Hong Kong Business (June - July 2019) by Charlton Media Group

Display to 31 July 2019 HK$40

HAS HONG KONG REACHED PEAK CO-WORKING? WHY LOCAL BRANDS ARE FAILING HOW TO GET RICH FROM BEING POOR

2019 SALARY SURVEY • Here’s where salaries are still growing • The highest-paying tech jobs

SMALL FIRMS TAP DEEP POCKETS FOR BIG DISPUTES 54

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

TIME TO RETHINK HOME OWNERSHIP?

EY V R SU 0

S NK A B ED S EN LIC

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

Justice as a concept has always been a value deeply embedded in the Hong Kong psyche. Nobody likes to be pushed around or forced to accept an injustice, especially by a stronger and more powerful entity. Which is why the recent law changes to allow small firms to partner with financing partners to take on disputes with large companies should be welcomed in Hong Kong. The first to benefit will be the subcontract ors who are often at the bottom end of the financing chain and the first to be hit when a building defect needs to be rectified and the developer won’t pay for it. Until now, many small firms would just have to suck it up, but now they can access large pocketed friends to help finance their legal bills. Let’s hope Hong Kong continues in all matters legal to stand up for the smaller individuals in society so that all can enjoy rights to justice and fairness.

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Another interesting trend we are seeing is in how and where people work. Co-working spaces have been around for a few years, but now the largest player is introducing a pay as you use by the minute basis, which begs the question: where does the coffee shop end and the working office begin? We can envisage all sorts of city folk who would otherwise pop into a Starbucks and do a few emails deciding to head instead to WeWork for the same. Perhaps it is only a matter of time until these co-working spaces provide office cats too. Finally, local Hong Kong brands have been ranked by consumers as inferior to their international counterparts. In our marketing briefing we look at what has caused this and how some brands are making meaningful connections with consumers. As always, we hope you enjoy the issue.

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CONTENTS

COVER STORY TECH AND FINANCE JOBS BUCK SALARY STAGNATION IN HONG KONG

FIRST

HR BRIEFING WEWORK LAUNCHES CHARGEBY-THE-MINUTE SERVICE

LEGAL BRIEFING SMALL FIRMS TAG DEEP POCKETS FOR BIG DISPUTES

FINANCIAL INSIGHT

MARKETING BRIEFING

06 Has Hong Kong hit

12 Can Hong Kong retain the global

42 Why local brands are failing to

connect?

peak co-working?

07 IPO proceeds hit $21.19b across 35

IPO crown as US rivals step up game?

OPINION

floats in Q1

ANALYSIS RANKING 30 Virtual bank data scientists are

driving bank hiring

44 The most significant tax reform in

34 Can Hong Kong developers still

cash in from the weakening property market?

China

46 Mammoth Bills and False Economy:

Itâ&#x20AC;&#x2122;s time to reconsider home ownership in Hong Kong

48 How to get rich from being poor in HK

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 | JULY 2019 262 Des Voeux Road Central, Hong Kong

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ECONOMY

Hong Kong beats Singapore in ease of doing business rankings Hong Kong trails only behind Thailand, Korea and Japan to rank as the fourth easiest place to do business in Asia, according to a report by TMF Group. It also beat out close regional competitor, Singapore, which holds sixth place.

INFORMATION TECHNOLOGY

Entertainment and media sector set for breakneck pace of growth Hong Kong’s fastest revenue growth in entertainment and media (E&M) will be in digitally driven segments which will account for over 60% of total revenue in 2023, according to PwC. Per segment, over-the-top (OTT) video is set to double from $1.33b (US$170m) in 2018 to $3.14b (US$400m) in 2023.

HONG KONG BUSINESS | JULY 2019

FINANCIAL SERVICES

Over $13b in arrears owed to SMEs A total of $13.34b worth of invoices were paid late to small businesses in 2018, according to small business platform Xero. Around 13.87% of invoices from Hong Kong SMEs worth a total of $7.89b were left unpaid. Only 56.04% of total payments Kong small businesses

HR & EDUCATION

Over 65% of bosses rejected promotions in last three years In the past three years, 65% of Hong Kong’s business leaders have denied promotions to employees with 46% of respondents citing lack of potential ability to lead as the top reason. Other reasons include lack of experience (43%), lack of soft skills (42%), lack of technical skills (38%) and the availability of a more qualified internal candiate (23%).

PROPERTY

Hong Kong’s second richest man passes on massive property empire The last of Hong Kong’s property dynasties is handing over the reins to a younger generation, after Lee Shau Kee, the city’s second-richest man, announced his plans to step down as chairman of Henderson Land Development Co.

COMMERCIAL PROPERTY

Can Hong Kong’s first smart city project make good on its promise? Three years after the government announced its plans to develop Kowloon East into a second Central Business District (CBD), Hong Kong’s first smart city is finally taking shape to help position the city as a techpowered business hub. The CBD has hi-tech features like multi-purpose lampposts that analyse air quality and even charge electric vehicles.

FIRST

WeWork Tower 535

Has Hong Kong hit peak co-working?

ong Kong’s co-working sector may have already peaked with the booming industry now seeing some operators close shop seemingly as fast as they opened. The latest casualty is China-based Kr Space which surrendered its lease at One Hennessy in Wan Chai where it would have occupied seven floors spanning 83,000 sqft. “Most of co-working space operators have yet to be profitable whilst initial capex requirement is relatively

demanding. We do not rule out the possibility of some industry consolidation in future if funding becomes a concern,” Jeff Yau, CFA at DBS Research said in a report. That hasn’t stopped most flexible space operators from trying to capture the elusive Hong Kong market. WeWork is committing to another 150,000 sqft of office space at Gateway in Tsim Sha Tsui, which comes on the heels of an earlier agreement with Swire Properties to be the sole tenant of Generali

Tower near Pacific Place Three in Wan Chai where it will occupy 100,000 sqft of office space at newly built H Code in Central. WeWork is also taking up two floors at The Quayside, Kwun Tong. WeWork will also be bringing its “go” concept to Hong Kong following its successful trial in Shanghai. This membership plan charges users by the minute, placing it firmly in the space for a seat for an hour or so that Starbucks has profited so well from. Perhaps Hong Kongers will decide it’s just as good to take a lift up to WeWork for a caffeine pick-me-up instead of the local coffee shop. But it’s not all exit and leave. Players are also growing their footprint with theDesk set to operate its fifth outlet in the Bonham Trade Centre in Sheung Wan by Q4. Sunlight REIT is tasked to carry out the enhancement works in Bonham Trade Centre which will be rebranded as Strand 50. In January, Spaces unveiled its fourth and largest location in 81 Des Veoux Road in the form of a 20-storey hub spanning 77,000 sqft. Room to grow There are over 50 flexible workspace operators spread across 80 locations in Hong Kong to cover more than 1 million sqft of land area, property consulting firm JLL said in a June 2018 report. It is unsurprising that such setups have gained momentum in pricey Hong Kong which is no stranger to sky-high property prices. A report from CBRE ranks Central as the world’s priciest office market for the third straight year in 2018 where it beat out the likes of New York, Paris and London.

THE CHARTIST: LAND-STARVED HONG KONG IS NOW RUNNING OUT OF OFFICE SPACE The government is estimated to have enough land that could deliver about 10 years’ worth of commercial office supply in yet another sign of Hong Kong’s chronic land shortage forming the source of its perennial property woes, according to JLL. This translates to around 20.1 million sq ft of potential office space that could be delivered from future government land sales (GLS) with the majority of office space (14.7 million sqft) located in Kowloon and Hong Kong Island (5.4 million sqft). Grade A office space has increasingly become reliant on GLS rather than the redevelopment of privately-held land, with estimates that the former could account for over 60% of Grade A office supply between 2018 and 2022 from a little over 30% in 20082017. JLL predicts that all Grade A offices set for completion in 2022 are from GLS.

HONG KONG BUSINESS | JULY 2019

Office supply by development type

Source: JLL

Office rental comparison across APAC

Source: JLL

FIRST Prime office occupancy costs, which include rent, local taxes and service charge, in Central clock in at a whopping $2,405 (US$306.57) per sqft annually as of Q1, far beyond London’s West End at $1,843 (US$235.01) and Beijing’s Finance Street at $1,576 (US$200.91). Kowloon also ranks amongst the world’s top ten priciest office locations, with prime office occupancy costs at US$189.56. Beijing CBD, Midtown and Midtown-South Manhattan, Tokyo, New Delhi and London complete the top ten. However, the share of flexible workspace in the office segment accounts for just 1.2% of occupied office space, one of the lowest penetration rates in Asia Pacific, according to JLL, which ranks Hong Kong alongside other APAC economies where growth is notably slowing such as Tokyo, Taipei and Auckland. On the other hand, cities from the Mainland like Beijing and Shanghai have the highest penetration rate of flexible

WeWork Causeway Bay

workspace in the region at 3.7% and 3.6%, respectively. Flexible spaces as a percentage of office space were similarly higher at 3.4%

“Flexible workspace accounts for just 1.2% of overall occupied space, one of the lowest rates in APAC.”

in Melbourne and 2.8% for both Singapore and Bengaluru. However, prospects for the office sector look promising especially with the Greater Bay Area plan set to fuel demand for office space. For more on co-working, see page 38 for details on the upcoming launch of WeWork Go

IPO proceeds hit $21.19b across 35 floats in Q1 Despite a general global slowdown in initial public offering (IPO) activity, the Hong Kong Stock Exchange (HKEx) ranked first by both volume and proceeds in the global IPO leaderboard with $21.19b (US$2.7b) clinched across 35 IPOs during the quarter, placing it amongst the top 10 global exchanges, according to a report from accounting firm EY. Hong Kong also ranked as the top initial public offering (IPO) destination in Q1 with a total of five cross-border IPO deals sealed during the quarter. By sector, industrials received the highest

The industrial sector had the most listings at 7

(US$285m), and Chinese ticketing app Maoyan Entertainment earned $1.96b (US$250m). In number of IPOs with seven deals, racking in a general, median deal sizes surged 84% YoY in total of $2.06b (US$263m) during the quarter. Q1 2019 to $275.47m (US$35.1m) from Q1 Consumer products (five deals) and real estate 2018, whilst median post-IPO market cap leapt (four IPOs) followed suit, earning $2.94b 69% YoY to $1.05b (US$134.5m). (US$375m) and $3.47b (US$443m), respectively. “After a strong IPO year in 2018, the first three months of 2019 have been quiet as a Mega deals number of companies already went public The largest Hong Kong IPO in terms of proceeds toward the 2018 year-end. Additionally, was by auto finance firm Shanghai Dongzheng new restrictions on “back door” listings has Automotive Finance Co. which bagged limited IPO activity on the junior market GEM $2.81b (US$358m). Biopharma company to only four IPOs raising a total of $290.39m CStone Pharmaceuticals clinched $2.24b (US$37m) in Q1 2019, compared with 33 IPOs that raised $2.24b (US$286m) in Q1 2018,” the report’s authors noted. Outlook Although Hong Kong experienced a remarkably strong 2018, the year ahead is expected to be comparatively slower with smaller IPO sizes and fewer mega deals, according to EY, with new-economy firms like pharmaceuticals, pre-revenue biotech and education companies driving listing activity. Reforms initiated by the HKEx will also continue to play a positive role in attracting issuers and help insulate the city against increasingly cautious investor sentiment as companies wait and see how geopolitical uncertainty, trade issues and a likely increase in interest rates could impact the capital markets, and, by extension, investor sentiment for IPOs.

