Asian nations that import energy, the few producers in Asia are looking at the China’s nascent shale boom with trepidation. This includes Australia and Indonesia, said Baig, whose LNG producers have invested heavily in recent years with Asia’s seemingly insatiable demand in mind. Domino effect China’s increasing energy independence could further affect Australia and Indonesia who have thrived in recent years on the back of soaring coal exports, with coal making up about an average of 15% and 14% of total exports, respectively. China imported 30.55 million tons of coal in January alone, according to official customs data, but this could lessen gradually as domestic shale natural gas production hits its full stride. “Over the long term, a meaningful shift away from coal to cleanerburning natural gas driven by environmental as well as energy diversification imperatives, notably in China, could have significant ramifications for the global coal market and key exporting countries that have depended on China’s rising coal appetite,” said Baig.

Shale natural gas reserves: wait till China gets into the act

Source: US DOE/EIA, Deutsche Bank


SECTOR REPORT: Wealth Management

How banks can win Asia’s wealth management race Check out the possible challenges and opportunities in this market worth $10.7 trillion.


rivate banks are in a fierce competition to serve Asia’s rich which has a whopping combined wealth of $10.7 trillion. According to banking research and advisory firm East & Partners, for the first time, the Asia Pacific has the highest population of high net worth individuals (HNWIs) in the world. “In a year when the number of HNWIs fell by 1.7%, and India’s market slump saw the country fall out of the global top 12, the number of HNWIs in the Asia Pacific expanded 1.6% to 3.37 million, with estimated private wealth of $10.7 trillion,” said the report. As the market segment for HNWIs grows, competition will no doubt become even more intense. So how can banks attract more clients and win Asia’s wealth management race? What are possible challenges as well as opportunities for this 40 HONG KONG BUSINESS | APRIL 2013

The number of HNWIs in the Asia Pacific expanded 1.6% to 3.37 million, with estimated private wealth of S$10.7 trillion

burgeoning market? Wealth management According to Jeremy Soo, managing director and head, Consumer Banking Group (Singapore) at DBS Bank, it is important to realize first that Asian HNWIs are different from their peers in the West as the wealth of the Asian HNWIs is usually closely inter-linked with their business. “They have varied portfolios and want a more proactive investment strategy. There is also the need for succession planning as wealth flows to the next generation,” says Soo. RCBC’s senior executive vice president for retail banking Ismael Sandig notes that what will be most critical to capturing the market is building relationships and offering a more simplified process. Private banking customers become more demanding and will want the banks to go the extra mile to

make the difference. Asia’s wealthy have a set of needs that must be met by the banks such as a reliable and personalised service, a wide suite of financial and wealth products and a strong financial advisory support to help them make investment decisions, notes Renzo Viegas, group deputy CEO and head of consumer banking at CIMB Bank. Hence, building a competent network of relationship managers is also key. Apart from wealth management, another key trend in Asia’s retail banking sector is the rise of new generation channels like social media as this affects the client’s preference and expectations of the bank. How do the banks use social media not for making revenue, but for connecting with customers? As DBS’ Soo notes, customers do not want to be marketed to on social media platforms. Instead banks need to set out to share banking insights on social media to add more value to their customers and to deepen relationships with them. Social media Marged Lloyd, head of online communications at Standard Chartered, notes it is inevitable

SECTOR REPORT: Wealth Management that people will talk about the bank online so they have made a conscious decision to participate in these conversations in a meaningful way. Lloyd reckons that this may simply involve responding to customers when they approach the bank through social channels such as Facebook and Twitter but on the other hand, it entails using social media to reach out and speak to people about the topics that are important to them. The main impact of using social media, notes Lloyd, is that banks are compelled to review how their various internal teams work together. “As a consumer, when you speak to your bank through social media, you don’t care whether you’re speaking to customer service, human resources, marketing or communications. As far as you’re concerned, you’re simply talking to your bank. You expect them to give you the right answer quickly.” Increased integration and teamwork between relevant departments across the globe therefore prove to be pivotal in social media activities. But apart from the positive feedback a bank can get from social media, RCBC’s Sandig takes note of its sensitivity to negative comments as well. The virality factor of social media must indeed be handled with a careful strategy. The challenge behind this form of engagement, says CIMB’s Viegas, is essentially the ability to add value to the customers as users of social media want to connect with banks only if the bank is able to bring value to their lives. This value can be in the form of providing useful content, answering queries, giving them a chance to participate in a contest or building a community of like-minded people to connect with. “We can understand more about what our customers want and what we can do for them only by engaging with our community of customers,” Viegas adds. So in today’s highly digitized banking environment, what is the role of the branch? With the internet and with the concept of mobility in terms of payments and connecting with customers rising in Asia, is the branch still considered a profit center?

