Hong Kong Business (February - March 2019) by Charlton Media Group

Display to 31 March 2019 HK$40

ART

ISSUE ISSUE FACETIME: WHY INVESTORS ARE EYEING COMPANIES EYEING YOU HOW TO GET 8,000 HECTARES OF LAND FOR FREE IS YOUR FUTURE HOME A FLOATING HOME? 52

MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

Art by: KAWS, WAITING, 2017, Bronze, paint, 178.4 x 85.1 x 72.1 cm

Standards donâ&#x20AC;&#x2122;t bother me, all I want is your data! AD: VASTCOM

Sensitive Data Discovery Our software helps companies of all sizes discover, remediate and monitor sensitive personal data across on-premise storage and in the cloud to meet data security standards such as PCI DSS, HIPAA and GDPR.

Discover

Monitor

For a free risk assessment, visit groundlabs.com

Remediate

HONG KONG

BUSINESS

FROM THE EDITOR

Established 1982 Editorial Enquiries: Charlton Media Group Hong Kong Ltd 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166

Whilst Art Basel Hong Kong is still the region’s premier fair, others are starting to slowly muscle in on the action to compete for art collectors’ attention. In January, the inaugural Taipei Dangdai attracted 90 exhibitors, including a number of international heavyweights lured by the opportunity to present to a largely untapped market. To add to the positive buzz surrounding the new fair, three satellite fairs took place around town at the same time, including Ink Now, a new nomadic fair devoted to contemporary ink painting. Shanghai is also posing a threat to neighbour Hong Kong’s art scene, with art museums now at 78, up 130% from five years ago. Can Hong Kong maintain its position as a leading art hub?

Publisher & EDITOR-IN-CHIEF Tim Charlton associate publisher Louis Shek production EDITOR Genelie Sta.Ana-De Leon graphic artist Elizabeth Indoy ADVERTISING CONTACTS Louis Shek +852 6099 9768 louis@hongkongbusiness.hk Rochelle Romero rochelle@charltonmediamail.com

ADMINISTRATION ACCOUNTS DEPARTMENT accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@hongkongbusiness.hk

Over at the co-working scene, operators are coming up with creative add-ons to lure more tenants. This includes features such as game stations, ice cream bar, high-tech screens to monitor the stock market, and even 3D printers. As of 2018, there are over 50 co-working spaces across 80 locations in Hong Kong, occupying over a million sq ft of land. This issue also features coverage of the 2018 Hong Kong Business High Flyers Awards. On its 15th year, 22 enterprises were recognised for their outstanding quality of service, innovative business practices, and efforts to contribute towards social progress. These businesses represent a wide range of industries, including banking and finance, insurance, legal services, interior design, luxury timepieces, information technology and telecommunications, boutique hotels and serviced apartments, and F&B. Flip the pages to find out the big winners. Enjoy the issue!

PriNting Gear Printing Limited Flat B, 3/F, Derrick Ind. Bldg., 49-51 Wong Chuk Hang Rd., Hong Kong.

Tim Charlton

Can we help?

Hong Kong Business is available at the airport lounges or onboard the following airlines:

Editorial Enquiries: If you have a story idea or just a press release, please email: editorial@hongkongbusiness.Hong Kong and our news editor will read it. For Media Partnerships, please email: editorial@hongkongbusiness. Hong Kong and put “partnership” in the subject line and it will forward to the right person. Subscriptions email: subscriptions@charltonmedia.com Hong Kong Business is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Hong Kong Business can accept no responsibility for loss. We will however take the gains. Sold on newstands in Hong Kong, Macau, Singapore, London, and New York *If you’re reading the small print you may be missing the big picture    

HONG KONG BUSINESS | MARCH 2019

CONTENTS

COVER STORY

20 Hong Kong art scene faces competition FIRST

38 FINANCIAL INSIGHT

06 Specialised co-working spaces

14 VC fundraising hits US$2.28b

on the rise

07 HKâ&#x20AC;&#x2122;s ultra rich population shrinks 08 Desperate developers slash

new home prices

10 Retailers undaunted despite

in 2018

36 2019 China outbound real estate investor intention survey

REGULAR

26 New hotels enter scene but

persistent spending slowdown

an iconic hotel exits

44 CMO Briefing

OPINION

ANALYSIS 34 Chinese banks are putting up

a fight against tech giants

46 Hello sailor! Floating homes

are worth considering

48 How to get 8,000 hectares

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 19/F, Yat Chau Building, 2 HONG KONG BUSINESS | MARCH 2019 262 Des Voeux Road Central, Hong Kong

EVENT COVERAGE High Flyers 2018

NUMBERS

RANKING

CEO INTERVIEW HSBC targets US$1b in additional wealth revenue by 2020

of land for free

For the latest business news from Hong Kong visit the website

www.hongkongbusiness.hk

News from hongkongbusiness.hk Daily news from Hong Kong most read

Economy

retail

Hong Kong GDP growth grinds to a halt at 1.5% in Q4 as exports take hit

Are Hong Kong residential rents finally bottoming out?

Retail sales growth crashed to 18-month low in December

The Hong Kong economy grew at a measly 1.5% in Q4, which is significantly lower than the 3.7% GDP growth recorded in the first three quarters, according to finance secretary Paul Chan. Goods exports showed zero growth in end-2018.

The protracted slump in residential rents may end by Q2 2019 as leasing costs recover after recording their smallest contraction in the past five months. Rents dropped 0.3% to $35.8 psf in January from 1.9% decline in December.

The retail sector closed the year on subdued footing after sales inched up by 0.1% to $44.9b in December as buyers held back on their purchases against the dismal economic backdrop, data from the Census & Statistics department show.

hr & education

Banker bonuses fall by a fifth as stock market weakens Hong Kong bankers had less reason to cheer in the Year of the Pig as bonuses crashed by as much as 20% following a tumultuous year for the stock market. The benchmark Hang Seng Index fell 14% in 2018 to book its biggest annual decline since 2011 amidst the trade dispute which effectively weighed on the value of compensation packages.

residential property

HONG KONG BUSINESS | MARCH 2019

hotels & tourism

New Hong Kong passport features hi-tech security upgrades The Immigration Department is set to issue a new passport featuring a series of security upgrades and creative designs that will replace the one issued since 2007. The biodata page will be made of polycarbonate and will contain a laser-engraved portrait photo, which is the same technology adopted for the new Hong Kong ID cards.

food & beverage

Restaurants extend positive streak as receipts hit $30.4b in Q4 Food establishments in Hong Kong continued to enjoy a steady stream of business after restaurant receipts rose 2.2% to $30.4b in Q4. Non-Chinese restaurants outdid bars and other F&B segments in Q4 after witnessing the largest increase in receipt value at 4.4% and 2.2% in volume. They were followed closely by fast food shops where receipts rose 4.1% volume.

FIRST firm Pamfleet Real Estate Fund LP. Co-working spaces now occupy about one million sq ft of land in Hong Kong, similar to around 16 soccer fields in land area. These spaces are scaterred across 80 locations in Hong Kong. “The number of major flexible space operators in Asia-Pacific doubled, while flexible floor space also increased by 150% between 2014 and 2017,” according to real estate consultancy firm JLL.

new restaurants

Écriture

Up-and-coming culinary players are hoping to cash in on Hong Kong’s thriving restaurant sector that saw its total receipts rise by 6% in value and 3.1% in volume to $119.5b in 2018. From classic Greek cuisine to Punjabi dishes, here are four new establishments that promise to satisfy even the most refined palates. 1. Écriture At Écriture, Executive Chef Maxime Gilbert elevates French cuisine to new heights by uniting it with exceptional Japanese produce to explore the endless possibilities that occur when Western craftsmanship meets Eastern philosophies. Écriture is located atop H Queen’s in Central. 2.Arbor Arbor provides a haven for relaxation, sanctuary of refinement and bohemian leisure. It serves as an elevated home away from home for fine dining, drinks, business meetings and life’s many celebrations. Hailing from the pristine natural environment of Finland, Arbor’s Chef de Cuisine Eric Räty represents vibrant innovation that matches perfectly with its enchanting, nature-rich concept. 3. Wagyumafia Founded by Chef Hisato Hamada and internet entrepreneur Takafumi Horie, the Tokyo-based Wagyumafia began as a series of private dinners that bloomed in popularity to become a members-only restaurant group. Wagyumafia opened its first Hong Kong restaurant in late 2018. 4. New Punjab Club New Punjab Club harkens to the liberated era of post-Colonial Pakistan and India. Saluting the regal yet flamboyant attitude of the time, the boisterous tandoor grill house brings the region’s traditional flavours and the Punjabi zest for life to Hong Kong. Awarded a Michelin star in the 2019 guide, New Punjab Club becomes the world’s first Punjabi restaurant to receive the honour.

HONG KONG BUSINESS | MARCH 2019

The allure of co-working Co-working companies accounted for 10% of new lettings on Hong Kong Island in 2018, according to JLL. Meanwhile, current average desk rates in Hong Kong are approximately 31% cheaper than London ($616 compared to $897) and almost half as cheap (44%) as New York City, which is $1,110. This also means that flexible workspace is less expensive in Hong R One targets 50% occupancy rate in its first three months of operation Kong than both Paris at $842, but also the two key cities of the Middle East — Abu Dhabi and Dubai at $717 and $755, respectively. The rapid growth of Asia-Pacific’s key cities has created issues for those Co-working ith over 50 co-working seeking office space, Instant Group spaces now spaces in Hong Kong notes, and flexible workspaces occupy about competing for tenants, provide a sustainable solution. Despite 1 million sq ft operators are now ramping up their the rosy outlook, barriers belie the of land in Hong offerings. R One Space is amongst stunning growth of coworking spaces Kong, similar to the influx of shared space operators in the region. “Corporate culture in around 16 soccer to offer these add-ons in its new coAsia tends to be more hierarchical, fields in land working facility in Kwun Tong. and not always in sync with the area. “The occupancy rate is targeted to casual, flexible atmosphere,” says JLL reach 50% in the first three months, research. “Large organisations place with plans to expand the total gross high value on retaining brand identity floor area of R One to 100,000 sq and culture. Such concerns, along metres in stage one,” explained Chan with the need to protect trade secrets Yan Tak, R ONE Space Founder & and secure IT infrastructure, must be Chairman. The three-storey centre addressed.” has a game station, an ice cream bar, and even a 3D printer to promote Flexible space operators in Asia Pacific multiplied innovation and creativity. Industry watchers also note that co-working spaces are growing more segmented, with the likes of coworking space Campfire Collaborative Spaces targetting fintech firms through screens monitoring the financial markets. Aside from this, the company also leased three floors of the Harbourfront Landmark building in western Kowloon from private equity

Specialised co-working spaces on the rise

Source: JLL Research

FIRST HNW population in Hong Kong dropped by more than 11% in 2018.

There are now only 440,000 individuals in Hong Kong with a net worth between US$1m to US$30m

HK’s ultra rich population shrinks

hen the Hong Kong stock market tumbled in late 2018, it took a bite out of the net worth of the territory’s wealthiest residents. As a result, Hong Kong’s ultra high net worth population shrank by over 11% in 2018, a new report by Wealth X revealed. “Stock markets in Hong Kong and China generally reacted negatively to the US-China trade terms uncertainty. As a result, the HNW population in Hong Kong dropped by more than 11% in 2018. At 440,000

individuals, the HNW population is less than half of the New York metro area,” the report noted. New York has reclaimed its crown as the world’s top destination for the ultra rich. Back in 2017, Hong Kong overtook New York as the metropolitan area with the largest UHNW population. The region witnessed a 31.0% increase in ultra wealthy numbers, becoming the first city to exceed the 10,000 mark. There are now as many HNWs in Asia as in Europe, and Wealth-X

expects Asia to be the fastest growing region for the crazy, rich over the next five years. Building on their existing financial expertise, Hong Kong and Singapore are likely to remain key centers but other markets are developing or importing services to serve HNWs locally. Where are the crazy, rich Asians? Asia, which saw its billionaire populations grow faster than any other region in 2017, saw less than 1% growth in its HNW population and its wealth in 2018 at 0.6% and 0.3%, respectively. Whilst Asia’s GDP (in current dollars) grew by more than 8% in 2018, its stock markets plunged by more than 11% during the year. This competing effect has resulted in almost no change in the HNW population and its wealth in the region. “Asia-Pacific is forecast to experience the strongest growth in the number of HNW individuals and combined wealth. The region’s HNW population is projected to increase at a compound annual growth rate of 7.6% over the next five years, with total net worth trailing slightly at 7.5%, leading to a minute reduction in average wealth,” Wealth-X said. “At some point in 2020–2021, a significant milestone will be reached, where we expect the HNW population of the region to overtake that of EMEA,” the report noted.