HONG KONG BUSINESS | JULY 2019

EXCLUSIVE: SPACE WATCH

Drawing Room

Studio I & II

Dedicated Office

Workhall

The Great Room debuts at One Taikoo Place The 24,000-sqft premium co-working space targets deep-pocketed tenants and established corporates.

ingapore-based premium co-working space operator The Great Room has brought its unique brand of hospitality-inspired ethos to its newly opened space at One Taikoo Place. Drawing inspiration from luxury hotels and business clubs, tenants can work at the 24,000-sqft environment decorated in neutral earth tones designed to help them strike the perfect balance between productivity and creativity. The office has a drawing room, state room, studio, atelier and study equipped with enterprise-grade wifi and video conferencing capability to hold highvalue business interactions but also features lifestyle components such as a drawing room, bar and pantry in addition to a Monday Breakfast Club that offers a sumptuous breakfast spread. Warm cookies and fresh cuppa brewed by the in-house barista are also served in the afternoons in a turndown cart. Instead of stalelooking tiles and fluorescent lighting, The Great Room One Taikoo Place also features a hand-dyed carpet and ambience lighting as part of its goal of rethinking workspace conventions. The Great Room has a value proposition targeting established corporates instead of startups. Rates start at $7,000 per desk per month for hot desks and $11,000 per month for dedicated offices that come with free use of lounges, nooks and phone booths. “Many co-working places focus on densification to cram as many workstations per square foot as possible because Hong Kong real estate is very expensive,” Jaelle 8

HONG KONG BUSINESS | JULY 2019

Ang, CEO of The Great Room told Hong Kong Business. “In an expensive city such as Hong Kong, it becomes even more important to make every dollar count. At The Great Room, beyond paying for prime square footage, member fees are used to ensure they are also working towards delivering impact for business interactions, employee engagement and productivity,” she said. Jaelle Ang

Strong regional footprint In its opening week, The Great Room One Taikoo Place was able to achieve over 40% occupancy rates. Its overall portfolio counts more than 300 high-growth companies in finance, legal, consulting, luxury, media and tech, such as the fintech team at HSBC, Teads, Plug and Play and Impossible Foods, which all acknowledged the firm’s unique value proposition. Founded in 2016, The Great Room has five locations in Singapore, Hong Kong and Thailand in its portfolio, with the goal of setting up shop in premium spaces in key Asian financial centres. In Hong Kong alone, Ang said that they plan to open two to three more locations over the next year as it aims to cement its footprint in the city with the eventual goal of conquering the region. “One cannot win Asia-Pacific without winning Singapore and Hong Kong,” Ang said. “In Hong Kong, we are focused on telling our brand story, setting up a few more locations, demonstrating our superior unit economics here.” The Great Room is located at One Taikoo Place, Level 23, 979 King’s Road, Quarry Bay.

STARTUPS

ICW on digitising the supply chain

nternational Compliance Workshop (ICW) is a onestop supply chain service platform that helps businesses with managing massive suppliers and products, researching for regulatory requirements, seeking services from different testing institutes, as well as keeping reports & data. In April, ICW secured US$2.52m in a series A funding led by MindWorks Ventures, in partnership with the Innovation and Technology Venture Fund Corporation (ITVFC). To date, they have raised a total of US$4m. The firm works by connecting various international laboratories, making use

of its big databases, artificial intelligence and team. Its revenues are generated from commission from laboratories and subscription from users. “Testing and certification are an important part in the supply chain. Stakeholders need to ensure the products and suppliers meet the specified regulatory requirements of different countries, and, to an extent to build consumer’s trust through constantly supply of quality products. However, enterprises often spend much time and resources to deal with trivial matters,” said ICW CEO Gary Lam. Moving the industry forward The supply chain industry is still using traditional means and doesn’t leverage technology as much as they should to improve efficiency, according to Lam, who seeks to turn this around. “As our name stands, we want to facilitate supply chain compliance in the international market and workshop means interactive, which means it cannot be done by only ICW, but it should be an interaction and collaboration with stakeholders, from retailers, importers, brands to manufacturers,” he added.

Bill Gates-backed biotech in diagnostic push

Biotech startup PHASE Scientific develops point-of-care tests and sample preparation tools such as molecular diagnostics to increase the concentration of low-concentrated target molecules for easier detection. Initially developed at the University of California, Los Angeles department of bioengineering, the startup’s technologies allow doctors to create diagnosis based on its findings. Its lead product for point-of-care testing is a self-test that assesses the risk of cavities, and the product portfolio has since expanded to include major infectious diseases such as hepatitis and influenza. On the other hand, its lead product for sample preparation focuses

HONG KONG BUSINESS | JULY 2019

on extraction of circulating cell-free DNA in liquid biopsy. In April, the startup raised US$13m from US government agencies, the Bill and Melinda Gates foundation and Prof. Joseph Tam, chairman of Diagcor, Hong Kong’s largest independent laboratory. It plans to use the funding proceeds to obtain regulatory approval and develop new clinical diagnostics. “Our core technology can make any diagnostics better by enriching the target biomolecules of interest and providing samples with better quality and integrity by using proprietary liquid “phase” systems. That was where the company name PHASE Scientific came from,”Ricky Chiu, founder of PHASE Scientific, told Hong Kong Business, adding that its wide range of customers come from the general consumer to major hospitals. It’s also forming a collaboration with MD Anderson Cancer. Chiu also stated that the startup plans to raise another $30-50m by end-2019.

How YouTrip is taking away the pain of overseas payment

Getting hit by unreasonable currency transaction charges whilst travelling is a major problem for holiday makers, but startup YouTrip thinks they have found a solution that could save customers as much as 5% on credit card fees. YouTrip provides a multi-currency mobile wallet that comes with a prepaid Mastercard issued by contactless smart card brand EZ-Link. It allows for the exchange and storage of 10 selected currencies in advance through its in-app exchange feature and lets the user pay fees in more than 150 currencies at wholesale exchange rates with no additional fees. Caecilia Chu, co-founder and CEO of YouTrip, said that their platform helps their customers save up to 3.5% on transaction fees and can even go as high as 5% in some cases. Rather than make a profit on the exchange rate, YouTrip only takes commissions of each purchase from the merchant. “Both Arthur and I travel across Asia frequently and have experienced hefty card transaction fees firsthand— a result of restrictions imposed by traditional financial institutions,” Chu said, referring to her business partner Arthur Mak, the firm’s chairman. She also added that because of this, they wanted to address how travellers in the ASEAN region experience more currency conversions as compared to travelling in North American and European markets, which both leverage on dominant currencies. “Fundamentally we believe payment for travellers is a massively underserved segment by financial service providers, not only in the fee perspective but overall from a service and product offering aspect,” Chu continued. Strong backing In May 2019, YouTrip secured US$25.5m in a pre-series A funding led by Asian family office and venture capital firm Insignia Ventures Partners. The startup plans to use the proceeds from the funding round to bolster its engineering hub in Hong Kong, where it will allow them to roll out new product features and functionalities. Chu mentioned that they are keen on involving insurance, remittance and other travel-related areas in the pipeline. “We are unable to share the exact names of which countries we plan to expand to publicly for now. But, since our launch in Singapore, we have been constantly receiving requests from users in different countries for YouTrip to come to them. Currently, we are looking to expand into 1 to 2 countries within 6 to 12 months’ time,” Chu said.