will continue to be an important customer touchpoint. However, the role of branches have changed to one which provides more value added service such as loans and investment related services as customers migrate to self-service banking and online banking for basic transactions such as cash withdrawal/deposit and funds transfer. “The branch’s role really is to accommodate queries and to build the relationship. For RCBC, it is considered a profit center,” adds RCBC’s Sandig. The advent of internet banking and other digital channels have not marginalised the branch as an important channel and profit centre especially for an effective face-to-face interaction with customers, according to CIMB’s Viegas. In Malaysia where services are becoming the main differentiator in an extremely competitive market, the traditional brick-and-mortar structures of the branches are the “welcoming faces“ which represent a bank’s values. The ability to create this exceptional first impression can be one of the contributing factors for a bank’s excellent turnaround. However, Viegas still notes the importance of investing in other channels like internet banking. With household broadband penetration reaching 62.9% as at the first quarter of 2012 from an estimated 6.7 million households in Malaysia, Viegas believes internet banking will become the channel of the future. Mobile banking will also feature dominantly especially

Renzo Viegas

Ismael Sandig

with the country’s cellular phone subscriptions having breached 35.7 million at the end of 2011 or over 124% penetration rate. “Going forward, we see all channels complementing each other and creating its own niche, with branches as the shops that provide the advisory services and internet and mobile banking as the transaction platforms. The challenge for banks is to provide the same exceptional customer experience,” says Viegas. Profitability check In all aspects, however, banks need to be even more innovative in the way they increase customer touchpoints. Keeping profitability in check amid the uncertainties in the market is of course of utmost importance. While on a mission to expand across Asia, banks need to focus in delivering excellent cross border services, enabling customers to invest wider and to trade more with one another. “In the midst of our expansion quest, we are always mindful of the need to reap clear synergies when we enter into a new market or acquire a new business. These synergies will help mitigate any short term profitability pressures as we would typically need to incur set-up or integration costs at the onset,” notes Viegas. Ultimately, a bank needs to be very clear on its plans and objectives from the start when setting up a new business or entering a new market.

Role of the branch DBS’ Soo reckons that branches HONG KONG BUSINESS | APRIL 2013 41





geas Insurance Company (Asia) Limited is one of the largest life insurance companies in Hong Kong. It is a wholly-owned subsidiary of Ageas, an international insurance company with a heritage dating back more than 180 years. Headquartered in Belgium and Netherlands, Ageas is among Europe’s top 20 insurance companies, with 13,000 employees working throughout Europe and Asia.


Ageas remains one of Hong Kong’s leading life insurance providers


geas Hong Kong recently became the first insurance company ever to locate identical neon signs on both sides of Victoria Harbour. It also adheres to a policy of associating itself with world-class sports events. Having already made inroads into the high-net-worth market through its title sponsorship of the HKPGA Championship since 2010, it announced in 2012 that it is extending this support for a further three years. The company has led the field in harnessing the latest social media technology for advertising purposes by becoming the first insurance company in Hong Kong to employ U-tie technology, QR Code and AR App to integrate its advertising campaigns with mobile apps. In addition, it has launched the Ageas Facebook Fanpage to engage its customers. In recognition of these initiatives, Ageas Hong Kong was named Outstanding Achiever in Social Media Engagement (Insurance) in the 2012 Benchmark Wealth Management Awards. Proactivity provides the edge Ageas Hong Kong has more than 2,800 financial consultants. Of these, 7% are members of the Million Dollar Round Table, the premier international association for financial professionals, compared with the industry average of 5%. The company’s new business premiums increased by 49% in 2012, following the strong growth of both its agency and IFA channels, the latter accounting for 24% of total new business in terms of Annual Premium Equivalent. A holistic approach to financial planning that is based on three pillars – protection, savings and investment – enables Ageas Hong Kong customers to take good care of themselves and their finances at different stages of their lives. As its CEO, Stuart Fraser, puts it, “We uphold our commitment to