The Chartist: Warehouse rents to rise 5% as 3PLs and data centres fuel demand Industrial property rents are set to rise 5% in 2019 amidst strong demand from third-party logistics players seeking to cash in on strong e-commerce sales as well as the data centre boom. In particular, the Tseung Kwan O (TKO) industrial estate is rapidly shaping up to be a critical cluster of high grade data centres. The area received a significant boost when SUNeVision won the latest tender for a 1.2 million sq ft data centre site in Area 85 for a bid of around $5.46b or an AV of around $4,500 per sq ft. Other data centre operators in Hong Kong include Singapore-based AirTrunk which leased 187,000 sq ft warehouse in Tsing Yi and Chinese data centre operator GDS Services which acquired the CS Logistics Centre in Kwai Chung for $770m with plans to develop it into a 195,000 sq ft data centre.

Gross rents (HK$/month/sqft)

Source: CBRE

Vacancy rates for the Hong Kong industrial property sector (2001-2018)

Source: CBRE

HONG KONG BUSINESS | MARCH 2019

FIRST supply of luxury homes dwindles

The Peak

ess than 100 new luxury units sized 1,722 sq ft or above will be completed in The Peak, Southern district, Kowloon Tong, Homantin and Mid-Levels in 2019, according to a report from JLL. Despite a marked lack in new home supply, Kwai Tsing ranks amongst the top five fastest growing districts in terms of affluence in Hong Kong, according to JLL’s residential sales market monitor. Kwai Tsing is the only district that has witnessed almost zero new completions over the last five years and is expected to house only 1,000 units coming on stream by 2023. Nonetheless, strong income growth from residents in the area is poised to brighten the residential market outlook for the district and streamline the delivery of new home supply. The supply of new luxury residential homes at the Peak in particular, is projected to fall to an average of 13 units per year between 2018 and 2020 from 36 units in the past three years, according to an earlier report from JLL. The 2019 pipeline is expected to contribute just 2% to total luxury residential supply over the three-year period. However, the luxury segment may be proving to be more resilient to the ongoing housing downturn than the weakening mass segment as the latter’s capital values have retreated by 4.2% after peaking in August 2018 whilst the former’s capital values have stayed largely flat in Q4 2018. Historically, this trend was also observed in the previous market downturn in 2016 when capital values in the mass segment fell by 10.1% whilst the posh market segment saw a more controlled decline of 1.9%.“Whilst the luxury residential segment is being supported by cash-rich investors that stay fixated on acquiring their dream homes, the mass segment is more sensitive to market sentiment and filled with buyers that are more pragmatic,” said Henry Mok, Senior Director of Capital Markets at JLL.

HONG KONG BUSINESS | MARCH 2019

Desperate developers slash new home prices

hen China Overseas Land launched its newest residential project for sale, potential buyers saw steep discounts as the developer sacrificed bottomlines to dispose of their residential stock. Flat prices at The Regent in Tai Po averaged at just HK$12,800 per square foot, roughly 32% lower compared to nearby developments that were launched five months prior. China Overseas is just one amongst a number of developers that has chosen to slash prices amidst Hong Kong’s residential property downturn. Nan Fung Development has also reduced prices by 19.5% at its project in Tseung Kwan O, with flats going for HK$16,006 per square meter. Yet another example is Sun Hung Kai, which has cut the prices of homes at its Cullinan West II development by as much as 10%. “Declining investor confidence is likely to result in the continued fall of residential prices from August 2018 continuing into H1 2019. We do not expect a market collapse as the market has not been over-leveraged as in 199798,” noted Daniel Shih, Senior Director of Research at Colliers Hong Kong. “Emerging cases of price cuts from the secondary market of 15% to 20%

Cullinan West II

could eventually inspire similar discounts in the primary market,” noted Stephanie Lau, vice-president and senior analyst at Moody’s.

Emerging cases of price cuts from the secondary market of 15% to 20% could eventually inspire similar discounts in the primary market

Buyers on the fence Official data show that home prices have dropped over 7% from their peak. Average transaction volume decreased from over 5,700 per month in the first seven months of 2018 to just 3,500 per month for the last five months of the year. “We believe that investors of the year. should look at the residential market again around mid-2019, when the impacts of rising interest rates and trade disputes become more apparent. In the most optimistic scenario, residential prices could stabilise by mid-2019 followed by a moderate recovery in H2 2019, with a whole year fall of 3.8% in 2019,” Shih stated. Despite the continued weakness in the primary sales market, experts note that the leasing market should stay relatively firm as rental prices have been less volatile than price growth.

Mobile App Watch

Fitness app developer OliveX nabs US$1m funding OliveX Limited, the subsidiary of Hong Kongbased mobile game developer Animoca Brands Corporation, has raised US$1m in funding from strategic investors including VC firm Alabaster and businessman Tony G, to enhance the body motion AI initiatives of its app offerings. Launched in 2018, OliveX develops a wide range of AI-powered mobile apps that use gamification to improve the health, fitness and engagement rates of users. OliveX apps include 22 Pushups, an app which encourages a pushup rep for 22 straight days; Vora - Fasting Tracker which monitors and summarises a user’s fasting programmes and Lympo Squat which rewards users with cryptocurrency after performing squats. As a result of the funding round, Alabaster founder Sonny Vu will become chairman of OliveX. Vu has had prior experience in the fitness industry after setting up wearables startup Misfit.

Lympo Squat lets you earn crypto for squat rep

The app has a smart detection feature

FIRST

Retail newcomers undaunted despite persistent spending slowdown

hen London-based luxury jeweller Graff unveiled its new flagship store in Central in December, shoppers were treated to a tantalising display of jewels cut from the legendary 1,109-carat Lesedi La Rona diamond. The store, designed by celebrated architect Peter Marino, featured magnificent interior mirrors that evoke the multi-faceted beauty of the brand’s jewels. The store covers 2,800 square feet and is located in St. George’s Building, on the intersection of Chater Road and Ice House Street. New store openings show that retailers are not discouraged by the slowdown in retail spending. “The expected record-breaking tourism arrivals to Hong Kong to hit over 60 million in 2018 has become an impetus for retailers to put innovative retail strategies into action,” notes David Ji, Director, Head of Research and Consultancy at Knight Frank Hong Kong. New infrastructure supports arrivals Two new cross-border transport links have pulled in more tourists since they became operational in September and October, bringing in 40.3% more same-day visitors year-on-year in November whilst mainland overnight visitor numbers rose by only 6.1%

over the same period. Suburban retail areas including Tung Chung, Yuen Long and Tuen Mun have benefitted from the Hong Kong-MacauZhuhai Bridge, the 55-km bridge has recorded average daily patronage of 68,500 people from October 24th to December 23rd. Elements, the premium shopping mall adjacent to the West Kowloon Terminus Station, has already seen a noticeable increase in mainland visitors since the opening of the new cross-border railway link even if actual traveler numbers were below previous forecasts. “Not surprisingly, this surge in daytrippers has given a boost to retail markets in areas surrounding the two new crossborder bridge and rail links,” said Simon Smith, Senior Director-Asia Pacific at Savills Research. “For now, it seems that many of the increased visitor numbers are day trippers without big budgets for shopping, but despite this some modest uptick was noted in sales of pharmaceuticals, F&B and cosmetics in the areas benefiting from the cross-border bridge and rail links,” he added. In view of the changing profile and spending patterns of mainland visitors, Hong Kong’s retail market may shift away from luxury, especially jewellery and

Graff’s flagship store in Central

watches, to focus more on the mass market, and this will therefore have less of an impact on prime rents. For instance, Japanese discount store Don Quijote is expected to open its first Hong Kong store in Tsim Sha Tsui’s Mira Place 2 within the year. “The longer term impact of the new infrastructure on the overall Hong Kong retail scene and the luxury segment in particular, has yet to be seen as the spending patterns of day-trippers differ substantially from their overnight counterparts. Mainland same-day visitors tend to spend much less on shopping than overnight visitors (typically 50% less) and they focus more on daily necessities, pharmaceutical products and cosmetics,” Smith noted. “As for any new market, time is needed for the retail sector in Hong Kong to reap any concrete economic benefits from the Greater Bay Area development. Meanwhile, the overall slowdown of the economy in the region could also impact consumer spending. We forecast that Hong Kong’s slow retail market will persist in 2019,” Ji added.

OFFICE WATCH

Spaces unveils sleek 20-storey co-working hub Located just a block away from the Hong Kong Business headquarters, at 181 Des Veoux Road lies Spaces, a new, sleek co-working space. Spaces Sunhouse is the fourth and largest location spanning 77,000 sq ft over 20 storeys. Spaces Sun House offers a pristine view of the Victoria Harbour on its top floor. The office also houses a 7,000 sq ft“Business Club” designed for hot-desking, informal meetings and interaction amongst members whilst the second floor is dedicated to meeting rooms. The third through nineteenth floors provide private offices to accommodate teams on flexible terms of one to 24 months. “Central and Sheung Wan have always been core business districts,” said Nancy Yip, Area Director with IWG. The latest opening in Central adds to Spaces portfolio in Hong Kong which already counts locations in Kowloon East, Causeway Bay and Wong Chuk Hang. It also has a fifth hub set to open in Wan Chai in Q1 2019. 10

HONG KONG BUSINESS | MARCH 2019

Top floor

Work stations

Lounge

Meeting room

startups

FinFabrik closes seed round

ong Kong-based startup FinFabrik makes use of blockchain technology to digitise real-world assets like equities, fixed income, and real estate. It aims to shake up the infrastructure of capital markets through its range of solutions that target the end-to-end lifecycle including Crosspool for issuance, CryptoFabrik for trading and QuantFabrik for the market-making of digital assets. “Our team is focused on creating solutions that enable owners to deploy their assets and liabilities. Owners may digitise and fractionalise their tangible and intangible assets, raise capital, and

reach investors in a frictionless manner using FinFabrik’s proprietary blockchain and machine learning technologies,” Alex Medana, FinFabrik’s co-founder and CEO said. In February, FinFabrik raised an undisclosed amount in a seed funding round led by BitMEX Ventures, the investment arm of crypto exchange and derivatives trading platform BitMEX, to enhance its capital markets software solution and explore new product offerings based on digital assets. Access to capital Through asset digitisation and tokenisation, real-world assets like equities, fixed income, real estate are divvied up into fractional equity ownership and transformed into digital assets that make use of distributed ledger technology. “By transforming traditionally alternative, illiquid assets into Digital Asset-Backed Securities, FinFabrik powers a digitally integrated end-to-end lifecycle, from issuance to trading. This will broaden access to assets and capital, link supply and demand more efficiently and enable innovative new business models,” FinFabrik said in its website.

Expense tracker gini raises $1.6m seed fund

Smart spending tracker gini has raised US$1.6m in a seed round led by early stage fintech VC Vectr Ventures in January in its bid to help users take greater control over their finances. Through gini’s mobile app, users can easily view their spending across all off their bank accounts in one convenient viewing. The app also has a feature that enables users to pick up, sort and categorise expenses as well as generate visual insights like pie charts and graphs on their spending. The startup draw its name from the Gini coefficient which measures income inequality. In June 2017, Hong Kong’s Gini coefficient hit a 45-year high at 12

HONG KONG BUSINESS | MARCH 2019

0.539. “Hong Kong has one of the worst Gini coefficients. We can’t fix that but we can give people the tools to deal with this,” CEO Raymond Wyand said. Since its beta launch in March 2018, gini claims to have amassed 20,000 users and handled over $6b in transactions in line with its goal of being compatible with over 3,000 overseas banks across 60 countries before 2019 ends by starting with over 60 banks across Hong Kong, France, Switzerland and the UK. “Ultimately, our goal is to build a truly worldwide financial marketplace, to service not just a user’s home market but make managing money across markets accessible and easy for anyone to do,” Wyand added. “This new seed round allows us to start making that vision a reality, and we have a strong new partner in Vectr who shares our passion and believes in our vision for what gini can do to disrupt the global personal finances industry more broadly, and make financial freedom accessible to everyone around the world.”