FINANCIAL INSIGHT: IPO

Total deal value on the Hong Kong Mainboard accounts for only 8% of global YTD total

Can Hong Kong retain the global IPO crown as US rivals step up game? The number of listings in Q1 fell short of last year’s record with only US$4.63b raised across 52 deals in May.

n 2018, the Hong Kong stock exchange reclaimed its spot as the top IPO market globally, edging out rival New York, although momentum seems to be dissipating as listing activity has slowed save for a few bright spots in sectors such as biotechnology. A slow trickle of deals so far in 2019 could herald bad news for Hong Kong could slide down a couple of notches in the global IPO leaderboard by end-2019 as traditional rivals and emerging ones such as Shanghai gather strength. In 2018, total deal value of IPOs in the Hong Kong stock exchange jumped to US$33.42b across 196 deals, from US$14.29b across 156 deals in 2017, Dealogic data showed. However, as of May 28, total deal value of IPOs in the Hong Kong exchange has only reached about 14% of the full-year 2018 total or US$4.63b across 52 deals. While the number of listings in Q1 2019 was dismal compared to the

HONG KONG BUSINESS | JULY 2019

previous year, Hong Kong’s weaker performance was not an isolated case as other bourses also saw slowdowns, according to Edward Au, partner – audit, national public offering group at Deloitte. In particular, mega and large deals were scant in the first quarter of 2019 as companies chose to sit in the sidelines and hoped for the U.S.-China negotiations to pick up in the latter half of 2019. Au foresees two potential mega issuers in the consumer service and technology, media and telecoms sectors that could raise US$10b each, but declined to name the companies. Biotech fever The strong flow of biotech deals seen in 2018 and early 2019 following the relaxation of rules should continue in the coming months, according to Au. Since the introduction of the new listing regime, there were 9 biotech listings on the HKEX Main Board raising a combined US$4.1b,

A slow trickle of deals could herald bad news for Hong Kong as traditional rivals and emerging ones like Shanghai gather strength

according to the HKEX’s first biotech newsletter published in May. “Following last year’s introduction of the relaxed rules and listing requirements for biotech companies, we have begun to see noticeable influx of biotech companies leveraging the relaxation in the listing rules to float on the Hong Kong’s main board,” said Kenneth Lee, director, head of corporate secretarial services, Hong Kong at the TMF Group. Lee noted that there were five biotech listings in 2018 with combined funds of $18.5b raised or accounting for roughly 12.5% of the total amount raised for that year, excluding the top 3 IPOs which he said were extraordinarily large and raised a combined $134.5b. The first biotech listing in 2018 was in August with Ascletis Pharma Inc. raising about $3.1b, and Lee reckoned the trend appears to be continuing in the first quarter of 2019 with two similar biotech listings

FINANCIAL INSIGHT: IPO raising some $3.9b. Biotechs have also been performing well. The stocks of Innovent Biologics Inc and Shanghai Junshi Biosciences Co Ltd -- the two biggest IPOs in 2018 in the Healthcare Biomed - Genetics industry with more than US$400m in total value -- have seen their share price rise 63% and 52%, respectively, from their initial price offer. Lifted by biotech IPOs, the healthcare sector ranked first in terms of total deal value at US$844m across 4 deals, representing an 18% share, Dealogic data as of May 28 showed. The technology sector placed second with US$740m across 9 deals, accounting for a nearly 16% share, while the finance sector came in third with US$560m across 3 deals. By contrast, the healthcare sector only ranked fifth in total deal value in the full-year 2018.

Lifted by biotech IPOs, the healthcare sector ranked first in terms of total deal value at US$844m across four deals.

Tech powerhouses Other notable sectors in terms of total deal value year-to-date include the utility & energy sector, which saw 1 IPO with a total deal value of US$465m, and is currently in fifth place. The utility & energy sector’s total deal value is already more than four times higher than US$90m raised across 3 IPOs in 2018 and ended that year in 13th place. Similarly, the Oil & Gas sector, which placed 16th in 2018 with US$65m in total deal value across 5 IPOs, is ranked seventh so far nearly five months into 2019 with a total deal value YTD of US$246m for 1 deal. “Similar to biotech companies, the Hong Kong Stock Exchange also broadened the listing regime for companies with weighted voting Hong Kong Exchange listing trends (2009-2019)

Source: Dealogic

Top IPO destinations as of May 2019

Source: Dealogic

right structures in 2018. This had resulted in two mega IPOs last year, Xiaomi and Meituan Dianping, which raised a combined $75.7b. Unlike biotech companies, however, we have not seen any noticeable trend in the first quarter of 2019 yet,” said Lee. The TMT sector, which was an IPO hotspot in 2018, has only encountered a speed bump in 2018 but has not entirely lost steam. “Although there’s an overwhelming trend of high-tech companies still very much driving the overall interest into Hong Kong, market participants are weary that some potential new issuers are holding off or slowing down their plans in view of the renewed or even escalating trade wars between the U.S. and China, particularly on the technology front, as well as the new Science and Technology Innovation Board in Shanghai, which is expected to be up and running in mid-2019,” said Lee. Outlook Despite the first quarter of the year showing relatively flat growth in the Hong Kong IPO market compared to the same period last year, a deeper look into the numbers would show that 2019 actually saw “a much more stellar performance” than the prior year, added Lee. Even if the total amount raised by 38 new mainboard listings in the first quarter of 2019 dipped to $20.8b versus the 36 new listings that raised approximately $22.2b in the same period last year, there were 6 IPOs which raised more than $1b each compared to 4 in the prior-year

period. Lee noted another listing trend as more IPO issuers increasingly consider engaging smaller accounting firms for their deals. “Traditionally, the IPO market had been dominated by the Big 4 accounting firms where the auditors acted as the reporting accountants for issuers,” said Lee. “In the first quarter of 2018, some 38% or 11 of the new mainboard issuers had retained nonBig 4 reporting accountants, while there were only 19.4% or 6 such issuers in Q1 2019. The Hong Kong Mainboard could potentially lose its crown as the top IPO destination in the world, with its total deal value YTD of US$4.59b representing only about 8% of the global total. This is far behind New York Stock Exchange’s total of US$17.08b across 18 deals (29.5% share) and the NASDAQ’s US$14.31b across 66 deals (24.7% share). In 2018, the Hong Kong Mainboard was recognised as the hottest IPO destination, with a 15.6% share, less than 1 percentage point behind the NYSE. Au said that the looming listing of Uber and Lyft in the US will give Hong Kong some stiff competition, and data showed that other regional bourses are starting to raise their competitiveness in attracting issuers. Notably, five of the 10 top IPO destinations in the world as of May 28 comes from Asia; the third-ranked HK Mainboard is currently joined by Shanghai (4th, US$3.36b total deal value YTD), Shenzhen - ChiNext (8th, US$1.97b), Shenzhen Stock (8th, US$1.12b) and the Singapore - Mainboard (1oth, US$969m). HONG KONG BUSINESS | JULY 2019

NUMBERS HK COMMERCIAL PROPERTY INVESTMENT MAINTAINS STRENGTH

HONG KONG BUSINESS | JULY 2019

ECONOMY WATCH

The economy grew by just 0.5% in Q1

GDP to bounce back after bottoming out in Q1 After the economy recorded its slowest pace of growth since Q3 2009, private consumption may bring back some of Hong Kong’s fading luster.

he Hong Kong economy is expected to recover after a weak start to the year with GDP tipped to expand by 2-2.2% by end-2019, according to analyst forecasts. “Private consumption and gross fixed capital formation, the two main drags on growth in Q119, will likely pick up over the coming months. The former, due to renewed buying momentum and the latter, due to a stronger-than-expected Mainland Chinese economy,” Fitch Solutions said in a report. The local economy grew by a weak 0.5% in Q1, the slowest pace of growth since Q3 2009. Private consumption, which accounts for 60% of GDP, slowed to 0.1% from 3.1% in the previous quarter despite a strong equity market rally and goods exports fell to 4.2% in its first decline since Q1 2016. Contraction in gross fixed capital formation also deepened, to 7.0% from -5.4% in the previous quarter. Government consumption growth slowed as well but remained relatively steady at 4.5% from 5.0%. However, the worst may already be behind Hong Kong with investment growth likely to recover as China 16

HONG KONG BUSINESS | JULY 2019

Private consumption is likely to grow over the coming quarters, supported by the government’s cash handouts which were announced in the latest budget address

bounces back through a wide range of stimulus measures, which include a $295.31b (CNY2t) tax cut for businesses and a series of required reserve ratio cuts to unleash funding for credit-starved firms. Already, the world’s second largest economy appear to be on its way to stabilising as PMI has returned to postive territory at 50.5 in March and 50.1 in April, ending four months of contractionary readings. “We expect the Mainland’s PMI to maintain its expansionary posture over the coming months, which bodes well for Hong Kong’s own manufacturing PMI readings and investment growth,” Fitch Solutions

said. The bullish sentiment was echoed by OCBC Investment Research (OIR) which expects reason for optimism given the sustained monetary and fiscal stimulus from China as well as Trump and Xi’s G20 meeting in late June. the ongoing US-China trade talk. “With the high base effect to abate, GDP growth may also be allowed to rebound moderately in the coming quarters,” OIR said. However, the recovery over the coming months is unlikely to replicate the robust average quarterly growth of 3% YoY achieved from Q2 2009 to Q1 2019, warned OIR. The government also keeps their forecast for 2019 GDP growth unchanged at 2-3%. Retail therapy Private consumption is likely to grow over the coming quarters, supported by the government’s cash handouts which were unveiled in the latest budget address and recovering property prices which may also spill over to retail sales. Property prices in Hong Kong are also starting to receover after witnessing 0.8% YoY growth in prices on a 3-month moving average (3MMA) basis in February, coinciding with a 1.0% YoY contraction in retail sales, also on a 3MMA basis, data from the CentaCity Index show. Gains, however, may be short-lived. “We highlight that whilst we expect property prices to pick up over the coming months, we do not expect this to be lasting trend, especially as the high volume of transactions push prices up in a self-fulfilling prophecy, which could once again see demand wane due to unaffordability,” Fitch Solutions said.