Ageas Hong Kong’s CEO Stuart Fraser is confident that the company will achieve its priorities for the next few years, including retaining its agency channel’s top five position

“The company’s new business premiums increased by 49% in 2012, following the strong growth of both its agency and IFA channels.”

innovation by offering diversified and competitive products that deliver tailor-made solutions for individual needs.” So what sets Ageas Hong Kong apart from other life insurance providers? One factor is its aim to be more responsive to its key

stakeholders than its competitors, and to build strategic partnerships actively with them. Good corporate citizenship is another core value. “For instance, the company was a major sponsor of an exhibition match between the visiting English Premier League team Arsenal and HONG KONG BUSINESS | APRIL 2013 43


Ageas team of professional consultants

Ageas enhanced its brand awareness and signified its commitment to the city by becoming the first insurance company to launch twin neon signs along Victoria Harbour

Hong Kong League champions Kitchee. The proceeds went to the Kitchee Foundation’s fund to build a youth football development centre in Hong Kong,” Fraser adds. What’s more, Ageas has been an enthusiastic supporter of Hong Kong’s “Caring Company” logo ever since it was initiated in 2002. Unique offerings Ageas Hong Kong ensures its products cater to its clients’ every need. In September 2012, it launched the Elite Choice Insurance Plan. This innovative product enables customers to accumulate and protect their wealth in a prolonged low-interest-rate environment by allowing them to choose their own currency mix and benefit from annual crediting interest. “The choice of USD, HKD, AUD and RMB allows clients to earn crediting interest every year and enjoy potential currency appreciation, with insurance coverage included as well. Plus they can review their currency allocation every five years and adjust it to suit their personal needs,” says Fraser. Ageas Hong Kong has also launched another investment product called Cheers, which combines investment and life protection. “This enhances our competitiveness in the investmentlinked assurance sector, because it fulfils the growing demand for a single plan that satisfies 44 HONG KONG BUSINESS | APRIL 2013

both investment and protection requirements.” Leveraging IT Fraser reveals that Ageas Hong Kong is actively expanding its business and the reach of its marketing and promotional activities by leveraging on the fresh opportunities provided by advances in IT. In fact, it was the first insurance company to begin using Google Apps. “We have also been putting enormous efforts into raising the quality of our services and products even further,” Fraser continues. “Examples of this include free, easy-to-use smartphone apps for specific purposes, such as retirement, education funds and protection. Our online portal allows clients to check policy details and perform housekeeping tasks as well.” Ageas Hong Kong launched the new Ageas CDA – a portable, interactive recruitment presentation tool that runs on iPad – in January 2013. Its purpose is to equip agency managers with an efficient, effective and versatile tool that will empower them to recruit high-calibre agents, regardless of their current personal recruitment style. “The Ageas CDA makes it possible for agency managers to provide prospects with an all-round analysis and in-depth understanding of the key aspects

“Ageas Hong Kong is actively expanding its business and the reach of its marketing and promotional activities by leveraging on the fresh opportunities provided by advances in IT.”

of financial planning careers with the company,” Fraser explains. These outstanding initiatives to adopt the latest IT technology to support its sales force have earned the company the PC Market Magazine Biz IT Excellence Award. “We will constantly continue to seek ways to make innovative use of new technologies to meet the ever-evolving challenges we face in the marketplace and satisfy our customers’ aspirations in the future. This will enable us to deliver more comprehensive and high-quality solutions that are more personalised to match individual needs.” Vision of the future Fraser also discloses the top five priorities of Ageas Hong Kong in the coming years. It aims to: • Continue posting strong growth, with a focus on value creation; • Maintain its agency channel’s top five position in the industry by increasing its headcount of professional agents to 3,000; • Become a top five player in the IFA channel; • Continue to respond to its customers’ wealth management needs with innovative solutions; and • Reinforce its Martini customer service proposition – “Anytime, Anywhere”. He goes on to say that Ageas last year rolled out its “Vision 2015”, which sets out a clear roadmap of where the company intends to be in three years’ time, as well as the values and tactics it is going to emphasise to take itself there.