HKDecoman raises US$1.4m to revamp home renovation

When entrepreneurs Benny Liu, Andy Lau and Simon Tang pooled their savings and set out to establish a onestop digital renovation platform, the home renovation industry in Hong Kong was rickety at best. Homeowners were plagued by a crippling lack of information, low transparency rates and quality issues with suppliers, homeowners had little choice but to hire an extremely costly decorator or do the work themselves without the convenience of a central platform that could assign them a reliable company that could respond to their particular renovation needs. Enter HKDecoman. Launched in 2016, the startup connects homeowners with decoration companies and engineers as well as offer consultancy services for home renovation through its website. Once information of the renovation unit is entered into the system, a consultant will follow up within twelve hours to respond to the user’s design preference, budget and location. The startup will then proceed to select up to three companies for the user whilst a specialist will monitor progress during renovation. “Other than other similar platforms offering one to two related services, what HKDecoman is trying to do is to build the whole online to offline ecosystem,” the firm told Hong Kong Business. Online marketplace, education The startup also has a physical office called HKDecoBar which aims to be the city’s largest renovation experience centre. The bar offers monthly courses and a trial-use area stocked with renovation materials, parts and tools. The DIY tools and building materials available on its bar are all paired with a QR code that are linked to the items for sale in its e-marketplace, HKDecoMall. Beyond the startup’s main offerings, HKDecoman takes its commitment to advancing the renovation industry by honing its educational component. The startup has produced over 700 tutorial videos and provides online decorating tips and anti-scam guidelines on its website. “HKDecoman is the only player in the industry which has invested a lot in building content, divided into articles and video, which enables our users to have an all-round experience during the whole process, starting from researching info to postdecoration services,” the firm added. The startup is now valued at $50m after it raised US$1.4m in funding in October 2018. HKDecoman aims to enhance products and integrate resources before embarking on its plans to expand into China and Southeast Asia over the next three years.

FINANCIAL INSIGHT: venture capital

Deal #1: Facial recognition unicorn sensetime scored a billion-dollar investment from alibaba

Deal #2: tink labs, which developers smartphones for hotel guests, is valued at about US$1.5b

VC fundraising hits US$2.28b in 2018 Artificial intelligence accounted for a significant amount of VC activity in 2018, led by the headline-grabbing US$1.2b investment in SenseTime the largest VC and technology transaction last year.

he number of venture capital (VC), and technology deals in Hong Kong remained the same in 2018 at 42 deals in total, but their combined value jumped 81%, powered by what analysts noted as a “breakout” class of homegrown startups, primarily in the technology space, that are attracting the lion’s share of funding. VC and technology investments in Hong Kong hit US$2.287b in 2018 from US$1.262b in 2017, according to data from the Hong Kong Venture Capital and Private Equity Association (HKVCA). Of the VC and technology transactions in 2018, the biggest by far was the US$1.2b investment in facial-recognition technology company SenseTime by high-profile institutional investors including Alibaba Investment, Temasek, Hopu Capital, Silver Lake and Tiger Global. The second-largest deal was the US$300m investment in Tink Labs by an undisclosed group of investment funds and strategic investors in a deal that values the Hong Kong-based developer of smartphones for hotel room guests at about US$1.5b. Online logistics platform GoGoVan attracted US$250m from InnoVision Capital, Hongrun Capital and the Russia-China Investment Fund, among other investors, in what marked as the thirdbiggest VC and technology transaction in 2018. The technology, media and telecom sector accounted for a dominant 89% of all VC and technology deals 14

HONG KONG BUSINESS | MARCH 2019

The technology, media and telecom accounted for a dominant 89% of all VC and technology deals by volume in 2018, according to HKVCA.

by volume in 2018, according to HKVCA, with the healthcare, consumer & retail and business services splitting the remainder at 6%, 3% and 2%, respectively. The technology sector will continue to to draw in VC funds looking to compete for higher-quality targets in 2019, according to analysts. “You are starting to see a very interesting development in the emergence of breakout companies coming out of HK. I would say these are still isolated incidents; they haven’t created a cluster effect yet. But I think quite soon in other entrepreneurial clusters you will start to see some breakout examples,” said Denis Tse, chair, research committee of HKVCA and founding managing partner of private equity manager Asia-IO Holdings Aside from SenseTime, Tse reckoned another notable deal involved travel tech platform Klook, which attracted US$200m in funding in August 2018. The company plans to use the financing to expand in the U.S. and Europe. There is also buzz surrounding virtual reality startup Sandbox VR, which in late January 2019 raised a US$68m Series A investment round led by US-based VC firm Andreessen Horowitz -- a “very rare” occurrence as the latter does not usually invest in a Hong Kong-based company, according to Tse. “AI is going to be one of the key focus areas in the HK market going forward,” said Alyssa Aaron, director of investments at Nest Ventures. “In the wake of the Chinese

FINANCIAL INSIGHT: venture capital government’s ambition to be a world leader in AI by 2030, investors are pouring billions into AI startups similar to SenseTime.” However, she noted that whilst there is a clear trend around investment in AI -- the government has even launched the HKAI Lab to further support growth in this space -- it remains to be seen what some of these startups can practically deliver. Flight to quality The larger investment rounds and heightened market uncertainty, especially in late 2018, have pushed investors, including VC funds, to place a higher premium on quality when evaluating potential targets, analysts noted. “The overall backdrop is that there is a flight towards quality because as you can see in the public market, investors are getting more discerning about company growth potential. They are really looking at an individual company’s capability and quality, rather than just a generalized approach that you have seen in the past two years,” said Tse. “I think it’s a positive trend for companies that are delivering quality and are really thinking about creating innovative products and services. It’s a good recalibrating juncture,” he added. Many Hong Kong startups were either not prepared or lacked the desired scale by Mainland Chinese investors, noted Lap Man, co-founder and managing partner of Beyond Ventures, a HK-based VC fund established by VC fund eGarden Ventures in partnership with local serial entrepreneurs. “What we have observed in HK is that many startups are not ready at all, or they have only a written proposal on hand, and they have not started the business yet,” said Man. “Though there is so much money floating around, it is not easy for startups to seek financial backing especially from mainland Chinese capital which has a much higher requirement on the business scale of the startups.” SenseTime’s emergence as the market leader in facial recognition has made it more difficult for smaller AIfocused firms to gain a foothold, according to KPMG’s latest quarterly Venture Pulse report, although it expects growth to likely be driven by other areas of AI and a bevy of corporates looking to embed such technologies within their own applications. “However, with the focus of investors primarily on late-stage deals, it will likely be difficult for AI-focused startups to attract funding without strong use cases,” the report said. Large corporates in Hong Kong have shown increased interest in exploring digital transformation, Aaron said, citing how 85% of firms boosted their digital investment in 2018, whilst 93% said they were planning to increase such investment over the next two years. She also noted that many corporates have begun setting up a dedicated ventures arm in order to facilitate innovation, including the electricity supply company CLP Group. “We are expecting to see more startup-corporate partnerships and corporate venture investments in 2019 and in the future,” said Aaron. Amongst sectors, there should also be continued

Denis Tse

Alyssa Aaron

Lap Man

interest in the fintech space in 2019, according to Man. “Startups are not only changing how banks operate, but they reinvent other financial areas that have been left untouched for decades.” For example, financial services and technology startup Oriente raised US$105m in an initial funding round in November 2018 which it said it would use to level up its technology and product development, as well as fuel its growth into new Southeast Asian markets. Man reckoned the government’s rollout of virtual banking licenses, the first set of which could potentially be granted as early as the first quarter of 2019, will further change how individuals and businesses reshape the delivery of financial services. Aaron also saw a positive uptrend for fintech in 2018, and she foresees the sector continuing to be dominant moving forward, factoring in the government’s planned US$63.9m allocation to boost financial services in the city, including fintech, over the next five years. However, Man maintained that opportunities for VC funds can come from any sector. “We do not see particular sectors dominating the deals. We have examined more than 200 deals annually and the successful deals come from a wide range of sectors. For Beyond Ventures, we invest in startups with unique technological innovation and/or self-sustained and creative business model.” With the economy becoming more uncertain, Tse said there will likely be “some crunching” on valuation on VC fundraising, although it remains to be seen whether that will lead to a withdrawal of VC activity by less experienced players that were attracted to the sector. “Good managers continue to be strong in fundraising but you can see that the less proven managers would have a hard time raising capital.” Family office rush Despite the prevailing uncertainty, many Hong Kongbased family offices are either setting up their own fund or are partnering with VC funds to co-invest in potential startups, noted Man. For example, Union Capital, a family office and institutional investor focused in Western Asia and Africa, entered the HK market in late 2018 and

Global first-time venture financings of companies 2010-2018

Source:KPMG

HONG KONG BUSINESS | MARCH 2019

FINANCIAL INSIGHT: venture capital Global unicorn funding rounds 2010-Q4 2018

Singapore view

Singapore startups hauled US$7.5b

S Source: KPMG

is looking to work with local partners to spot opportunities. Peter Stein, managing director of the HK Private Wealth Management Association, told CityWireAsia in October 2018 that close to half of the $1t assets managed by the domestic private wealth industry stems from corporate and institutional professional investors. “We believe much of this figure is made up of family offices in various forms, from single family offices to family offices embedded within family businesses,” he was quoted as saying. In order to boost the city’s attractiveness to family offices, the PWMA has recommended tax-related incentives such as expanding asset coverage of offshore funds exemptions and revamping trust taxation, among others. The association has argued that such changes would enable HK to match some of the tax perks that have made Singapore a favored destination among family offices. Matthew Tai, whose father built a fortune in real estate and is the CEO of JM Enigma Capital Group, has placed roughly 15% of his family office’s US$70m capital in technology investments, up from zero percent two years ago, according to Bloomberg News. “My family’s traditional business was about development of land,” Tai was quoted as saying in the Bloomberg News report. “But that’s history. The new world is the cyber world.” The family office trend is partly driven by a recent surge of newly minted millionaire and billionaire startup cofounders following a surge in IPOs last year. The number of IPOs in the Hong Kong Stock Exchange reached a new record in 2018, capping off a very positive year for exits in the region, according to KPMG’s latest quarterly Venture Pulse report. The advisory firm said the acceleration in HK IPO activity, which saw a strong surge in the third quarter, was also enabled by changes to listing rules for technology companies with dual-class share structures and for biotech companies earlier in 2018. The trend could be sustained as KPMG assessed that sentiment remains favourable for future listings in HK despite some caution about private valuations potentially being higher than those within the public markets. “You don’t see an immediate impact on the local venture community, but in terms of creating avenues for IPOs, I think it has become more interesting for venture-backed companies,” said Tse. 16

HONG KONG BUSINESS | MARCH 2019

tartups in Singapore continued to account for the lion’s share of regional funding after raising US$7.5b in 2018 across 189 deals, according to a report from e27. The average deal size in Singapore was US$29m with fintech reigning supreme as the most popular vertical for deals (21) although the enterprise solutions segment is fast catching up with 20 deals on its belt. E-commerce, healthtech and big data rounded out the top five with 12-14 deals each. In terms of average deal size, the automotive segment raised the highest average round at over US$1.3b in 2018 driven almost entirely by ride-hailing app Grab who remains undaunted in its bid for superapp status. The ICT segment raised over US$300m and Entertainment crossed the US$200m mark. E-commerce averaged over US$15m whilst the Aerospace sector raised an average of US$50m. Roughly 75% of all funding deals in Southeast Asia went through Singapore with a significant chunk of the money going to only three companies: Grab, Lazada and Sea Group which all trace their roots to Singapore. Despite the burgeoning VC funding landscape, some startups are turning to alternative funding routes for their funding needs. Singapore-based startup Delegate sought to raise US$1m for its pre-series A round to improve the capabilities of its event platform through a family office, a trend seen to flourish in Singapore this year. Through the capital injection of an undisclosed Singapore-based family office and the participation of an angel investor, Delegate managed to raise enough money for its plans to expand into the US and Australia and enhance its SaaS offering.“We weren’t willing to raise more than we required so family offices were the ideal investment vehicle for us. The flexibility in their investment mandates was a definite advantage for us,” said Jacqueline Ye, co-founder of Delegate. What used to be the exclusive domain of VCs is no more as family offices have been slowly but actively expanding into the thriving tech startup landscape, particularly in the early-stage scene, as part of their long-term wealth generation ploys, observed Justin Hall, partner at Golden Gate Ventures. The private equity (direct and fund investing) asset class currently accounts for a 22% share of the average family office portfolio, up 3.8 percentage points from 2017, according to a report from UBS and Campden, which noted how nearly 80% of these investments either met or exceeded their performance expectations.