GDP components to real GDP growth

Source: OCBC Investment Research

EVENT COVERAGE: QSR MEDIA CONFERENCE

From left to right: Krispy Kreme Thailand’s Ausanee Leonio, PizzaExpress HK’s Helen Leung, and Kebab Turki Baba Rafi’s Hendy Setiono

Adapting to Southeast Asia’s booming and diverse restaurant sector

Executives from three of the region’s biggest QSRs talk about what it takes to expand in nearby markets.

ue to the outstanding and sustained economic growth of the region, Southeast Asia has become a magnet for foreign investment. In particular, many QSR locators looking for opportunity have come to the region, attracted by consistent economic outperformers such as Indonesia, Thailand, Singapore, and Malaysia. However, newcomers should be prepared to meet stiff competition and an unpredictable market. A certain adaptability and a knack for current technological and cultural trends will go a long way in securing a foothold in the region, according to a panel of executives during the QSR Media Asia Conference and Awards. Improvise, adapt, overcome Hendy Setiono, founder and chief executive officer of Indonesian chain Kebab Turki Baba Rafi, noted the importance of knowing the market

HONG KONG BUSINESS | JULY 2019

In Hong Kong, Leung said more consumers would like to be served by human workers.

conditions of the country you are doing business in. “The interesting thing about doing business in Indonesia is that it is a massive market,” he says. He says that with a population of over 250 million, and rising middleclass income and consumer spending, a sound marketing and operations strategy can help a brand connect with both an audience and potential business partners. “The way we grow internationally is through a master franchisee strategy. We work with local partners as the master franchise and after we deliver our know-how technical training, then they are able to open their own shop as well as a franchise model. We tap into what we call the young generation, the millennials.” There is opportunity to be found in similar markets like Thailand. “We are a growing country. The economy this year will forecast

better than the previous year. We see a lot of positive things coming in,” KDN Company Limited president Dr. Ausanee Mahagitsiri Leonio says. KDN Company Limited is the master franchisee of Krispy Kreme in Thailand since 2010. Technology and delivery Technology can often bridge the gap between a brand and the market, especially among the younger generation. In addition, being aware of the culture in a country’s technology space can bring an awareness of certain factors that could affect your brand. Leonio mentions that there is an emerging trend of independent brands selling home-cooked meals on social media platforms such as Instagram. “Technology is the focus for all of us,” Helen Leung, finance director of PizzaExpress Hong Kong, adds. “It’s

EVENT COVERAGE: QSR MEDIA CONFERENCE just about CLM (contract lifecycle management), analytics, etc. It is about promotions, and it’s about how we serve our customers better in general.” Part of the job is knowing how to use technology to serve that function more effectively. Leung explains that there are different receptions to technology in different markets, adding that more consumers in Hong Kong like to be served by human workers whereas Singaporeans have a greater preference for technology. A straightforward example of how a brand can leverage technology to create a niche in the Southeast Asian market is through delivery platforms like Go-Jek and Grab. Setiono says that 30% of their sales could be attributed to delivery. The importance of brand management For Leung, branding is just as important as everything else when

coming in to a new market. She mentions that in Hong Kong, PizzaExpress’ uniqueness as a brand from the United Kingdom stands out as a mark of assurance and cultural heritage to local consumers, and serves as part of its enduring appeal. “As a finance person, you may think that I care about price. Yes, I care about price. I care about quality. But the other thing I am thinking about is the perception and understanding of brands, because the new generations will focus on their customer journey and whether they agree with the brands before they spend a penny,” she says. “We have to strike a balance because locally-sourced products probably will be cheaper and fresher, but at the same time we need to ensure consistency and quality so that people will recognise this as PizzaExpress.” Such a strategy can also work in setting up partnerships with local

players. Leonio says that having a core management team that knows their brand can help in the process of working with business partners. “We started with Krispy Kreme so we have our core management team. When we acquire more [restaurant] concepts, we use the management team to help grow the new brands. Then of course, when we have more brands we can share resources and processes like finance, procurement, warehouses. All those things can be shared,” she says. Leung agrees, adding that working with local teams can give you insight into how a particular market operates. “We acknowledge that the local team would have the most knowledge in the area. We also consult with them from time to time.” For Setiono, utilising their existing management team has helped them grow easily in new markets overseas. “Management is sometimes key in collaborating,” he says.

Why fast food giants and niche players have plenty of space to grow in China Fast food giants like McDonald’s and KFC are amongst the pantheon of brands that have successfully grown in China over the past two decades. Lately, recent activities of the major coffee chains in China have led analysts to think that there is a coffee war brewing in the growing market. Starbucks, considered the top player in that category, made headlines following its monumental partnership with Alibaba-owned Ele.me to reach more customers through delivery kitchens. This was then followed by other Western coffee chains such as Tim Hortons and Costa Coffee, who expressed interest in opening more outlets in the growing market. Another notable coffee player is homegrown brand Luckin Coffee, which has been aggressively expanding in the country in a bid to rival Starbucks. Luckin Coffee is aiming to open 2,500 sites in China this year, which will bring their store count to more than 4,500. But as the market continues to mature due to technology, changing consumer preferences, and more spending capacity, niche players are also poised to grab a larger share, according to a panel of executives during the QSR Media Asia Conference and Awards 2019. “Twenty years ago, we had no market. For us, this trend is good because we have an audience now that I don’t think existed before,” FOCUS Brands’ senior vice president and managing director for Asia Pacific Ken Chen says. Last year saw the company’s pretzel chain Auntie Anne’s enter the country by opening its first location in Shanghai. Subway, which has been in China for over 20 years, continues to identify as a niche offering in the country. However, the sandwich chain is looking to become more of an omni-channel player, having observed that Chinese consumers are now looking for more variety and convenience due to increasing discretionary income. “We discovered that we needed to answer the question of whether we wanted to be a niche player or a multi-million-dollar brand – that defines your destiny,” Subway APAC regional director Pavel Dorosevich explains,

FOCUS Brands’ Ken Chen (left) says guanxi is a not a winning determinant

adding that brands need to be able to provide multiple daypart options in order to become a “champion in the market.” Euromonitor International research manager Ivan Uzunov noted that there is opportunity for both niche and general offerings alike, noting that only 5% of China’s restaurant industry consists of quick-service and fullservice outlets whilst 95% are independent ones. “Cracking the Chinese market is making space for new concepts which will attract those consumers. There’s plenty of space for expansion for everyone,” he says. “The problem there is that it’s very hard to keep quality. International chains who want to expand there will need to look more in caring for their network.” Do brands need guanxi? The panel also offers their take on guanxi, a Chinese term for “networks” or “connections,” recognising its value but differing on how essential it is in expanding throughout the country. “It’s a way to access network but it’s not the winning determinant,” Chen says. “It becomes critical in the retail space. Without strong connections with real estate moguls, will be running up with smaller locations and that’s what makes the difference,” Dorosevich adds. HONG KONG BUSINESS | JULY 2019

SALARY SURVEY 2019

An experienced developer can expect up t $540,000 in annual salary.

Tech and finance jobs buck salary stagnation trend in Hong Kong In-demand programmers and regulatory specialists can command a 30% raise even as a third of employers in other industries reined in the growth of salaries by up to 3% in 2019 compared to 27% in 2018.

t still pays to job hop in search of a pay rise, according to recruiters interviewed by Hong Kong Business for our annual survey, with job movers on average able to demand a 10-15 % pay rise, said Matthew Bennett, Managing Director, Greater China at Robert Walters. But if you’re one of the lucky ones with niche skills such as programmers and regulatory specialists, you could command pay rises of 30% or more when moving roles. Other industries which can expect steep pay hikes are e-commerce, artificial intelligence (AI), digital marketing, blockchain, web development and machine learning. Job stayers can expect modest overall salary raise at 3% to 6%, according to a report from Hays, with education and engineering roles experiencing the highest increases at 6.9%, and 6.1% respectively. In contrast, hiring activity by international banks may be static in the coming year. Despite the attractive compensation packages in the tech and finance industries, Dean Stallard, Managing Director at Hays Greater Bay Area, notes that salary growth has stagnated across most industries. So far 2019 has proved a slightly worse year for employees than last year, with 45% of employers willing to increase salaries by up to 6%, compared with 50% in 2018. Still, about three in five or 64% of employees interviewed stated that they were ‘satisfied’ with 20

HONG KONG BUSINESS | JULY 2019

More Hong Kong employees are asking for a raise, with two in five of those who do proving successful, the highest number in Asia

their current remuneration packages. However, only four per cent of respondents claimed to be ‘very satisfied’. “More Hong Kong employees are asking for raises with two in five of those who do proving successful, the highest number in Asia,” Stallard says. Tech calls the shots Fintech jobs are creating a surge in demand for data scientists and engineers, expected to last through 2020, with a focus on machine learning, predictive analysis and NLP, including openings for fresh graduates and junior level employees, explains Cayan Tsim, Operations Director at Morgan McKinley Hong Kong. For instance, a developer skilled in Java, C++ and .NET seeking a permanent entry-level position can expect an annual salary of $390,000 to $540,000, significantly higher compared to average annual salaries of $360,000 to $480,000 in 2018. Developers with five to eight years of experience can command salaries of up to $880,000 in 2019 compared to just $840,000 in 2018. “There is growth in the number of hires in AI, data analytics and machine learning,” Bennett says. “We expect strong demand for professionals experienced in these areas to continue into 2019 and beyond.” Demand is also strong for data scientists and IT

SALARY SURVEY 2019 Average salary increment per year vs. Number of job changes

Source: jobsDB

architects that can assist employers and consultancy firms to help in client advisory and improving digital footprint. Tsim noted that demand for senior IT professionals will be driven by intensified concern over data leaks and highprofile data breaches. “Certifications like CISSP or CEH are considered a prerequisite for anyone developing a senior career in information security and will help a candidate’s CV stand out from the crowd,” she says. “A trend new to Hong Kong, but one gaining momentum, is an emerging request for DevOps and Site Reliability Engineers (SRE). The demand is mainly coming from firms that have begun to embrace Agile methodologies and, as a result, seek out individuals with strong programming backgrounds.” Even contract tech workers can expect large salary hikes. A digital project manager with three to seven years of experience can expect a monthly salary of up to HK$63,000, up from a maximum of HK$60,000 in 2018. Meanwhile, a programme manager can command a monthly salary of up to HK$75,000 from just HK$68,000. Talent war Wealth and asset management will drive Hong Kong’s financial services sector amidst a rapid expansion in Chinese high-net worth wealth. A report by Kelly Services shows that entry-level wealth managers in consumer banking can expect an annual base salary ranging from $250,000 to $425,000. Meanwhile, portfolio managers can expect an annual base salary ranging from $550,000 to $700,000. “Competition in the banking and finance sector is expected to intensify with the arrival of new entrants. Besides the emerging crop of fintech start-ups, new virtual bank licenses issued by the Hong Kong Monetary Authority will bring telecommunications companies and more into the fray,” Alan Wong, managing director and country head of Kelly Services Hong Kong. “We expect a 15-20% salary increment on average for job movers, but in specific roles such as AI, blockchain, machine learning and private banking front office positions, we expect increments to reach 25%,” echoed Bennet. Data from Robert Walters show that entry-level investment banking analysts can expect a base pay of at least $650,000, higher compared to $628,000 in 2018. Junior analysts in hedge funds can expect a starting base pay of $800,000, a notch higher compared to $785,000 last year.