Good document processes will bring revenue growth

Check out how Director Aaron Yim successfully transformed Ricoh into a fullsolution document services consultancy with their expertise in information management and document processes.


anaging Director Aaron Yim is an energetic, committed leader of Ricoh sales and service operation in Hong Kong. Transforming the company from a hardware and software provider to a full-solution document services consultancy has been a gradual yet successful process under his management. Mr. Yim said, “We are the market leader of document management services in HK because we have continually developed our expertise to help improve companies’ information management and document processes. Our consultants work side-byside with company employees to oversee all parts of the process, from the purchase of hardware, software and storage solutions to creating the applications needed to speed their time to market on average by 13 percent. Where companies have adopted Ricoh’s Managed Document Services, we have seen the increased revenue that results from good document

Aaron Yim, Managing Director of Ricoh 46 HONG KONG BUSINESS | APRIL 2013

processes and archiving”. He added that some lower-level managers still put document management as a low priority, because they may not realise that disorganized or inadequate processes can result in serious business risk and loss of revenue. Yim said, “We are moving towards being an integrated outsourcing company with complete professional services for all types of companies and industries. We place our employees within the company structure not only to provide a full-range of document printing solutions, but also scanning, conversion services, IT services and business process outsourcing so the companies can concentrate on their core missions”. Now celebrating its 50th year of service in Hong Kong, Ricoh is also launching new solutions for helping businesses to catch up with technological changes, such as its new communications solutions like

video conferencing and mobile device management to help customers work anytime, anywhere. In addition, it assists customers to move to cloud computing while providing the document archiving and storage backup

“Good information management will improve customer response and leads to more business. C-level management should put higher priority on looking at how to improve information processes with help from experts like us.”


Ricoh’s latest communication solutions include its ultra-short throw projector and Unified Communications System as well. Each stage of the process must be handled efficiently. Improper or inefficient document handling can result in loss of revenue and time. “Proper document management has a financial impact on revenue. Companies can pay according to the volume of our services they use. For the companies, this is a regular expense because Ricoh trains and employs the manpower needed to execute the proper processes,” Yim added. Messy workflow systems can cause mistakes and can prevent companies from getting the right information at the right time to their customers. Having a totally integrated system can lower the initial costs and incur less capital expenditure, while making the document handling process faster and easier. Ricoh sends their Managed Document Services (MDS) consulting analysts first to recommend the proper solution for each company’s unique situation, encouraging effective input/output devices placement and usage by providing a good office system design. After the consultation, Ricoh sends in a formal proposal and finally introduces the implementation of the recommendations once the proposal is accepted. Yim said, “Often the biggest obstacle to implementation is resistance, either from

employees who have a stake in their own systems, or from management, who only look at the expense and not the savings and efficiency once the system is in place. It is crucial to have a buy-in from a good sponsor within the company to effect changes, someone with hands-on authority and good links with senior management”. He added that Ricoh overcomes such resistance through good communications and a clever teaching process, including videos, seminars and information about the effectiveness of going “green”, reducing carbon emissions and reducing inefficiencies. Going green often results in better publicity for companies as well. Ricoh also maintains continuous monitoring over the life of a service contract, which usually lasts for a couple of years or more. Ricoh may recommend adding digital imaging, fleet management

“We also concentrate on building up expertise in certain industries, such as accounting firms, architects, and financial institutions.”

or other services as the result of the analyst’s recommendations. Yim’s approach to selling MDS to various industries is also innovative. “Some customers come to us because they have seen other companies succeeding with proper document management. In other cases, we take a vertical market approach by attracting, for example, a law firm. From solving that company’s problems, we can share our experience with other law firms so they can learn how to keep up with the competition. “We also concentrate on building up expertise in certain industries, such as accounting firms, architects, and financial institutions. Customers can accept our solutions if they can see others’ results and how these improved processes can help their own company’s bottom line. Banks, in particular, are working with compliance issues so they need on-site services rather than outsourcing of document management, for timely reporting to regulatory bodies and governments. It is important to have these processes embedded into the normal workflow”. With years of experience and knowledge in managing documents and information, Ricoh HK believes that to be a one-top solution and service business partner is the way to move forward for the years to come. HONG KONG BUSINESS | APRIL 2013 47