Startup funding based on vertical in 2018

Source: e27

INTERVIEW

HSBC targets US$1b in additional wealth revenue by 2020 The bank is adding 1,300 roles for its Hong Kong, Singapore and China offices in its bid to tap on the wealth of Asia’s high-net worth individuals. its wealth management, retail and private banking segments by adding 1,300 roles primarily in Hong Kong, Singapore and China. HSBC is looking to grow wealth revenues by at least US$1b by 2020 from retail and Private Bank wealth management, insurance and asset management.

Mark Surgenor, head of wealth, Asia, HSBC

ith Asia tipped to lead high-net worth wealth creation as Western powerhouses lose momentum to the region’s upstarts, HSBC is banking on its accummulated expertise and heritage in an effort to capture the wealth of opportunities arising from the region’s explosive wealth boom. Of the 2,158 billionaires around the world in 2017, Asia is home to 814 such individuals with a combined net worth of $2.7t, according to a report from UBS and PwC. In response to this explosive growth momentum, HSBC has been steadily beefing up its frontline wealth teams supporting 18

HONG KONG BUSINESS | MARCH 2019

Of the 2,158 billionaires around the world in 2017, Asia is home to 814 such individuals with a combined net worth of $2.7t.

HSBC is adding a significant number to its retail and private banking teams by 2022. What role will Asia play in HSBC’s banking agenda? We expect that Asia will become the largest creator of wealth worldwide – the region’s total share of global private financial wealth is forecast to overtake North America by 2021 – and is growing rapidly. So it’s a huge opportunity for us. We see opportunities across retail banking, wealth management and private bank segments. Geographical boundaries are disappearing for the emerging wealthy in Asia – they are travelling more, studying more overseas, investing more internationally, and have businesses in multiple markets. With needs, aspirations and investment philosophies that are highly mobile, our customers have complicated lives that need the help of a bank that can fully support them. HSBC’s global network and especially our long heritage in Asia gives us the edge to support such clients’ wealth needs across different markets. What are the opportunities and challenges of the Asian pivot? Well, if you think about our geographic spread and our capabilities - we have private banking, we have Jade, we have Premier, we have asset management, we have insurance - and a lot of that is locally embedded into all of the key countries across Asia where the growth is going to come from. The

real opportunity for us is to put all of that together and make sure we bring the very best of HSBC to our clients, and make sure we capitalise on that opportunity and give the best possible service that we can. Against a chronic talent shortage in Asia, what strategies is HSBC deploying to lure and retain indemand relationship managers? The key for us is making sure that we have the very best proposition for relationship managers – we’re confident we have something to offer other players can’t easily match. In terms of personal development, HSBC gives a lot to groom our people, develop and retain them – be it through courses via HSBC University, or support for employees obtaining country or global accreditations. As well as recruiting externally, HSBC will fill some of the new positions through internal promotions: we pride ourselves on having a robust programme to grow talent. The ability to deliver for our customers is also attractive to future employees – we can connect our customers to our global network, help provide for a broad range of financial solution needs from retirement to legacy planning, and this comes alongside manufacturing supported by our insurance and asset management arms. What are HSBC’s goals in the next three to five years? We’ve talked about the opportunity and we’re making a huge investment in people. We’re also going to invest significantly in digitisation to help support and empower our frontline, and enhance customer interactions. It’s really making sure that we do the very best for our customers. For us, ensuring that we’re successful over the next three to five years will be about leveraging the capability we already have, and bringing it together our investments in people, capability and technology, and making sure that we can serve our clients better than anybody else. Our goal is simple – to be as client-centric as possible. We want clients to value us and think of us first whenever they want to look at their wealth needs across Asia.

Hong Kong Arts Centre - 24th IFVA - Yang Li-chou, Father Film Still

Hong Kong art scene faces competition Whilst Hong Kong is rightly placed for the market-driven influx, the art scene may be reaching a saturation point.

very March, art lovers in Asia make an annual pilgrimage to Hong Kong to attend one of the most important international art fairs. Offering access to some of the most renowned Asian and international galleries in one place, Art Basel Hong Kong has become the largest art fair in the region, prompting stiff competition amongst international art galleries to make the cut. “It’s actually harder for a Western gallery now to get into the Hong Kong show for the first time than it is to get into our show in Basel. We decided in 2013 to devote 50% of the booths to galleries who have exhibition spaces in Asia, so there is a much smaller number of slots available to Western galleries and galleries vying for those slots are at the levels of Paula Cooper or Matthew Marks. Basically, if you are not one of the best Western galleries in the world at this point you’re not getting into the Hong Kong show,” remarks Marc Spiegler, the Global Director of Art Basel. And whilst just a few years ago Asian collectors would bemoan the fact that western galleries tended to bring mainly second-rate works, albeit by well-known artists, things have certainly changed as the rise of the Asian collectors, and their spending power, combined with their deepening appreciation for Western art, has been felt throughout the international art market. Spiegler says Western galleries are now bringing “amazing works that would be considered masterpieces at any fair or auctions,” noting that rather than just sending 20

HONG KONG BUSINESS | MARCH 2019

“Shanghai feels more active than Hong Kong: there are many more museums, galleries, more artists’ studios.

staff, gallery owners are also coming to be at their booth, ensuring they interact with collectors. Competition ahead But whilst Art Basel Hong Kong is still the region’s premier fair, others are starting to slowly muscle in on the action, competing for art collectors’ attention. This January, the inaugural Taipei Dangdai attracted 90 exhibitors, including a number of international heavyweights lured by the opportunity to present to a largely untapped market. Despite the difficult economic environment, many galleries reported strong sales with Galerie Thaddaeus Ropac selling a work by Georg Baselitz to a Taiwanese institution for more than $2.25m, whilst Hauser & Wirth sold six acrylics by German abstract painter Günther Förg, with prices ranging from $27,200 to $540,000. Adding to the positive buzz surrounding the new fair, three satellite fairs were taking place around town at the same time, including Ink Now, a new nomadic fair devoted to contemporary ink painting and launched by Hong Kong-based dealer Calvin Hui, who plans to take it next to Shanghai, Hong Kong and London. Meanwhile in November, Shanghai hosted two concurrent fairs —ART021 and West Bund Art & Design — drawing veteran international galleries to China. Each fair had a distinct flavour, prompting some galleries such as Kamel Mennour, Galerie Chantal Crousel, and Thaddaeus Ropac to exhibit at both. “West Bund focuses

ASIAN ART REPORT on presentation and on introducing non-Chinese galleries to the region, whereas ART021 is a broader platform, encompassing both established and emerging artists and collectors,” explains David Tung, Asia Representative of Lisson Gallery, which chose to participate only at the West Bund fair. Shanghai’s supremacy Galerie Templon had participated in the inaugural SH Contemporary and its Executive Director Anne-Claudie Coric remembers how disappointing that experience had been, both in terms of sales and attendance, but notes that now “Shanghai feels more active than Hong Kong: there are many more museums, galleries, more artists’ studios.” Though she also points out, the art scene “remains very national. It doesn’t have the international flavour of Hong Kong, where we can find many expats. Also, Art Basel Hong Kong attracts many collectors from Australia, Taiwan, Europe; they do not travel to Shanghai, yet.” In the last five years, private, and public museums have blossomed throughout Shanghai building on the success from earlier pioneers such as the Long Museum Pudong and the Long Museum West Bund opened by Liu Yiqian and his wife Wang Wei in 2012 and 2014, respectively, and the Yuz Museum, opened by Indonesia-Chinese collector Budi Tek in 2014. A government report published last December stated the number of art museums in Shanghai now stood at 78, up 130% on the number just five years ago. Meanwhile commercially, a few international galleries have chosen to open an outpost in Shanghai. Hong Kongbased dealer Edouard Malingue opened a space in the West Bund art district in 2016 and has since been followed by Perrotin, which opened a new offshoot of its global imprint at the heart of the Bund quarter in 2018. This March it is the turn of Lisson Gallery to join the fray. Having chosen Shanghai over Hong Kong in 2016 to open its first Asian office, the gallery decided to follow with its first gallery space in the region, with Tung of Lisson noting that whilst Hong Kong “may be the first choice for many, Shanghai has a very rich cosmopolitan history and a vibrant museum and collector base. It provides opportunities to service our clients and allows us to tap into the productive possibilities within China.”

Lisson Gallery

Art Basel Hong Kong is the largest art fair in the region

Morgan Long, Senior Director for The Fine Art Group, a London-based art advisory, points out that whilst Hong Kong has established itself as an international art market hub, thanks in part to Art Basel Hong Kong and a forgiving tax regime, its notoriously high rents have fostered a “top heavy” market for bluechip contemporary art. “Hong Kong’s commercial galleries are somewhat restricted in their programming, with high overheads often dictating conservative and sellable presentations. They are also limited by the similarities of the gallery units available in the Pedder and H Queen’s Building (where many of the top-tier galleries are based), whereas gallerists (and collectors) in Shanghai have a much greater range of locations and property types to choose from,” Long says. Hong Kong is still the place to be But Hong Kong boasts a number of factors that will allow it to remain as an important international art hub. “Hong Kong is an open market, with a sophisticated legal system, free trade and free port policies, a low tax rate, as well as excellent infrastructure, a strategic location to most Asian countries, and an efficient transportation and logistics system,” remarks Kevin Ching, CEO of Sotheby’s Asia, adding “This combination of strengths continue to allow Hong Kong to stay ahead of its rivals and facilitate its art market to grow. As a matter of fact, we have seen more and more international galleries setting up in Hong Kong in recent years.” Last year, the opening of H Queen’s prompted New York-based gallery David Zwirner to open a gallery in Hong Kong, joining the likes of Pace Gallery and Hauser & Wirth in the new space. This March, Lévy Gorvy is the latest international heavyweight to establish an outlet in Hong Kong, opening a 2,500-square foot gallery inside the historic St. George’s building in central Hong Kong. “In recent years, we are seeing many international galleries entering Hong Kong, because it has the upper hand in many aspects; for instance tax and the relative convenience of opening up a business,” notes Kelvin Yang, director of Galerie du Monde, which has operated there since 1974. But Sundaram Tagore, founder of Sundaram Tagore Gallery, expresses concern about the number of art galleries setting up in Hong Kong, HONG KONG BUSINESS | MARCH 2019

and warns: “It’s hard to imagine that the Hong Kong art market can support so many galleries — especially because all of the most important activities in terms of sales tend to take place during Art Basel week, when collectors fly in from across the globe. Whilst Hong Kong is rightly placed for this market-driven influx, we may be reaching a saturation point.” “Mainland China has a very high tax system on art so most people who buy art from Shanghai will tend to focus principally on art produced within China. At this stage it remains very hard for us to bring important nonChinese art to Mainland China,” Tagore says. Henrietta Tsui-Leung of Galerie Ora-Ora agrees and notes that whilst Shanghai is really only competing with other Mainland cities such as Beijing, Hong Kong is trading on its “150 years of Commonwealth-city experience” which she notes “will not be easily replaced. The mentality and education here are very different from Mainland China, and art professionals and collectors in Hong Kong enjoy freedom of speech to a large extent, with little censorship.” In contrast, several international galleries report having exhibitions in China censored. “We had three works censored at the (West Bund) fair, and we still don’t understand the reasons for the decision,” says Coric.

Ellen Pau, Portrait, 2018. Para Site

HONG KONG BUSINESS | MARCH 2019

Xiao Yu, BB, 2018-2019, cast copper with chemical stain, 60 x 34 x 50 cm ©️ Xiao Yu, courtesy Pace Gallery

Hong Kong’s commercial galleries are somewhat restricted in their programming, with high overheads often dictating conservative and sellable presentations.