Matthew Bennett

Dean Stallard

Cayan Tsim

On the legal and compliance front, firms are fighting over talent with experience in mobile payment, financial regulations in virtual banking and cryptocurrency, Bennett explains. Compliance professionals within the fixed income, currency and commodities [FICC] are also in high demand. An in-house counsel with one to three years of post-qualified experience (PQE) can expect an annual base salary ranging from $550,000 to $800,000, whilst a general counsel with at least eight years of PQE can command an annual base salary ranging from HK$1m to HK$1.5m. For instance, junior sales and trading monitoring and surveillance professionals can expect a base pay of $350,000 to $450,000, an increase from $300,000 to $420,000 last year. Similarly, an AML manager can expect base pay of up to $1m per annum, up from $960,000 in 2018. Startups struggle for talent The tight job market will have an arguably more adverse effect on startups that have to compete with bigger corporates and multinationals to attract and retain top talent. “With regards to salaries, startup companies generally pay a higher premium than traditional companies as they would like to draw talent from more sizable organisations to add value to the business,” says Sharmini Wainwright, Senior Managing Director, Michael Page Hong Kong. For instance, a DevOps engineer salary ranges at around $35,000 a month, but online job posts show that salaries reach as high as $55,000 a month for startups such as Venturenix. “We noticed companies, in particular start-ups, seeking to hire non-local candidates under the Immigration Arrangements for Non-local Graduates (IANG) scheme in areas such as fintech, blockchain, big data and AI, due to the scarcity of such talent,” Bennett explains. In Q3 2018, the government launched the $500m Technology Talent Admission Scheme to fasttrack the admission of overseas IT talent. A maximum of 1,000 individuals is expected to be admitted in the scheme’s first year and will focus on biotechnology, AI, cybersecurity, robotics, data analytics, fintech and material science. “Companies are realising that a brand itself no longer sells for candidates, who, with the exception of salary, find it difficult to differentiate between one firm and the next. We are seeing an increasing number of organisations employ more relaxed dress codes, open office plans, hot desking and working hour flexibility to become more appealing to these candidates,” Tsim says. Though prospects are bright for jobseekers, a fat paycheck is no longer enough to keep employees engaged. “We have seen an increasing number of candidates pursue work-life balance and job security over higher pay, and many former bankers have made sideways moves into rating agencies as a result. At the same time, we are seeing fewer institutions asking investment bankers to come in on weekends, alongside soft changes such as providing higher quality food in canteens to promote employee wellness,” Sandeep Mohanan, Senior Manager, Financial Services Front Office Recruitment at Morgan McKinley notes. For instance, Deutsche Bank offers extended parental leaves to both male and female employees, whilst HSBC holdings offers up to six months of maternity leave and two weeks of HONG KONG BUSINESS | JULY 2019

SALARY SURVEY 2019 Overall average of monthly salary increments over the years

Source: jobsDB

paternity leave. Employers are also using various perks to boost employee retention such as work-at-home arrangements, parent/child work day, breakfast, lunch and dinner catering in the office pantry, carpark allowance, no limit on annual leave, no dress code and education allowance to upskill topics of personal interest, according to Wainwright. For instance, KPMG offers employee training support, enabling workers with no accounting backgrounds to undergo a comprehensive conversion programme which will provide technical knowledge and skills needed for an accountancy career. For managers, the firm has Senior Management Development Centre (SMDC) and the Leadership Development Centre are highly structured programmes, tailored to accelerate the progression of senior managers towards partnership. Some companies go as far as hiring consultants to provide bespoke curricula for their employees. For instance, corporate course provider Xccelerate was invited by a hedge fund house to train part of their team on Python, data engineering and visualization. Based on datasets from the finance industry, the team created a course which would be useful to the participants on an immediate basis to boost their day-today productivity. On top of offering bonuses, four in five companies or 84% offer additional benefits to financial packages. Further, 32% of bosses offer an extra vacation day on employees’ birthdays compared to 18% in Asia. The changing face of recruitment Technology is changing not only the workplace but also how recruiters find talent. A survey by Korn Ferry shows that 76% use AI as a sourcing tool to generate higher-quality candidates and 64% of APAC respondents say AI has changed the organisational recruiting. “AI helps us dramatically enhance outcomes by reducing the time spent on sifting through large numbers of candidate CVs to find those best matched for a particular position,” said Pip Eastman, Korn Ferry managing director APAC Regional Solutions. “Jobseekers now have insights to the management team or hiring managers, their professional profiles as well as their motivations. This is valuable information during a job interview as potential employees have some idea of what their interviewer is like on the personal front. Likewise, an employer will only be able to identify the strongest abilities and top achievements. Social media is what will provide more evidence of who the potential hire really is,” Wainwright says. 22

HONG KONG BUSINESS | JULY 2019

Alan Wong

Sharmini Wainwright

Pip Eastman

HOW MUCH ARE HK BANKERS PAID? Do you have a corporate banking relationship manager job in Hong Kong? Do you want to know how your salary and bonus stack up, to help you decide whether you might be better off at another firm? We’ve averaged out Hong Kong corporate banking salary surveys from four recruitment agencies to produce the table below, which shows low and high annual base pay ranges (and bonus percentages) from analyst to managing director (MD) level. The annual salary levels for RMs in our table owe much to the most recent hiring boom in corporate banking – 2010 to 2013 – when a competitive job market helped to push up pay, says John Mullally, director of financial services at recruiters Robert Walters in Hong Kong. More recently, global banks in Hong Kong have been shedding underperforming RMs and there’s been enough talent on the market to meet banks’ needs. If you change banks, expect a pay rise of about 10% to 12%, says Jack Leung, a business director at recruiters Hays. That’s a far cry from the increments of 20% or more experienced earlier in the decade. Top-performing RMs, however, can earn more than the market average and still snare decent pay rises. But demand is now focused on RMs with mainland corporate clients rather than local or multi-national ones. “People with large books of Chinese clients are best positioned when it comes to pay negotiations,” says Mullally. Global corporate banks in Hong Kong – the likes of Citi, HSBC and Standard Chartered – still tend to pay higher salaries than their Asian rivals. But Asian firms are currently recruiting more aggressively and can offer better potential bonuses. “Bonuses for Chinese, Singaporean and Japanese banks in Hong Kong continue to be competitive. They have higher bonus ranges than US and European banks,” says Leung from Hays. Corporate banking salaries in Hong Kong still pale in comparison with those in investment banking, as our IBD pay table shows. Analysts at investment banks in Hong Kong take home HK$675k on average, according to our analysis of pay surveys, wtih topperforming third-year analysts can earn up to HK$865k in 2019. From eFinancialCareers: What your corporate banking salary and bonus should be in Hong Kong

Corporate banking salaries and bonuses

Source: eFinancialCareers

SALARY SURVEY 2019 FINANCIAL SERVICES FRONT OFFICE ROLE Investment Banking (M&A, ECM, DCM) Analyst (1 - 3 yrs’ exp) Associate (2.5 - 6 yrs’ exp) Vice President (7+ yrs’ exp) Director (10+ yrs’ exp) Managing Director (15+ yrs' exp) Asset Management - Investment Research Investment Analyst (1 - 3 yrs’ exp) Senior Investment Analyst (5+ yrs’ exp) Assistant Portfolio Manager (10+ yrs' exp) Portfolio Manager (13+ yrs’ exp) Asset Management - Execution Trading Junior Trader (3 - 4 yrs’ exp) Senior Trader (5 - 8 yrs’ exp) Head of Trading (10+ yrs’ exp) Asset Management - Institutional Sales Associate/Assistant (Client services) (3 - 5 yrs’ exp) VP/Manager (Client facing) (5 - 10 yrs’ exp) Head of Sales (15+ yrs’ exp) Hedge Fund - Investment Research Junior Analyst (3 - 5 yrs’ exp) Analyst (5 - 8 yrs’ exp) Senior Analyst (8 - 12 yrs’ exp) Hedge Fund - Portfolio Management Assistant/Junior Portfolio Manager (10 - 15 yrs’ exp) Portfolio Manager (15+ yrs’ exp) Senior PM/CIO (20+ yrs’ exp) Hedge Fund - Execution Trading Junior Trader (3 - 5 yrs’ exp) Senior Trader (5 - 8 yrs’ exp) Head of Trading (10+ yrs’ exp)

BASE SALARY PER ANNUM HKD ($)

Legal In-house Commerce & Industry In-house Financial Services ISDA Negotiator Private Practice - US Firms Private Practice - International Paralegal

ACCOUNTING & FINANCE ROLE Part & Newly-qualified Internal Auditor Financial Analyst Junior Business Analyst AR/AP Supervisor Management Accountant Senior Accountant Financial Accountant Assistant Accountant Billing Specialist Accounts Clerk 24