Hemlock The insurmountable horrors of standard working hours and Occupy Central

by hemlock Email:


he committee considering statutory maximum working hours in Hong Kong will take up to three years to produce its recommendations. Sounds as if the body is practicing an extreme version of what it has yet to preach, by strictly limiting its efforts to no more than – what? – 30 minutes per week. Officials insist that it’s technically a very complex issue. It used to be. Standard working hours raise interesting questions. What about forex traders who love 90-hour weeks? What about people whose irregular tasks mean they goof off some months but occasionally have to do tons of overtime? But policy wonks elsewhere sat down and solved these dilemmas years ago. Hong Kong could do worse than just pull Singapore’s system off the shelf, or Australia’s, or someone else’s. The real problem was summed up by the committee’s chairman, Leong Che-hung, who said: “We will not underestimate the difficulty for society to reach consensus.” Where there should be a modicum of leadership we have a void. And that brings us back to yesterday’s subject (which, to the disappointment of level-headed observers, produced only one comparison of Margaret Thatcher to Hitler among the fashionably nearpsychotic feedback). As if working hours weren’t bad enough, everyone is gearing up for the biggest urban civil conflict since Beirut: next year’s Occupy Central civil disobedience campaign to force Beijing to deliver 100% pure universal suffrage in 2017. The worst/best-case scenario is that for a few days traffic gets re-routed around the main business district, and commuters have to walk a bit further than usual. That’s it.

street, or something. The pro-dems, more excited than they have been for years, half believe they are capable of such enormities. So mutual is the freaking-out that you could easily rearrange the terrors. For example, it could be the pro-dems rather than the proBeijing camp who raise the dreaded possibility of the PLA running everyone over with tanks, or it could be the pro-Beijing folk rather than the pro-dems who ask if the cops will use their space-age ‘acoustic weapon’ to turn protestors’ brains to jelly that oozes out of their ruptured eardrums. Top prize for colourful imagery must go to whichever pro-dem asked about herding arrestees into the stadium – where presumably Chilean or Guinean soldiers “One way for the government to pull will be waiting. Interestingly, both camps the rug out from under Occupy Central: maintain that our law-enforcement pedestrianize the whole area by July 2014” personnel are such weenies that they will need counseling after this forthcoming But no-one has an interest in being calm and trauma. relaxed. Beijing, fearing a mass movement and One way for the government to pull the rug international attention, sets the nervous tone. out from under Occupy Central: pedestrianize Local patriots spy an opportunity to whip up the whole area by July 2014 as a long overdue popular feeling against the pro-dems by claiming anti-pollution measure, and install park benches such civic action will paralyze the entire economy everywhere so everyone, pro-democrat or proand irreparably wreck Hong Kong’s international Beijing, can sit in the middle of Queen’s Road as reputation as a place where people don’t sit in the much as they please. 48 HONG KONG BUSINESS | APRIL 2013

Occupy Central looms large



The age of hyper connectivity How we connect While the computer is still the primary device used to access social media, the last year saw significant increase in usage, most notably through tablets and internet-enabled TVs.

How we connect 2011-2012

Source: Nielsen Global

Total minutes spent on Mobile and PC

Source: Nielsen Global

So many engagements and not a ring in sight!

Source: SocialogueTM by Ipsos Open Thinking Exchange, Powered by Ipsos Global @dvisor

The most common butterfly on earth is the social butterfly!

Source: SocialogueTM by Ipsos Open Thinking Exchange, Powered by Ipsos Global @dvisor

“Hello? Oh, Hi there. Just let me finish this purchase...”

Source: SocialogueTM by Ipsos Open Thinking Exchange, Powered by Ipsos Global @dvisor

For more information contact: Ipsos, Tim Hill ( and Nicolas Bijuk (; Nielsen,  Ellen Cuijpers ( 50 HONG KONG BUSINESS | APRIL 2013



Hong Kong Business  

April-May 2013 issue

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