Lorenz Helbling, founder of ShanghART Gallery, one of the oldest and most respected art galleries in Shanghai, sees Hong Kong and Shanghai as complementary, “each side with its pros and cons,” adding, “Hong Kong may be easier for business and more streamlined with the international world, but Shanghai is a city of 30 million people with a surrounding population of 300 million in a country of a billion.” Francis Belin, President, Christie’s Asia, notes the many similarities between the two art hubs and says, “I don’t think it’s a mutually-exclusive game. Asia is a region with a population of over 4.5 billion which is four times that of Europe and North America combined. With fastgrowing High Net Worth and Ultra High Net Worth segments in many Asian economies, it can certainly accommodate more than one major art hub,” adding “Both are amongst the fastest-growing art markets in the world. Both are undergoing huge transformations with their art ecology, and both are growing in parallel.” Collaboration Tagore believes cities on the Mainland could develop a collaborative partnership with Hong Kong and the art galleries based there to mutual benefit, and notes that many galleries are starting to partner with each other to help broaden access to clients. “Last year, we partnered with a Beijing gallery, Ink Studio at our Madison Avenue location, showing work by one of their artists, which provided them with a whole new audience. In return, we hope to exhibit work by some of our artists at their Beijing space in the future,” he says. Para Site, one of the oldest and most active independent art institutions in Hong Kong, recently announced a collaboration with Rockbund Art Museum in Shanghai to co-present programmes, which Tung of Lisson gallery describes as “an exciting development that speaks to the two communities evolving together.” Tung also notes that in today’s world, “change is the only constant and Hong Kong is well aware of this and really creating new possibilities that will ensure the continued success of its art market: The recent opening of Tai Kwun - Centre for Heritage and Arts and the forthcoming M+ Museum opening come to mind.” Sonia Kolesnikov Jessop

Team of the Year-Pharmaceuticals

Proud heritage of 168 years and beyond Pfizer’s 168th anniversary embodies its proud history, trust, and quality management.

fizer Inc., founded in 1849, is a leading biopharmaceutical company, committed to applying science to improve health and well-being at every stage of life. The company strives to set quality excellence in the discovery and manufacturing of medicines and endeavors to fulfil healthy lives with “prosperity” and “longevity” as captured by Pfizer’s Chinese name (輝瑞). 168 Team – Foster Collaboration Pfizer’s 168th anniversary embodies its proud history, trust, and quality management. To accentuate a stronger collaboration, Pfizer Hong Kong established the “168 Team” in 2017, an initiative to combine its business aspirations (一路發) with its proud heritage. The 168 Team is a crossdepartmental collaboration and aims to further strengthen cross-functional synergy. Embrace Pride Leveraging its global OWNIT culture, the 168 Team, given full empowerment and exemplifying innovation, designed a parade of activities to further elevate teamwork. Noteworthy events include the OWNIT team sports competition, the “168” logo design competition, 168th anniversary themed name cards and a theme song and music video entitled “Our Glorious Road” written by colleagues. “As we aspire to show appreciation to peer colleagues at different levels, we leveraged our enterprise social network Yammer as a platform to encourage solutions sharing across teams. This led to our amazing business performance,” stated Kenny Ma and Kelvin Cheung (168 Team Leaders). Sabrina Choi, (Country Brand Lead) and Nicholas Chan (Oncology Category Lead): “We felt empowered to drive excellent business strategies with clear direction and were encouraged by colleagues’ active participation.” Partner of Choice A proud heritage is the synonym of trust and confidence. The 168 Team proudly represented our dedication to quality management, Research & Development

HONG KONG BUSINESS | MARCH 2019

Pfizer Hong Kong’s 168 Team has won the Hong Kong Business Management Excellence Awards 2018 - Team of the Year (Pharmaceuticals) which demonstrated strong collaboration and incorporated Hong Kong’s heritage into the firm’s commitment in family and health.

and commitment to patients by incorporating the 168 heritage in the product catalogue and anniversary memorabilia. We are committed to advancing health through preventive care, and actively partner with various healthcare organizations to promote health and wellness through our innovative Pfizer Health Express community health program. Priscilla Wong (Marketing Manager) and Benson Cheng (Senior Sales Manager): “We are glad to hear that our healthcare partners recognize our commitment in healthcare. With a wide spectrum of products and portfolios, they are confident with our quality management and service standard, enabling us to be the partner of choice.” With ongoing innovation and strategic branding carried out from the initiatives, Pfizer HK continues to achieve solid performance, with enhanced engagement and synergy across function to make greater business impact. New utilization of enterprise social network, like Yammer, has encouraged solutionssharing across teams. In addition, Pfizer HK has maintained remarkably high retention rate, about one-third of the employees have been devoting themselves to Pfizer for more than 10

years. Pfizer Hong Kong is proud of our heritage and our 168 Team’s effort to enhance further collaboration as we move forward. “Success is a journey, not a destination and our commitment to adding value beyond our colleagues and customers has already shaped the next chapter of 168 • 家 • 健康 extending our care from colleagues to their families and to all Hong Kong families. We remain committed to ‘Working Together for a Healthier World’ as we go beyond 168” stated by the Pfizer Country Manager, Stephen Leung. PP-CPF-HKG-0040

CONTACT Company Name : Pfizer Corporation HK Ltd Address : 18th Floor, Kerry Centre, 683 King’s Road, Quarry Bay, Hong Kong Phone number : (852) 2811 9711 Website : https://www.pfizer.com.hk

“We are glad to hear that our healthcare partners recognize our commitment in healthcare.”

PP-CPF-HKG-0040

hoTEL industry survey

Themed room in Ocean Park Marriott Hotel Kerry Hotel, Disney Explorer’s Lodge, and St Regis Hong Kong

New players enter scene but an iconic hotel exits The Excelsior will be transformed into a mixed-use commercial building.

ong Kong Business’ list of 50 largest hotels welcomed new entrants to the hospitality scene in 2018, with The Kerry Hotel, Disney Explorers Lodge, Hotel Vic on the Harbour, and Hotel Cozi Oasis making its way to the list. However, the 45-year-old Excelsior’s looming exit in March deals a blow to the industry, amidst its planned redevelopment into an office block. Meanwhile, Hong Kong’s top five largest hotels in terms of numbers of rooms remain unchanged with L’hotel Nina et Convention Centre, located in Tsuen Wan District, topping the list with 1,608 rooms. Regal Airport Hotel, with its unique location and tag as the only hotel attached to the Hong Kong International Airport by a link bridge, comes in at second with 1,171 rooms, whilst Regal Riverside Hotel in Hong Kong’s Sha Tin Wai area gets the third spot with 1,138 rooms. Harbour Plaza Resort City, located in Tin Shui Wai which is about 12 kilometres from the modern metropolis of Shenzhen in mainland China, and Panda Hotel round out the list at fourth and fifth

HONG KONG BUSINESS | MARCH 2019

Average Room Occupancy for the year reached 91%.

places with 1,102 rooms and 911 rooms, respectively. “2018 was a strong year for hotel trading performance in Hong Kong,” said Corey Hamabata, Senior Vice President of JLL’s Hotels & Hospitality Group. “Average Room Occupancy for the year reached 91%. From an operational standpoint, such high occupancies create challenges such as cleaning rooms in between stays and keeping hotel properties in good repair. However, as occupancy levels strengthen and there is confidence in the market. The most difficult decision hotel operators face is yield management.” Challenges as opportunities Whilst Hong Kong’s hotel and hospitality industry enjoy some of the most robust and dynamic growth in the Asia and Pacific region, the sector has been facing challenges over the past year with old hotels and hospitality institutions facing a slew of closure and redevelopment plans. An example of this is the impending closure of the Excelsior, one of the most iconic hotels overlooking

Hong Kong’s Victoria Harbour, in March of this year—a development some analysts are saying could reduce room supply by up to 8% in the famous and tourist-heavy Causeway Bay area and likely to drive prices up at competing hotels amidst the demand-supply imbalance. Owned by Singapore-listed Mandarin Oriental International, which has a wide network of hotels and hospitality institutions across Asia and the Pacific, the Excelsior’s rise and fall story is not new, especially in the rapidly growing and evolving real estate sector in the region, according to Hamabata. Whilst it’s always a challenge to see iconic names and brands go exit the limelight for good instead of being kept and renovated, the narrative, according to the JLL official, is more on safety, adaptation, and economic returns. “In its core, the exit of the Excelsior is a story less about the broader hotel sector and more about the age and functionality of the building,” he said. “As we are all aware, land along Hong Kong Island’s Harbourfront is extremely valuable and the reality is that a large scale, more than 800-room hotel built in the 1970s is no longer able to generate enough income relative to its land value.” In place of the iconic hotel, a new mixed-use commercial building is expected to be built over the next six years, which will cost around US$650m—pointing out an opportunity from this closure of an iconic hospitality institution. Other challenges in the industry have been mainly operational, with John Alexander Girard, Regal Hotels Area General Manager for Hong Kong and General Manager for Regal Airport Hotel, saying that competition is becoming fiercer, making it inevitable and necessary for hoteliers and practitioners in the industry to devise new ways to stand out and incorporate the most advanced technologies available to make the customers’ experience extraordinary. “We think the hotel industry has become more and more

HOTEL industry survey

3D Projection mapping technology

competitive and diversification is one of the key factors for continuing our success,” he said. “Guest experience is one of the key areas that we have been focusing.” Girard noted his hotel’s pioneering introduction of an advanced 270-degree built-in 3D Projection Mapping technology in their facility to turn the hotel’s Grand Ballroom into a “mood room”, whilst also strengthening their information technology services and integration by providing better customer experience on online booking and introducing a rewards and privilege systems. Bright spark for 2019 With the introduction of new infrastructure connecting mainland China and the special administrative region last year, the industry is set for a brighter performance this year. “We are positive on the outlook of tourist arrivals and growth as the market stands to benefit positively from the completion of the Hong Kong-Zhuhai-Macao Bridge and [the] Guangzhou-Shenzhen-Hong Kong Express Rail Link since late last year,” Girard said. “The new transport links will facilitate additional travel to Hong Kong and boost demand for hotels in Hong Kong.” Meanwhile, the GuangzhouShenzhen-Hong Kong Express Rail Link opened in September 2018, is expected to lessen travel time from mainland China to Hong Kong, making it easier for mainland tourists, already the biggest portion

of Hong Kong’s tourist arrivals, to visit the territory in a much faster and cheaper way. “2019 should be a year to watch. We saw near historic levels of demand and hotel performance in Hong Kong in 2018, which we expect will be supported by key infrastructure projects which opened last year,” said Hamabata, adding that the strong demand will likely be complemented by the fact that relatively limited new hotel supply is in the pipeline. “The area will attract more international world-class MICE organisers and companies to host their events or meetings in Hong Kong,” he said. Another bright spot for the hospitality industry in the coming months that comes even amidst shutdowns is that there have been steady incomings of new hotel rooms, with the new stock achieving a higher quality on average. “As such. we expect a continued improvement in the average quality of Hong Kong’s hotels,” added Hamabata. “Despite the deletions to hotel supply that have been much-publicised, plenty of new hotels have opened or are under construction; even accounting for the closure of Excelsior, we’re projecting a net increase in hotel room supply in Hong Kong in 2019,” the JLL senior official said. “I don’t think there is any evidence which suggests that this sector is going away or diminishing. With average room rates increasing, it should directly benefit the bottom line of hotels in Hong Kong and

“We are positive on the outlook of tourist arrivals and growth as the market stands to benefit positively from the completion of the Hong Kong-ZhuhaiMacao Bridge and [the] GuangzhouShenzhenHong Kong Express Rail Link since late last year.

support continued investment into this space.” New hotels to watch out for Rosewood Hong Kong, an ultraluxury hotel and a vertical private estate on the territory’s iconic Victoria Harbour, is expected to open on 17 March of this year. Rosewood Hong Kong is the first brand launched by Rosewood Hotels & Resorts and will feature a 65-storey exterior, with 43 floors dedicated to the hotel and its residences. The facility offers 322 guestrooms starting at 53 square metres (sqm) and 91 suites starting at 92 sqm. “The hotel’s creative, innovative, and distinctive offerings will bring new vibrancy to Hong Kong, establishing a compelling destination within Tsim Sha Tsui and the Kowloon waterfront and adding an important new and differentiated voice to the city’s luxury arena,” said Sonia Cheng, chief executive officer of Rosewood Hotel Group. Another is the expected opening of St. Regis Hong Kong, which is owned by Mariott, is located within the vibrant Wan Chai district and will feature restaurants led by Michelin-starred chefs as well as technologically advanced services like e-butlers. “St. Regis in Wan Chai, at 129 rooms, this hotel will bring something new to the neighbourhood with a more intimate, luxury experience,” Girard said. Lastly is the recently opened Hong Kong Ocean Park Marriott Hotel, which is a 471-room landmark urban green resort. The hotel also offers innovative spaces apart from toprated restaurants and dining areas including flexible meeting spaces and the largest pillar-free ballroom spanning 1,200 sqm on Hong Kong Island.