HONG KONG BUSINESS | JULY 2019

2018

2019

2018

2019

628k - 1.0m 1.0 - 1.8m 1.8 - 2.4m 2.2 - 3.1m 2.4 - 4.7m

650k - 1.1m 1.1 - 1.8m 1.8 - 2.6m 2.6 - 3.1m 3.0 - 5.0m

393 - 785k 628k - 1.6m 785k - 2.0m 1.6 - 3.1m 3.1 - 11.8m

280 - 600k 500k - 1.0m 750k - 1.8m 1.2 - 2.8m 2.5 - 7.0m

470 - 785k 1.2 - 1.6m 1.8 - 2.4m 2.8 - 3.9m

450 - 780k 1.2 - 1.6m 1.8 - 2.4m 2.5 - 4.0m

236 - 550k 785k - 1.6m 2.0 - 3.9m 3.9 - 10.6m

150 - 500k 600k - 1.4m 1.8 - 3.5m 3.5 - 9.0m

510 - 785k 785k - 1.3m 1.4 - 2.0m

550 - 800k 800k - 1.2m 1.4 - 2.0m

314 - 628k 628k - 1.3m 1.2 - 2.7m

200 - 600k 400k - 1.0m 1.0 - 2.2m

393 - 628k 903k - 1.3m 1.6 - 2.4m

480 - 660k 1.0 - 1.5m 1.8 - 2.5m

118 - 236k 785k - 1.6m 2.4 - 7.9m

150 - 250k 750k - 1.5m 2.5 - 8.0m

785k - 1.2m 1.2 - 2.0m 1.6 - 2.4m

800k - 1.2m 1.2 - 2.0m 1.6 - 2.2m

785k - 1.6m 1.6 - 3.1m 2.4 - 5.9m

600k - 1.4m 1.2 - 3.5m 2.0 - 5.0m

1.4 - 3.4m 1.8 - 1.84m 2.0 - 3.1m

1.5 - 3.0m 2.0 - 4.0m 2.0 - 3.5m

4.7 - 7.9m 5.5 - 19.6m 7.9 - 55m

4.5 - 8.0m 5.0 - 20m 10 - 50m

550 - 864k 785k - 1.4m 1.4 - 2.0m

550 - 900k 393 - 942k 400 - 800k 800k - 1.3m 785k - 1.7m 800k - 1.5m 1.4 - 2.0m 1.6 - 3.9m 1.6 - 3.5m PERMANENT SALARY PER ANNUM HKD ($) 1 - 4 YRS’ EXP 5 - 8 YRS’ EXP 8+ YRS’ EXP 2018 2019 2018 2019 2018 2019

YEARS OF EXPERIENCE ROLE Wealth Management Relationship Manager Product Specialist Investment Analyst Client Services Private Equity Investment Professional (Global Fund) Investment Professional (Regional Fund) Investment Professional (Fund of Funds) Investor Relations

LEGAL ROLE

BONUS PER ANNUM HKD ($)

550 - 800k 350 - 600k 400 - 600k 300 - 500k

550 - 800k 400 - 600k 400 - 600k 360 - 480k

700k-1.2m 500 - 800k 500 - 800k 400 - 600k

700k-1.2m 600 - 900k 600 - 900k 420 - 600k

900k-2.4m 800k+ 800k+ 500 - 800k

900k-2.4m 800k-2.2m 900k-2.2m 600 - 800k

900k-1.2m 700 - 900k 600 - 800k 600 - 800k

1.5 - 2.0m 1.0 - 1.2m 900k-1.2m 900k-1.2m

2.0 - 2.4m 1.5 - 1.8m 1.2 - 1.4m 1.4 - 1.8m

1 - 3 YRS’ EXP 2018 2019 500k - 1.0m 550k - 1.2m 300 - 600k 1.05 - 1.65m 850k - 1.4m 250 - 500k

PERMANENT SALARY PER ANNUM HKD ($) 4 - 7 YRS’ EXP 8+ YRS’ EXP 2018 2019 2018 2019

500k - 1.05m 550k - 1.25m 300 - 650k 1.05 - 1.8m 850k - 1.5m 250 - 500k

650k - 1.3m 800k - 1.5m 500k - 1.0m 1.6 - 2.4m 1.1 - 2.1m 400 - 650k

700k - 1.4m 800k - 1.5m 500k - 1.1m 1.6 - 2.5m 1.1 - 2.2m 400 - 650k

1.0 - 2.0m+ 1.2 - 2.0m+ 800k - 1.4m 2.0 - 2.6m+ 1.5 - 2.1m+ 550k - 1.0m

1.1 - 2.0m+ 1.4 - 2.0m+ 850k - 1.5m 2.2 - 2.6m+ 1.6 - 2.2m+ 550k - 1.0m

PERMANENT SALARY PER ANNUM HKD ($) 2018 2019 360 - 430k 360 - 450k 288 - 300k 300 - 360k 336 - 420k 360 - 450k 288 - 360k 216 - 300k 240 - 300k 156 - 180k

360 - 430k 360 - 450k 264 - 312k 300 - 360k 360 - 450k 360 - 450k 300 - 360k 216 - 300k 260 - 300k 168 - 204k

SALARY SURVEY 2019 FINANCIAL SERVICES MIDDLE & BACK OFFICE - PERMANENT YEARS OF EXPERIENCE ROLE Accounting & Finance Change Management Financial & Regulatory Reporting Fund Accounting & Admin Management Reporting Product Control & Valuation Tax Planning & Advisory Treasury Internal Audit Fund & Wealth Management IBD & Markets Insurance Information Technology Retail & Commercial Banking Risk Management Counterparty Risk Credit Risk Market Risk Operational Risk Operations Change Management Client Servicing & Corporate Actions Collateral Management KYC/Client Onboarding Trade Support & Settlement FINANCIAL SERVICES TECHNOLOGY YEARS OF EXPERIENCE ROLE IT - Application & Development Java, C++, .NET Developer UI/UX Developer Quantitative Analyst Quality Assurance/Testing Application Support Product Specialist (Murex, Calypso etc.) Software Architect Big Data Architect Scrum Master & Agile Evangelist IT - Infrastructure & Cyber Security Cloud & Storage Helpdesk Administrator Network Engineer Database Administrator Cyber Security Technology Risk IT - Project & Change Management Program Manager Project Manager Change Manager PMO Business Analyst Project Coordinator/Analyst IT - Digital Transformation Digital Product Manager Digital Project Manager Customer Experience Manager UX/UI Lead Digital Transformation Manager Lean Consultant IT - Business Intelligence Business Intelligence Analyst COMPANY SECRETARIAL ROLE Group Company Secretary Company Secretary Deputy Company Secretary Assistant Company Secretary Company Secretarial Assistant

PERMANENT SALARY PER ANNUM HKD ($) 1 - 4 YRS’ EXP 5 - 8 YRS’ EXP 8+ YRS’ EXP 2018 2019 2018 2019 2018 2019 240 - 480k 300 - 450k 156 - 420k 300 - 450k 216 - 450k 360 - 480k 250 - 500k

240 - 480k 300 - 450k 156 - 420k 300 - 450k 300 - 450k 300 - 500k 300 - 500k

480 - 850k 500 - 750k 420 - 800k 500 - 800k 450 - 800k 480 - 800k 500 - 800k

480 - 850k 450 - 750k 420 - 800k 450 - 750k 450 - 800k 500 - 800k 500 - 800k

850k-1.5m 800k- 1.6m 900k- 1.4m 800k- 1.5m 800k- 1.6m 1.0 - 1.7m 860k-1.35m

850k-1.5m 750k- 1.6m 800k+ 750k- 1.5m 800k- 2.0m 800k- 2.0m 800k- 2.0m

420 - 580k 450 - 600K 430 - 540k 420 - 650k 400 - 550k

420 - 600k 420 - 600k 420 - 540k 450 - 660k 400 - 550k

580 - 950k 680 - 970k 600 - 950k 650 - 970k 550 - 820k

600 - 960k 600 - 960k 540 - 960k 660 - 980k 550 - 820k

950k -1.7m 970k - 1.8m 950k - 1.6m 1.0 - 1.7m 820k-1.5m

960k+ 960k+ 960k+ 980k+ 820k+

350 - 500k 350 - 550k 400 - 550k 350 - 550k

400 - 550k 400 - 550k 400 - 600k 400 - 550k

500 - 900k 550 - 750k 550 - 950k 550 - 780k

550 - 900k 550 - 780k 600k- 1.0m 550 - 800k

900k - 1.5m 750k - 1.5m 950k-1.65m 780k - 1.4m

900k- 1.5m 780k- 1.5m 1.0 - 1.8m 800k- 1.4m

360 - 600k 300 - 480k 300 - 540k 300 - 540k 300 - 480k

360 - 600k 300 - 480k 300 - 540k 300 - 540k 300 - 540k

600 - 900k 480 - 650k 540 - 800k 540 - 800k 480 - 800k

600 - 900k 480 - 700k 540 - 800k 540 - 800k 540 - 840k

900k - 1.6m 650k - 1.2m 800k - 1.5m 800k - 1.4m 800k - 1.3m

900k- 1.6m 700k- 1.2m 800k- 1.5m 800k- 1.4m 840k- 1.3m

PERMANENT SALARY PER ANNUM HKD ($) 1 - 4 YRS’ EXP 5 - 8 YRS’ EXP 8+ YRS’ EXP 2018 2019 2018 2019 2018 2019 360 - 480k 300 - 420k 360 - 520k 240 - 300k 300 - 420k 275 - 320k 480 - 600k 300 - 420k 360 - 420k

390 - 540k 350 - 450k 400 - 600k 280 - 350k 300 - 420k 275 - 320k 500 - 660k 300 - 420k 360 - 420k

600 - 840k 480 - 660k 600 - 720k 420 - 480k 480 - 660k 480 - 600k 660 - 840k 480 - 660k 540 - 720k

630 - 880k 500 - 700k 620 - 750k 420 - 480k 480 - 600k 480 - 600k 660 - 840k 480 - 660k 540 - 720k

840k - 1.4m 660 - 960k 840k - 1.3m 540 - 780k 660 - 960k 600 - 780k 840k - 1.4m 720k - 1.0m 720k - 1.0m

880k- 1.4m 720k- 1.0m 840k- 1.5m 540 - 780k 660 - 960k 600 - 780k 840k- 1.4m 720k- 1.0m 720k- 1.0m