Mood room in Regal Airport hotel

HONG KONG BUSINESS | MARCH 2019

HOTEL INDUSTRY SURVEY Number of Rooms 2018 2017 1608 1608

General Manager/Head of Hotel Operations George Kuk

2018

Hotel

2017

L'hotel Nina et Convention Centre

Regal Airport Hotel

1171

Regal Riverside Hotel

1138

Peter Chiu

Harbour Plaza Resort City

1102

Dickson Lee

Panda Hotel

911

Andrew Chen - Deputy General Manager

Renaissance Harbour View Hotel Hong Kong (marriott hotel)

860

861

Hans Loontiens

The Park Lane Hong Kong, a Pullman Hotel

832

Luc Bollen

Harbour Grand Hong Kong

828

Benedict Chow

John Girard

9.5

Rambler Oasis Hotel

10.5

822

Anthony Lui

9.5

Harbour Plaza Metropolis

10.5

822

821

Andy Castillejos Anthony Lui

11.5

Rambler Garden Hotel

12.5

800

11.5

Winland 800 Hotel (formerly Mexan Harbour Hotel)

12.5

800

Patrick Ng

Sheraton Hong Kong Hotel & Towers

782

Charles Woo

Disney Explorers Lodge**

750

Fannie Tsang

The Kowloon Hotel

736

Victor Chan

Harbour Plaza North Point

714

Virginia Tam

Harbour Plaza 8 Degrees

704

Christina Cheng

Royal Plaza Hotel

699

Peter Wong

pentahotel Hong Kong Kowloon

695

Andy So

20.5

Royal View Hotel

20.5

688

Derek But

20.5

Kowloon Shangri-La, Hong Kong

20.5

688

Conor Hadlington

The Royal Pacific Hotel & Towers

673

Kevin Chuc

Hotel VIC on the Harbour**

671

Bryan Ko

24.5

Marco Polo Hongkong Hotel

23.5

665

Dalip Singh

24.5

Cordis, Hong Kong

23.5

665

Shane Pateman

Hong Kong Skycity Marriott Hotel

658

Michael MĂźller

Holiday Inn Golden Mile Hong Kong

621

Gerhard Aicher

City Garden Hotel Hong Kong

609

613

Annie Jea

JW Marriott Hotel Hong Kong

608

602

Silvio Rosenberger

30.5

Regal Kowloon Hotel

29.5

600

Christo Diamandopoulos

30.5

Disney's Hollywood Hotel

29.5

600

Cecilia Ho

Hotel COZi Oasis**

583

Henry Tse

InterContinental Grand Stanford Hong Kong

572

Alexander O. Wassermann

Island Shangri-La, Hong Kong

565

Ulf Bremer

Hyatt Regency Hong Kong, Sha Tin

562

Wilson Lee

Harbour Grand Kowloon

555

Peter Pottinga

ibis Hong Kong Central & Sheung Wan Hotel

550

Simone Hansen

Dorsett Tsuen Wan, Hong Kong

547

Florence Ng

The Kerry Hotel**

546

Nicholas Smith

The Kimberley Hotel

546

Samantha Hui

Grand Hyatt Hong Kong

542

Richard Greaves Bernard Chan

B P International

529

Courtyard by Marriott Hong Kong Sha Tin

524

Peter Sih

Conrad Hong Kong

512

Thomas Hoeborn

Novotel Century Hong Kong

508

Adam Hipp

InterContinental Hong Kong

503

Claus Pedersen

Mandarin Oriental, Hong Kong

499

501

Pierre Barthes

The Langham, Hong Kong

498

Shaun Campbell

Regal Oriental Hotel

494

Stephen Au

The Mira Hong Kong

492

Kenneth Sorensen

34,647

36,342

TOTAL NUMBER OF ROOMS

*Former 6th placer Excelsior Hotel will close on March 2019 **New hotels in the rankings include: The Kerry Hotel (opened in 2017), Disney Explorers Lodge (opened in 2017), Hotel VIC on the Harbour (opened in 2018), Hotel COZi Oasis (opened in 2018)

HONG KONG BUSINESS | MARCH 2019

FEATURE: DIGITAL & OPEN BANKING CONFERENCE

Asian banks race to keep China’s tech titans at bay Incumbent lenders are launching VC arms and innovation labs as well as tying up with their very challengers to minimise erosion to their bottomlines.

s the global growth momentum inexorably shifts towards Asia, financial institutions across the region are forging closer ties with the very firms working to challenge their dominance in an attempt to tip the scales in their favour. The number of new financial services players accounted for 17% of the global banking industry in 2017, consulting firm Accenture said in a report. Although these tech upstarts only accounted for 7% of the banking industry in China in 2017, the disruption they pose is evidently more felt in US, Canada and UK where they accounted for 19%, 47% and 63% of their respective banking structures. On the regional front, the industry shake-up in Asia is only set to intensify as more agile and scalable players enter the fray following the steady stream of capital injections received by these challengers, said Sam Tanskul, managing director at Krungsri Finnovate at the Digital and Open Banking Conference organised by

The industry shake-up in Asia is only set to intensify as more agile and scalable players enter the fray following the steady stream of capital injections by VCs

Mathur of DBS responds to live questions from the audience

HONG KONG BUSINESS | MARCH 2019

sister publication Asian Banking & Finance at Hotel ICON, Hong Kong. According to CB Insights, Asia already holds the distinction as the world’s top fintech market after snapping up 47% of global VC volume in 2016. Empowered by regulators and backed by prominent VCs, angel investors and family offices, challenger banks wasted no time to unbundle and repackage the wide array of services already offered by traditional banking players such as savings account, instant transfer, insurance, loans and overdraft in order to wrestle market share. Heightened collaboration “Consumers shifted their preference to digital offerings and we faced competition from aggressive attackers - leading to margin erosion,” admitted Ajay Mathur, Managing Director and Head of Consumer Banking Group & Wealth Management at DBS Bank Hong Kong. Scully Cui, principal at Bain & Company reckons that the proliferation of challenger banks

presents three likely scenarios with one extreme maintaining the status quo and another anticipating a ‘big tech takeover.’ However, a middle scenario sees banks co-existing with fintechs with the former providing core banking services such as lending and transaction accounts and fintechs choosing to thrive in their own niche like P2P payments. So far, the industry appears to be heading towards the second scenario as non-bank digital players dominate the game. “Digital players already have seamless experience, deep brand equity and trust plus control over critical data while traditional players are relegated to supporting roles,” added Cui. To prevent any further disruption from their bottomlines, banking players have been rolling out out dedicated spaces for collaboration and innovation and sponsoring accelerator programmes as players increasingly exhibit ‘co-optition’ (a portmanteau between cooperation and competition) to survive, said Ken Lo, of online insurance company Zhong An International. This development is particularly evident in the tie-ups of mega state banks and fintechs in China such as Industrial and Commercial Bank of China and Jingdong, China Construction Bank and Ant Financial, Agricultural Bank of China and Baidu and Bank of China with Tencent, said Raymond Chan, Managing Director at fintech company 9F International Business. In Singapore, this manifests itself in the form of controlled environments for experimentation aptly called innovation labs. Singapore’s big three banks, AXA, Metlife, Mastercard, PayPal and Visa have chosen to set up such spaces in the Lion City as they set out to create new revenue streams through initiatives aimed at enhancing productivity and speed. In November 2018, three global banks - Bank of China, Deutsche Bank and Westpac - jumped on the bandwagon and simultaneously unveiled their innovation labs in the city state.

THE

Beverage

ASIAN

EXPORT AWARDS

2018

IF Local Sensation 100% Coconut Water by General Beverage wins Asian Export Awards 2018

The juice company offers functional, trendy, and healthy beverages packed with superfood ingredients.

ince 2013, General Beverage Co., Ltd. has been at the forefront of manufacturing alternative healthy drinks. The juice firm relies on the strength of its state-of-the-art Cold Aseptic Filling System, which prolongs the shelf life quality of a beverage of up to 1 year or 12 months

General Beverage’s award-wining healthy drink

without adding any preservatives. General Beverage’s factory has been “guaranteed by Good Manufacturing Practice (GMP), Hazard Analysis Critical Control Point (HACCP), ISO 22000, and Food Safety System Certification (FSSC).”General Beverage’s fruit juice brand, IF Local Sensation 100% Coconut Water, offers the same nutrients and benefits as fresh coconut juice. Other offerings The juice company’s other offerings include fresh fruit pieces such as fruit pulp, aloe vera, and nata de coco. “We do our best to select premium ingredients across the world to make the perfect flavours for everyone. It becomes our mission to create the innovative healthy drinks that customers enjoy,” says Mr. Pongsakorn Pongsak, chief executive officer at General Beverage, adding that one of their goals is

to “create innovative drinks that can benefit consumers’ health at the same time.” The commitment to quality has translated in a warm response to their product as IF Local Sensation 100% Coconut Water hit No.1 sales value and volume for two consecutive years in Hong Kong. “We’ve been trying not to position ourself as substitute juice as we consider ourself as an alternative healthy drink,” he says. IF Local Sensation 100% Coconut Water has also been recognised by the inaugural Asian Export Awards under the juice category in 2018. “Our products are non-preservatives and offer the real natural sweetness from Thai raw materials guaranteed by iTQi Superior Taste award from Belgium and Healthier Choice from Thailand and Singapore,” Pongsakorn said. *Nielsen Retail Index Service for Coconut Flavour Segment of Juice August 2017.

R E C O G N I S I N G

HONG KONG’S EXCEPTIONALBUSINESS

LEADERS Nominate outstanding industry leaders and receive your well-deserved accolade.

To nominate, please contact MARIANNE AVILLA at +65 3158 1386 ext. 223 or email marianneavilla@charltonmediamail.com

FEATURE: DIGITAL & OPEN BANKING CONFERENCE

Can open banking deliver on its promise in Asia amidst scattered customer data? Banks do not have the monopoly on data as a wide array of institutions like telcos, hospitals, and travel agencies are also formidable information arsenals on their own. API is the both the mandate of the system developer and a corporate policy

KC Tsui of HSBC

o surface new revenue opportunities and ways of doing business, banks have been turning to open Applicaton Programme Interfaces (APIs) in a bid to court growth, according to Chun Man Hui, Regional Principal Solutions Architect at Software AG Asia. “API is both the mandate of the system developer and a corporate policy,” echoed Eiichiro Yanagawa, senior analyst at Celent’s Asian Financial Services Group. Through the process of sharing data with third-party players, banks can unlock data monetisation opportunities and reduce costs as they only need to forge partnerships to be able to provide a product or service offering from the data that’s otherwise gathering dust. Open banking also goes hand in hand with empowering customers through transparency, lifestyle integration and personalised, real time interactions that complements efforts to effectively engage with customers on their own terms, explained Smita Gupta of Finastra. “A successful Open Banking strategy is the key to extending a bank’s products and services beyond the traditional banking realm.” A comprehensive open API strategy also requires an acrossthe-board effort from the strategy, 32

HONG KONG BUSINESS | MARCH 2019

operations and marketing & communications teams that will define and carry out an API vision by redesigning products and services, design developer and TPP strategy and eventually build out technology enablers. “A number of existing business processes are going to change, some potentially dramatically such as mortgage origination,” explained Yanagawa.

KC Tsui, Head of Quality Management & Head of AI at HSBC notes that the open banking agenda is marred by a number of formidable challenges limiting its promise. The scattered nature of customer information that is located across a wide array of institutions including hospitals, travel agencies, airlines and telcos pose a challenge to data opening and the unreachable connections they generate in the process, leaving customers to wonder whether they are in possession of a complete set of their personal data and control over what and how much can be seen. Tsui cites an initiative by Tim Berners-Lee called Solid (Social Linked Data) which is working to give users back full control over their data. Through the creation of a personal data store (POD) that is stored in the user’s home, workplace or with an online Solid POD provider, users are free to move their data in any way they want.

smart banking

Next two years is make or break for Hong Kong’s old guard banks as tech-powered upstarts enter banking fray userbase, Chan suggests that 9F is in strong position to nab the license given its experience in using AI and big data for credit assessment, risk control and customer services. “The new players are equipped with new technologies and they will be providing customers with new customer experience and mission is for financial inclusion as well. So, they will challenge the traditional banks with their technologies, user Raymond Chan experience, and all their new initiatives,” Chan said. “All the banks, including the traditional banks and the virtual banks, have to do the same thing differently, to aymond Chan, managing director of Chinese cater for the changing system and for the changing fintech firm 9F International Business, is one environment and the changing customer.“ of the hopefuls for the new virtual banking The virtual banking push is one of seven efforts license that will be handed this year in Hong Kong. spearheaded by the Hong Kong Monetary Authority He outlines the firm’s competitive advantage in (HKMA) to future-proof the financial services sector for the heating virtual banking race. In a tie-up with the digital age. homegrown fintech VST ECS and an undisclosed Other initiatives include the formulation of a policy international company, 9F is pursuing a virtual bank framework for open API and the launch of a real-time license, according to local media reports. With 12 years of industry experience and 63 million money transfer system.

Asian and Western, historic and modern, traditions and innovation - these are the elements you will find in the neighbourhood of Lan Kwai Fong Hotel @ Kau U Fong. Discover hidden gems while staying with us and be amazedâ&#x20AC;Ś l l l l

No.3 Kau U Fong, Central, Hong Kong Tel: (852) 3650 0000 enquiry@lankwaifonghotel.com.hk www.lankwaifonghotel.com.hk

analysis: CHinese banks

Nonbank digital providers have already saturated small-ticket transactions in the country

Chinese banks are putting up a fight against tech giants S&P notes that mobile transactions by banks rose 794% in 2014-2017.

hina’s internet finance companies are driving the country’s banks to innovate and upgrade their digital offerings in a process creating new financial services to better fit a consumptionled economic growth model, according to S&P Global Ratings. In response, most banks will adjust to the digital disruption, although their market share in consumer-related finance will become less dominant. Financial technology is large and fast-growing in China. Since the launch of Alipay in 2012 and WeChat Pay in 2014, mobile-phone payments have soared to RMB320.4t (US$46t) from less than Chinese renminbi (RMB) 50t. On the online bank front, WeBank’s asset reached RMB81b by the end of 2017. Although still tiny compared with the Chinese banking system’s assets of RMB252t assets and loan balance RMB120t, this represented growth of 7.5x in

HONG KONG BUSINESS | MARCH 2019

Businesses and the general public continue to trust banks with large transaction settlement

the first two years of operations. And WeBank’s loan growth tripled last year, to hit RMB47b (US$6.9b). Disrupting the payments model The business model and credit impact is greater for smaller banks as they may lack the resources to make necessary technology upgrades. As a result, they may cede underwriting control on consumer loans to tech giants using big data and behavior models. Increasingly banks have been observed to be collaborating with internet finance companies on consumer loans, but these assets are under-tested through a cycle. Whilst internet finance companies see smaller banks as funding partners, they have less incentive to collaborate. The disruption in China’s payment services serves as a model for other transformations that could follow. Chinese nonbank digital payment providers, led by Alipay and WeChat

Pay are in many ways outcompeting banks on the payment services front. On the other hand, these companies are helping to grow new markets for all lenders. By transaction volume, digital payments conducted via nonbank providers overtook those transacted by banks in 2016. By end-2017, nonbank digital were almost double those of banks but in terms of value, banks still beat the rankings. Technology is clearly changing consumer payment behavior in China. Payments are made easy for both buyers and sellers, with a simple cell-phone scan of a vendor’s “QR” code. Thus they’re accepted everywhere, from online retailers to grocery stories to flea markets. Businesses can maximise customer relationships by offering discounts if the customer adds the vendor as a social media contact. These payment platforms are just another function under the main online retail/social media app, maximising clicks per day and in turn customer loyalty. However, a look at the trend in settlement fees shows that growth in online payments has come at some cost to banks, as indicated by

analysis: chinese banks Chinese banks retain their value dominance in e-payments

Banks also have their own data advantage such as traditional transaction records and payroll information

Source: S&P Global Ratings

declining settlement fees as share of total fee income. S&P believes that the falling growth in payment and settlement fee income will likely stabilise. This is because the nonbank digital payment service providers have already saturated the small ticket transactions, further explosive growth in this area is unlikely, and businesses and the general public continue to trust banks with large transaction settlement. In S&P’s view, banks are adjusting to changing payment behavior. Whilst the amount of nonbank third-party payments grew by 480% from 2014 to 2017, banks’ own mobile payments rose by 798% during the same period. Chasing such growth often involves collaboration with the disrupters. On platforms such as WeChat Pay or Alipay, banks cards are linked to enable consumers to make digital purchases. However, because these nonbank digital payment platforms act as the intermediary, banks receive significantly lower fee rates from these transactions. Consumer loan front “Big data” and hyperconnectedness will continue to expand the banking frontier. Individuals and small businesses with limited credit histories, for example, will increasingly be able to access banking services at their fingertips. If these new transactional relationships are not managed well, however, digital loans could increase credit risks in China.

Lending is a natural extension of payment and transactional services. Alibaba Group Holding Ltd. and Tencent Holdings Ltd., China’s two largest internet companies, both secured internet micro-credit licenses soon after they started their payment businesses. Moreover, Alibaba launched the digital MyBank in 2015, the same year Tencent-backed WeBank also started operating. These developments raise some questions: do the lending arms of Chinese tech giants pose a threat to traditional bank loan business? On the banking operations front, yes, although a number of factors limit the disruption. First, accounts at the branchless digital banks have regulatory limitations on transaction volume and cash deposit-taking, which limits their retail deposit base, so their average cost of funding is typically higher. Second, these companies target smaller-ticket loans, e.g., a retail loan could be a few hundred renminbi whereas a bank consumer loan is typically in the thousands. Third, retail and small and midsized enterprise (SME) loans still make up less than one-third of commercial banks’ book, contributing around 24.7% of total bank loans by 2016. At least for now, S&P estimates that only a small portion of this is in direct competition with the clientele of the Chinese tech giants. On the microcredit operations front, Chinese tech giants have a clear advantage in distribution and approval speed for small ticket

loans, access to better behavioral and consumption data. They are quick to respond to changing market dynamics. Internet microcredit is also comparatively less regulated than banks, having to answer only to the local China Banking and Insurance Regulatory Commission (CBIRC) which brings us to the next question: do the lending arms of Chinese tech giants have an information advantage? In some areas, yes. Access to transactional, behavioral, and personal data has aided the rapid growth of digital financial services in China. Tech giants gets data from their platforms: Tencent through social media, Ant Financial and JD Finance from online transactions. Reigning supreme Banks also have their own data advantages, however, such as traditional transaction records, and payroll information. They can swap information among each other, and partner with local tax offices and other government agencies to get useful data. Banks also typically lend when there is a particular loan purpose, whereas the lending arms of Chinese tech giants are typically more liberal about loan purposes so long as the customer passes its credit scorecard; they also mitigate risk by limiting loan size and requiring fast repayment. S&P notes that whilst these fintech tools are efficient, they are untested through a credit cycle. From S&P Global Ratings “As China’s Internet Firms Grow The Financial Services Pie, Banks Angle For A Larger Slice

Battling it out for mobile payment dominance

Source: S&P Global Ratings

HONG KONG BUSINESS | MARCH 2019

NUMBERS 2019 CHINA OUTBOUND REAL ESTATE INVESTOR INTENTION SURVEY C&W Investor Intention Survey â&#x20AC;&#x201C; 2019 MCREIO Sentiment by Destination

Top cities for cross-border investors (excl. development sites)

Annual MCREIO volume into Hong kong

MCREIO by Destination in 2018

2018 top 5 MCREIO deals in Hong Kong

Source: RCA, MCREIO by Destination in 2018 Cushman & Wakefield Greater China Research

HONG KONG BUSINESS | MARCH 2019

High Flyers 2018

Outstanding Enterprises and Business Leaders

On its 15th year, the Hong Kong High Flyers Awards is soaring to even greater heights. For the 2018 edition, 22 enterprises in their respective sectors were recognised for their outstanding quality of service, innovative business practices, and efforts to contribute towards social progress. These businesses represent a wide range of industries, including banking and finance, insurance, legal services, interior design, luxury timepieces, information technology and telecommunications, boutique hotels and serviced apartments, and F&B. The winners were awarded in a ceremony held on January 23, 2019 at the Tamarind & Terrace, Sun Hung Kai Centre in Wan Chai.

List of Honorees Wealth Management and Financial Advisory Best Smart Home and Home Theatre in Asia Leading Hospitality and Hotel Management Best Family Hotel in Hong Kong Innovative F&B Concepts Life Insurance Commercial Banking Outstanding Insurance Company Lifestyle Boutique Hotel Insurance Broker (Business & General Insurance) Premium Chocolatier Innovative Insurance Company F&B Management Innovative Tourbillon Watches Outstanding Finance Company Best Serviced Apartment Operator Bank of the Year and Retail Bank Law Firm IT Solutions Company Best Network, Broadband, Cloud and ICT Services Provider Interior Designer Outstanding Car Dealer 38

HONG KONG BUSINESS | MARCH 2019

Athena Best Financial Group AV Consultant (Intâ&#x20AC;&#x2122;l) Ltd Dorsett Hospitality International Dorsett Wanchai, Hong Kong Elite Concepts FTLife Insurance Company Limited Hang Seng Bank Limited Hang Seng Insurance Company Limited Lan Kwai Fong Hotel @ Kau U Fong Lifestyle Insurance Lindt & SprĂźngli (Asia Pacific) MassMutual Asia Ltd Mayfare Group Memorigin Watch Co, Ltd PrimeCredit Limited Shama Serviced Apartments Standard Chartered Bank TMA Vastcom Technology Limited WTT HK Limited Zchron Design Group Zung Fu Company Ltd

HONG KONG BUSINESS 2018 HIGH FLYERS AWARDs

Hong Kong Business print magazines

High Flyers Awards 2018 trophies

Guests from Standard Chartered Bank and PrimeCredit

High Flyers Awards 2018 Award Recipients HONG KONG BUSINESS | MARCH 2019

HONG KONG BUSINESS 2018 HIGH FLYERS AWARDs

Guests from PrimeCredit

Guests from Lifestyle Insurance

Guests from Shama Serviced Apartments

Guests from Shama Serviced Apartments & Mayfare Group

Guests from Lan Kwai Fong Hotel @ Kau U Fong 40

HONG KONG BUSINESS | MARCH 2019

Guests from Lindt & SprÃ¼ngli (Asia-Pacific)

Louis Shek with Paul Hsu of Elite Concepts

Hong Kong Business Team

Guests from Zchron Design Group

HONG KONG BUSINESS 2018 HIGH FLYERS AWARDs

Guests from TMA

Guests from Hang Seng Bank and Hang Seng Insurance

Guests from Vastcom Technology Limited

Networking

Guests from MassMutual

Guests from Lifestyle Insurance

Guests from Dorsett Wanchai and Dorsett Hospitality International

Guests from Vastcom Technology Limited HONG KONG BUSINESS | MARCH 2019

HONG KONG BUSINESS 2018 HIGH FLYERS AWARDs

Theodore Mak of Standard Chartered Bank

Priscilla Wong & Danny Tse of Athena Best Financial Group

Cherry Kwan of AV Consultant (Int’l) Ltd

Anita Chan of Dorsett Hospitality International

Jowie Wong of Dorsett Wanchai, Hong Kong

Paul Hsu of Elite Concepts

John Wong & David Ma of Hang Seng Bank

Daniel Li of Hang Seng Insurance

Tony Liu of Lan Kwai Fong Hotel @ Kau U Fong

Neil McCormick of Lifestyle Insurance

Giulia Muzzin Scevola of Lindt & Sprüngli (Asia-Pacific)