600 - 750k 300 - 600k 360 - 480k 420 - 800k 360 - 480k 360 - 480k

600 - 750k 300 - 600k 360 - 480k 420 - 800k 300 - 480k 300 - 480k

750k- 1.0m 360 - 480k 600 - 720k 540 - 660k 480 - 840k 480 - 840k

1.0 - 1.3m 480 - 600k 720 - 960k 660 - 800k 840k - 1.5m 840k - 1.5m

1.0 - 1.3m 480 - 840k 720 - 960k 660 - 800k 840k- 1.5m 840k- 1.5m

480 - 660k 360 - 540k 500 - 560k 550 - 620k 300 - 480k 190 - 360k

400 - 660k 300 - 540k 500 - 560k 500 - 620k 300 - 480k 100 - 360k

480 - 850k 560 - 850k 560 - 850k 610 - 730k 480 - 730k 390 - 540k

480 - 850k 560 - 850k 560 - 850k 610 - 730k 480 - 730k 360 - 540k

850k - 1.8m 850k - 1.3m 850k - 1.5m 730k - 1.5m 730k - 1.5m 550 - 800k

850k- 1.8m 850k- 1.3m 850k- 1.5m 730k- 1.5m 730k- 1.5m 540 - 600k

480 - 660k 420 - 600k 360 - 540k 360 - 540k 360 - 540k 300 - 480k

500 - 720k 450 - 660k 380 - 600k 380 - 600k 380 - 600k 300 - 480k

660 - 840k 660 - 840k 560 - 850k 560 - 850k 560 - 850k 480 - 730k

700k- 1.0m 700 - 900k 600 - 900k 600 - 900k 600 - 900k 480 - 730k

850k - 1.6m 840k - 1.4m 900k - 1.4m 900k - 1.4m 900k - 1.6m 730k - 1.5m

1.0 - 1.8m 900k- 1.5m 900k- 1.5m 900k- 1.5m 900k- 1.8m 730k- 1.5m

370 - 490k

480 - 660k

490 - 670k

600 - 780k

620 - 800k

PERMANENT SALARY PER ANNUM HKD ($) 2018 2019 1.4m+ 1.4m+ 850k+ 850k+ 600k - 1.1m 600k - 1.2m 400 - 700k 400 - 700k 300 - 500k 300 - 525k HONG KONG BUSINESS | JULY 2019

SALARY SURVEY 2019 FINANCIAL SERVICES MIDDLE & BACK OFFICE - CONTRACT YEARS OF EXPERIENCE ROLE Finance Project Management Financial & Regulatory Reporting Fund Accounting & Admin Product Control & Valuation Management Reporting Treasury Governance Compliance - AML/Surveillance Compliance - Control Room Compliance Advisory Project Compliance Governance Change Management Client Servicing Collateral Management Confirmation Corporate Actions Data Management KYC/Client Onboarding Settlements Trade Support Operations & Projects Business Analyst Risk Management Operational Risk

PERMANENT SALARY PER ANNUM HKD ($) 1 - 4 YRS’ EXP 5 - 8 YRS’ EXP 8+ YRS’ EXP 2018 2019 2018 2019 2018 2019 30 - 45k 30 - 40k 25 - 30k 30 - 40k 30 - 40k 18 - 35k

25 - 50k 30 - 40k 25 - 40k 25 - 50k 30 - 45k 20 - 35k

50 - 70k 50 - 70k 40 - 60k 50 - 60k 45 - 65k 35 - 60k

60 - 80k 50 - 80k 50 - 80k 50 - 60k 45 - 65k 35 - 60k

80 - 120k 70 - 100k 50 - 80k 75 - 80k 65 - 90k 60 - 90k

90 - 135k 70 - 100k 60 - 80k 75 - 80k 65 - 90k 60 - 90k

25 - 55k 40 - 80k 45 - 80k 40 - 75k

25 - 60k 25 - 50k 40 - 80k 40 - 80k

60 - 120k 65 - 120k 70 - 130k 75 - 120k

60 - 120k 60 - 120k 80 - 130k 80 - 130k

120 - 140k+ 120 - 140k+ 120 - 140k+ 120k+

120k+ 120k+ 130k+ 130k+

25 - 50k 25 - 40k 25 - 35k 20 - 35k 20 - 40k 20 - 45k 20 - 50k 20 - 35k 25 - 40k

25 - 50k 25 - 45k 25 - 40k 20 - 35k 20 - 40k 20 - 45k 20 - 50k 20 - 38k 25 - 45k

50 - 75k 40 - 60k 40 - 60k 35 - 45k 35 - 65k 40 - 80k 45 - 80k 35 - 50k 40 - 55k

50 - 75k 40 - 60k 40 - 65k 35 - 45k 35 - 65k 40 - 80k 50 - 80k 38 - 55k 45 - 60k

75 - 120k 60 - 90k 60 - 75k 45 - 60k 65 - 85k 75 - 100k 70 - 90k 50 - 70k 55 - 75k

75 - 120k 60 - 100k 60 - 90k 45 - 60k 65 - 90k 80 - 100k 80k+ 55 - 75k 55 - 75k

25 - 45k

20 - 45k

45 - 80k

90 - 120k

80 - 120k

20 - 50k

22 - 60k

50 - 80k

60 - 85k

75 - 100k

85 - 105k

HUMAN RESOURCES ROLE Commerce & Industry HR Director Head of Compensation & Benefits HR Manager Organisational Development Manager Payroll Manager Recruitment Manager Shared Services Manager Training & Development Manager HR Generalist (non-managerial)/Business Partner Recruitment Specialist Payroll Specialist HRIS Analyst C&B Officer/Specialist Financial Services HR Director Head of Compensation & Benefits HR Manager HRIS Manager ER/Organisational Development Manager Shared Services Manager Training & Development Manager HR Generalist (non-managerial)/Business Partner Payroll Specialist Recruitment Specialist TECHNOLOGY CONTRACT ROLE Infrastructure & Network Middleware Specialist DBA Helpdesk/Helpdesk Lead Network Support Engineer Windows Systems Administrator Unix Systems Administrator Information Security Specialist Cloud Engineer Software Solution Architect Data Analytics/Data Scientist Software Developer Software Developer (Banking Systems) Mobile Developer 26

HONG KONG BUSINESS | JULY 2019

SALARY PER ANNUM HKD ($) PERMANENT 2018 2019

SALARY PER ANNUM HKD ($) CONTRACT 2018 2019

1.0 - 1.5m 800k - 1.5m 550 - 800k 600k - 1.0m 420 - 600k 450 - 750k 480 - 650k 480 - 700k 360 - 500k 300 - 400k 336 - 420k 300 - 400k 300 - 400k

1.1 - 1.5m 1.0 - 1.6m 550 - 800k 650k - 1.0m 520 - 715k 540 - 780k 540 - 845k 520 - 780k 360 - 585k 300 - 455k 240 - 420k 330 - 420k 216 - 400k

90 - 110k 95 - 120k 35 - 55k 45 - 80k 40 - 75k 50 - 85k 45 - 80k 45 - 70k 28 - 50k 35 - 70k 30 - 58k 20 - 40k 15 - 30k

90 - 115k 95 - 120k 35 - 60k 45 - 80k 45 - 75k 50 - 85k 45 - 80k 45 - 80k 30 - 50k 35 - 75k 30 - 60k 25 - 45k 25 - 40k

1.2 - 1.5m 1.2 - 1.5m 600 - 900k 550 - 700k 800k - 1.2m 600 - 900k 600 - 900k 420 - 550k 300 - 500K 360 - 550k

1.2 - 1.6m 1.2 - 1.6m 650 - 920k 550 - 750k 850k - 1.25m 600 - 900k 600 - 900k 420 - 580k 400 - 520K 400 - 550k

110 - 130k 115 - 140k 45 - 85k 55 - 90k 50 - 95k 50 - 80k 65 - 85k 30 - 60k 35 - 50K 30 - 70k

110 - 130k 115 - 140k 45 - 90k 60 - 100k 50 - 100k 50 - 85k 65 - 100k 35 - 65k 35 - 50K 35 - 80k

PERMANENT SALARY PER ANNUM HKD ($) 3 - 7 YRS’ EXP 8 - 14 YRS’ EXP 15+ YRS’ EXP 2018 2019 2018 2019 2018 2019 28 - 42k 25 - 45k 20 - 45k 25 - 50k 25 - 50k 25 - 50k 30 - 50k 20 - 60k

28 - 45k 25 - 50k 20 - 45k 25 - 50k 25 - 50k 38 - 58k 30 - 50k 20 - 60k

43 - 50k 45 - 78k 45 - 60k 50 - 70k 50 - 65k 50 - 75k 50 - 75k 60 - 80k

45 - 70k 50 - 78k 45 - 60k 50 - 75k 50 - 65k 58 - 75k 50 - 75k 60 - 80k

50 - 70k 78 - 90k 60 - 75k 70 - 90k 65 - 80k 75 - 100k 75 - 120k 80 - 110k

45 - 80k 78 - 90k 60 - 80k 75 - 100k 65 - 80k 75 - 100k 75 - 100k 80 - 110k

45 - 55k 20 - 35k 25 - 40k 25 - 50k 25 - 35k

45 - 55k 30 - 60k 25 - 45k 25 - 55k 25 - 40k

55 - 70k 35 - 50k 40 - 60k 50 - 75k 35 - 50k

55 - 80k 60 - 90k 45 - 65k 55 - 80k 40 - 60k

70 - 100k 50 - 60k 60 - 80k 75 - 120k 50 - 60k

80 - 95K 90 - 120k 65 - 80k 80 - 140k 60 - 75k

SALARY SURVEY 2019 TECHNOLOGY PERMANENT ROLE Management Chief Information Officer IT Director Program Director IT Manager Infrastructure Data Centre Network Pre-sale Help Desk IT Security Pre-sale IT Security Technical Specialist System Administration Network Administration Telco Pre-sale Service Delivery AWS/Microsoft Azure Expert Solution Architect Projects Business Analyst Implementation Consultant Project Manager Software Developer Big Data ACCOUNTING & FINANCE ROLE Chief Financial Officer (large co.) Finance Director (large co.) Finance Director - (SME) Financial Controller - (large co.) Financial Controller - (SME) FP&A Director - Regional FP&A Manager - Business Partner Finance Manager - Control & Reporting Accounting Manager (GL, AP, AR) Senior Accountant Senior Financial/Business Analyst Financial/Business Analyst Corporate Development/M&A Director Corporate Development/M&A Manager Corporate Development/M&A Analyst Tax Director Tax Manager Audit Director Audit Manager Corporate Auditor Treasury Director Treasury Manager Investor Relations Director Investor Relations Manager SUPPLY CHAIN, PROCUREMENT & LOGISTICS ROLE Commercial/Industrial Head of Supply Chain Head of Procurement Logistics/Operations Director Logistics/Warehouse Manager Procurement Manager Demand/Supply Planner Retail Sourcing Office/Agent Managing Director/EVP Sourcing Director/VP Quality Director QA/QC Manager Merchandising Manager Product Development/Technical 3PL Sales/Operations Director Operations/Logistics Manager Trade Lane Manager Key Account/Business Development Manager Financial Services Category Manager Sourcing Manager Head of Vendor Risk Management Head of Procurement