K. P. Tay of MassMutual Asia Ltd.

HONG KONG BUSINESS | MARCH 2019

HONG KONG BUSINESS 2018 HIGH FLYERS AWARDs

Harshil Bhasin of Mayfare Group

Ivy Kung of Memorigin Watch Co, Ltd

Susanna Liew of PrimeCredit

Mael Vastine of Shama Serviced Apartments

Theodore Mak of Standard Chartered Bank

Eric Mayer of of TMA

Victor Ieong of Vastcom Technology Limited

Samantha Lee of WTT HK Limited

Wing Chan & Nison Chan of Zchron Design Group

Brian Lam of Zung Fu Company Ltd

Ernest Fung of FTLife Insurance Company Limited

John Wong of Hang Seng Bank & Daniel Li of Hang Seng Insurance HONG KONG BUSINESS | MARCH 2019

marketing Briefing

Can marketers cash in on Instagram stories? The 15-second Instagram clips have over 400 million daily active users globally, according to Socialbakers.

ong Kong Tourism Board’s Discover Hong Kong is one of the growing number of organisations that have tapped on Instagram’s most recent upgrade, IG stories, to reach a wider range of social, tech savvy tourists across the globe. “Hong Kong Tourism Board uses its renowned hashtag #discoverhongkong, deploys a very visual and straight forward way of crowdsourcing the best photos that depict its beautiful city. It then has the additional Japanese description that targets its growing majority tourist, the Japanese people,” said Firefly Photography Chief Marketing Officer (CMO) Benny Chow. “For brands looking to enhance their brand awareness and create a more personalised touch, utilising Instagram Stories is a great way as it enables brands to increase engagement and organic visibility,” said Charles Tidswell, Vice President JAPAC of Socialbakers. Tidswell, meanwhile, mentioned that Instagram Stories have also been recignised in Hong Kong’s beauty and fashion industries, opening up these segments to more personalised and unique experiences for followers and potential consumers to see—from behind the scenes shoots, events, and direct interactions with celebrities and influencers. In Hong Kong, fashion brand Ziztar, for instance, has leveraged the Instagram Stories format to capture the attention of their followers through eye-popping and minimalistic visuals—a strategy that has given the highly visual fashion brand an edge over its competitors. Research by Socialbakers suggest that volume of brands posting Instagram Stories have increased four times over the course of 2018, with these short 15-second clips boasting over 400 million daily active users. “Instagram stories account for about 19% of brand impressions (total number of times your Story was viewed),” he said. “Whilst this may seem insignificant, this actually makes up a third of impressions earned—an impressive indicator of organic reach. If a brand’s focus is simple just publishing posts, close to a quarter of impressions will be lost if Instagram Stories is not utilised.”

Hong Kong fashion brand Ziztar

HONG KONG BUSINESS | MARCH 2019

Average ratio of impressions by source on Instagram

Source: Socialbakers

Benny Chow

Charles Tidswell

The time limitation of 15 seconds, according to Chow, is also helping reshape how the marketing departments of companies and brands approach their marketing campaigns, spurring creativity in a new platform that offers more interaction than ever before. The Firefly Photography CMO shared that some of the advantages would be increased publicity and anticipation that the stories can generate amongst the account’s followers. Some of the unique features of Instagram Stories allow its users to post poll questions (and answer them); provide a swipe up option (for certain users with enough followers) that will redirect viewers to a specific website or webpage; and provide actual Stories ads for a specific market with a fee. Data from Instagram Business, according to Socialbaker, noted that 80% of accounts in the social media platform follow a business account, 60% use it to discover new products, and 72% of users buy products after seeing them on the platform.

Instagram stories account for about 19% of brand impressions. “To further enhance performance of their content, I believe that companies should continue analysing their data and identifying what their users are engaging with—personalising experiences,” said Tidswell. “This will allow the brand to create a personality and build a more genuine persona, allowing consumers to connect with the brand even more.” Tidswell, however, mentioned that brands and companies need to have the understanding on what makes a good story in a storytelling ecosystem. “Their investment in creating seemingly valuable content and then promoting it, may end up short of expectations without a good story,” he said. “We believe a good story consists of two characteristics—authenticity and the ability to be delivered fast and episodically.”

OPINION

tim hamlett

Hello sailor! Floating homes are worth considering

rom time to time some official, or a sympathetic commentator, laments the dearth of constructive suggestions among the criticisms which tend to greet any new government policy. On the other hand, when one comes along it doesn’t get a very warm reception. This thought was prompted by a recent announcement from a group called the Real Property Federation, which was responding to the government’s request for opinions and suggestions about the shortage of land for housing. Never heard of the Real Property Federation? Me neither. Apparently it comprises developers, real estate agents and professionals like architects and surveyors. A gathering of rich participants in the real estate racket, then. This may justify a certain suspicion, but good ideas can crop up in unlikely places. Some of the federation’s proposals had a whiff of special pleading about them. They did not approve of developing the Fan Ling golf course. They did approve of reclamation as a long term measure. They wanted public-private partnerships to develop agricultural land owned by developers. The idea is to put pre-fabricated container homes on barges, which would be moored, presumably next to a dock constructed for the purpose. The word “barge” is here used in the technical sense of a vessel which is not expected to propel itself. Actually the boats would apparently be big – the federation proposes about 400 container homes on each barge. The idea has been roughly costed. Apparently a suitable barge could be built from scratch for $60 million, though it might be cheaper to buy a second-hand ship and adapt it. Another $80 million would be needed for containers, services, etc. Each barge could accommodate about 2,000 people. Now I am prepared to believe that the authors of this scheme may have overlooked some hidden drawback, or been a bit optimistic in their costings. On the other hand compared with the competing suggestions floated this is quick, cheap and doesn’t require displacing any current land users. So you might think it would stir up a certain amount of interest. Not at all. The Standard’s intrepid reporter managed to collect two reactions.One came from a Marine Department spokesperson. She said that nobody was allowed to live on a boat in Hong Kong unless it was licensed for the purpose. And “no new licence for a dwelling vessel will be issued,” she said firmly. According to the Marine Department there were only four licensed dwelling vessels in Hong Kong last year. This comes as a surprise because a swift search for houseboats or “liveaboards” for sale in Hong Kong finds 28 on offer at just one yacht broker. Now this may come as news to the Marine Department, but it is not the absolute monarch of all Hong Kong’s wet parts. If the government 46

HONG KONG BUSINESS | MARCH 2019

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

A barge could be set up from scratch for $60m that could house 2,000 people

decides that it would be in the public interest for large numbers of people to live on barges specially constructed for the purpose then the Marine Department’s policy on this matter will have to change. It is a government-made rule and the government can remove it. Actually if the Greenland icecap succumbs to global warming and slithers into the sea next year we may need a lot of floating homes round here. The other reaction came from legislator Andrew Wan Siukin, who by a convenient coincidence is also a member of the Housing Authority. It was kind of Mr Wan to offer a comment on this proposal since he was clearly unencumbered by any relevant knowledge. The proposal, he said, was “impractical and weird”. He went on, “it won’t be fun to live on the fifth level when there are waves, and people living on land can’t get accustomed to it, as they get seasick even on ships as stable as ocean liners…” What is weird is that Mr Wan apparently doesn’t know that thousands of people used to live on boats in Hong Kong. Some of them, according to legend, never went ashore. Some of them, according to undisputed fact, only went ashore in emergencies because they were mainland women married to Hong Kong fishermen and were for some reason not eligible for ID cards. People can get used to all sorts of things. Actually a barge in a backwater like the Kai Tak nullah is not going to encounter large waves, even in a typhoon. A big boat, tethered, will not move that much. Besides, we should remember, what counts as unattractive housing depends on where you are now. If the alternatives are sleeping in a cage, or McDonalds, or a subdivided firetrap, then a container home on a barge may look quite attractive. In fact if the long-awaited offer of public housing is a flat in distant and sorrowful Tin Sui Wai I imagine quite a lot of occupants would be reluctant to move out.

There are 4 licensed dwelling vessels in 2018

interior design architecture 連續十三年榮獲Hong Kong Business頒發

傑出室內設計獎2006–2018 Outstanding Interior Design Award 2006–2018

20年設計經驗及專業資格 20年公司商譽及誠信表現

誠信．準時．不超支屢獲名人客戶多次推薦本公司 (註1) 連續30個工程準時完工及準確預算 (註2) 20 years of professional experience 20 years of credible reputation

Integrity．Punctuality．Budget control Prestigious clients recommend us on multiple occasions (*1) 30 projects have been completed with precise budget continuously within the provided timeline (*2)

朗科建藝及室內設計工程管理．

九龍塘．牛津道註 1 : 請參考本公司網頁 - 名人推薦 *1: For more details please refer to our website - clients references 註 2 : 請參考本公司網頁 - 工程準時完工記錄 *2: For more details please refer to our website - projects record

分

西九龍．君臨天下

OPINION

Hemlock

How to get 8,000 hectares of land for free

atching up with all the riveting Hong Kong things I missed over the last week, and I find the Lantau Mega-Reclamation Artificial Islands Vision Project still seems to be struggling to win the community’s support. Construction/property tycoon Gordon Wu is getting grumpy about riffraff opposition, of the sort that greets another spokesman for the infrastructure lobby. The government can further provoke public resistance by rushing preliminary work through the rigged legislature. But coming soon after the opening of the high-speed rail and Zhuhai Bridge white elephants and various MTR-related problems, the timing isn’t good. Interestingly, Chief Secretary Matthew Cheung points out that the concept is merely an idea and not a done deal, in contrast to his boss Chief Executive Carrie Lam, who seems adamant that the deranged moneywaster will go ahead. It feels rather like that time in the early 2000s, when the government tried to hand West Kowloon to the property developers. The crony-scam was so obvious, and public opinion so hostile, officials backed down. Lantau reclamation If the Lantau reclamation boondoggle had Beijing’s blessing at this stage, it would just happen – no debate or lobbying necessary. As it is, the constructiondeveloper parasites are almost embarrassingly eager to push it onto the disfranchised populace. Their reasoning for the project is so unconvincing that it looks more like desperation than plain everyday opportunistic drooling at the prospect of getting their hands on the city’s fiscal reserves. As if they fear someone might decide to do something else with the half-trillion dollars. For example, one minute they tell us the megareclamation will be used for affordable housing. The next, they claim that the value of the new land will

CE Lam unveils the plan in her policy address in October 2018

HONG KONG BUSINESS | MARCH 2019

by hemlock www.biglychee.com Email: hemlock@hellokitty.com

be so great that the thing will make a huge profit. Lantau Tomorrow Vsion Meanwhile, rational plain folk pick holes in the blueprint arguments. Won’t we be integrated and Mainlandized into the Bay Area Hub Zone by the time it’s finished? Why do we need an extra one or two million people living here? If you’re going to blow half a trillion bucks, why not just buy land from Shenzhen, or pay people to emigrate? A former planning official comes up with an arguably elegant and brilliant way for Hong Kong to magic far more land for housing into existence. And it costs nothing. Near-worthless land banks? The government announces that it will not renew the leases on developers’ agricultural-zoned land in the New Territories in 2047 (when all land leases technically end, though everyone assumes they will be rolled over). These land banks suddenly become near-worthless – would you buy a home with such an expiry date? If the developers want to make any returns on these holdings, which they acquired for pennies decades ago, they will need to start cooperating with the government rather than ordering it about. It’s staring us in the face. No mess, no fuss, no wrangling over resumption, no need for private-public partnership on developers’ terms. The author even points out (original article here) that it would make the Hong Kong government popular – a miracle in itself. This plan would presumably impact developers’ share prices. If that doesn’t worry you, be assured that – as with all proposals to use existing land sensibly for the public good – officials will find some excuse why this Cannot Be Done.

2376 1001

2827 7777

2739 1133

1/F, Ashley Centre, 23-25 Ashley Road, Tsim Sha Tsui, Kowloon

2/F, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong

Shop G18, Empire Centre, 68 Mody Road, TST East, Kowloon