PERMANENT SALARY PER ANNUM HKD ($) 3 - 7 YRS’ EXP 8 - 14 YRS’ EXP 15+ YRS’ EXP 2018 2019 2018 2019 2018 2019 750k - 1.2m 850k - 1.0m 550 - 700k

800k - 1.2m 900k - 1.2m 550 - 750k

550 - 850k

550 - 900k 650k - 1.2m 550 - 750k 600 - 800k 650k - 1.2m 700k - 1.2m 650k - 1.2m 700k - 1.3m

600k - 1.0m 650k - 1.2m 550 - 750k 600 - 800k 650k - 1.2m 700k - 1.2m 650k - 1.2m 700k - 1.3m

1.5 - 3.0m 1.2 - 2.0m 1.2 - 1.5m

1.8 - 3.0m 1.2 - 2.0m 1.2 - 2.2m

1.0 - 1.5m 750 - 850k

1.0 - 1.2m 1.2 - 1.5m 980k - 1.3m

1.0 - 1.2m 1.2 - 1.5m 1.0 - 1.3m

450 - 550k

240 - 300k 450 - 550k 250 - 360k 450 - 550k 450 - 650k 250 - 420k 300 - 420k 300 - 540k 300 - 540k 550 - 650k 480 - 650k

240 - 300k 360 - 550k 240 - 360k 450 - 550k 336 - 650k 240 - 420k 300 - 420k 300 - 540k 360 - 540k 360 - 650k 480 - 650k

300 - 450k 400 - 450k 450 - 540k

300 - 450k 336 - 450k 300 - 540k

450 - 600k 550 - 900k 600k - 1.0m

900k - 1.2m 950k - 1.5m

240 - 360k 350 - 500k

240 - 420k 360 - 540k

450 - 650k 550 - 800k

750k - 1.0m 750k - 1.5m

750k - 1.2m 800k - 1.5m

SALARY PER ANNUM HKD ($) PERMANENT 2018 2019 2.4 - 4.0m 2.2 - 4.0m 1.4 - 2.5m 1.6 - 2.7m 1.3 - 1.6m 1.2 - 1.8m 1.2 - 1.7m 1.2 - 1.8m 1.0 - 1.2m 950k - 1.4m 1.3 - 1.7m 1.4 - 1.6m 720k - 1.2m 700k - 1.2m 600 - 900k 600 - 800k 560 - 780k 580 - 800k 480 - 600k 500 - 520k 480 - 700k 500 - 720k 420 - 500k 450 - 550k 1.5 - 3.0m 1.5 - 3.2m 900k - 1.5m 800k - 1.5m 600 - 800k 600 - 900k 1.3 - 2.0m 1.5 - 2.3m 650k - 1.0m 700k - 1.2m 1.2 - 1.9m 1.2 - 2.2m 700 - 970k 650k - 1.0m 450 - 600k 480 - 660k 1.4 - 2.2m 1.4 - 2.3m 750k - 1.1m 650k - 1.2m 1.2 - 2.0M 1.5 - 2.8M 600k - 1.0m 660k - 1.1m

SALARY PER MONTH HKD ($) CONTRACT 2018 2019 81 - 111k 81 - 91k 75 - 85k 60 - 80k

85 - 120k 85 - 115k 78 - 88k 62 - 82k

46 - 61k 51 - 65k 40 - 50k 40 - 55k 40 - 65k 30 - 45k

50 - 65k 55 - 65k 45 - 55k 40 - 55k 45 - 65k 30 - 50k

47 - 67k 37 - 52k

50 - 68k 38 - 55k

50 - 70k

52 - 72k

40 - 50k

45 - 55k

45 - 65k

48 - 68k

PERMANENT SALARY PER ANNUM HKD ($) 2018 2019 1.5 - 2.0m 1.2 - 2.0m 1.2 - 1.8m 500 - 700k 650 - 850k 400 - 600k

1.5 - 3.0m 1.2 - 2.5m 1.3 - 2.0m 550 - 900k 700k - 1.0m 500 - 800k

2.0 - 3.0m 1.2 - 2.0m 900k - 1.6m 600k - 1.0m 500 - 700k 700k - 1.0m

2.5 - 4.0m 1.3 - 2.3m 1.2 - 2.0m 650k - 1.1m 550 - 950k 600k - 1.1m

800k - 2.0m 600k - 1.0m 600k - 1.0m 450k - 1.0m

1.0 - 2.0m 700k - 1.2m 700k - 1.1m 480k - 1.1m

700k - 1.0m 700k - 1.1m 900k - 1.2m 1.5 - 2.2m

800k - 1.2m 800k - 1.2m 1.0 - 1.4m 1.7 - 2.5m HONG KONG BUSINESS | JULY 2019

SALARY SURVEY 2019 HUMAN RESOURCES ROLE Commerce & Industry Administration Manager Assistant Administrative Manager Administrator Administrative Assistant Office Manager Personal Assistant Legal Secretary Executive Secretary Team Secretary Receptionist Financial Services Administration Manager Assistant Administrative Manager Administrator Administrative Assistant Office Manager Personal Assistant Legal Secretary Executive Secretary/Executive Assistant Team Secretary Receptionist Customer Service Business Development Executive Customer Service Officer COMPLIANCE ROLE Banking AML, Advisory/Policy AML, Transaction Monitoring/Surveillance/Investigations Control Room Compliance Testing Regulatory Advisory Sales and Trading, Monitoring/Surveillance Sales and Trading, Product Advisory (e.g. FI, Equities, IBD) Buy Side Investment Compliance General Compliance Head of Compliance Private Equity (usually sole operator) Hedge Fund Securities/Brokerage Securities Industry (Local/Regional) Global Securities/Brokerage (International Firms) Corporate/MNCs Investigations (AML/Financial Crime) Internal Controls (ABC, FCPA, AML) Legal & Compliance Hybrid COMPLIANCE ROLE Banking AML, Advisory/Policy AML, Transaction Monitoring/Surveillance/Investigations Control Room Compliance Testing Regulatory Advisory Sales and Trading, Monitoring/Surveillance Sales and Trading, Product Advisory (e.g. FI, Equities, IBD) Buy Side Investment Compliance General Compliance Head of Compliance Private Equity (usually sole operator) Hedge Fund Securities/Brokerage Securities Industry (Local/Regional) Global Securities/Brokerage (International Firms) Corporate/MNCs Investigations (AML/Financial Crime) Internal Controls (ABC, FCPA, AML) Legal & Compliance Hybrid 28

HONG KONG BUSINESS | JULY 2019

SALARY PER ANNUM HKD ($) 2018 2019

420 - 600k 320 - 420k 192 - 300k 168 - 270k 300 - 500k 216 - 600k 240 - 480k 360 - 600k 216 - 360k 168 - 240k

420 - 600k 300 - 420k 192 - 300k 168 - 300k 300 - 720k 240 - 720k 240 - 660k 360 - 600k 240 - 480k 180 - 360k

35 - 45k 28 - 35k 20 - 32k 15 - 28k 35 - 50k 30 - 50k 25 - 40k 30 - 48k 30 - 40k 15 - 25k

35 - 45k 28 - 35k 20 - 32k 15 - 30k 35 - 50k 30 - 50k 25 - 40k 30 - 48k 30 - 40k 15 - 28k

420 - 720k 360 - 420k 260 - 380k 200 - 280k 360 - 780k 300 - 600k 300 - 540k 360 - 720k 300 - 480k 216 - 360k

420 - 720k 360 - 420k 260 - 420k 240 - 360k 360 - 780k 300 - 720k 300 - 540k 360 - 780k 300 - 540k 216 - 408k

35 - 60k 30 - 45k 25 - 35k 15 - 30k 45 - 60k 35 - 65k 32 - 45k 35 - 48k 30 - 48k 18 - 30k

35 - 60k 30 - 45k 25 - 35k 15 - 30k 45 - 60k 35 - 65k 32 - 45k 35 - 50k 30 - 48k 18 - 30k

220 - 400K 144 - 300k

220 - 420K 144 - 300k

12 - 15k

12 - 18k

PERMANENT SALARY PER ANNUM HKD ($) VP, SVP, Director, Head of Officer, Assistant, Analyst Manager, AVP - Junior VP Compliance 2018 2019 2018 2019 2018 2019 300 - 420k 240 - 360k 240 - 360k 300 - 420k 300 - 430k 300 - 420k 300 - 460k

340 - 450k 260 - 400k 300 - 430k 320 - 450k 350 - 450k 350 - 450k 350 - 500k

600 - 960k 540 - 780k 600 - 840k 600 - 840k 600 - 850k 600 - 900k 600 - 960k

600k - 1.0m 540 - 800k 700k - 1.0m 650 - 900k 600 - 900k 660k - 1.0m 660k - 1.0m

1.02 - 1.5m+ 900k - 1.2m 960k - 1.32m 960k - 1.32m 960k - 1.4m 960k - 1.44m 1.02 - 1.6m+

1.1m+ 840k - 1.2m 1.2 - 1.5m 1.0 - 1.5m 1.0m+ 1.0 - 1.9m 1.2m+

240 - 420k 240 - 420k

360 - 540k 240 - 420k

480 - 780k 420 - 600k

540 - 840k 540 - 840k

420 - 600k

360 - 600k

660 - 960k 690 - 960k 720k - 1.08m 660k - 1.0m

840k - 1.44m 720k - 1.08m 1.44 - 1.8m 1.5m+ 1.5 - 2.4m

1.0m+ 960k - 1.4m 1.5 - 2.0m 1.4m+ 1.5m+

240 - 300k 336 - 420k

240 - 360k 360 - 420k

300 - 600k 480 - 720k

360 - 600k 540 - 740k

600 - 840k 960k - 1.2m

660k - 1.0m 840k - 1.4m

300 - 480k 300 - 600k

420 - 660k 540 - 720k 540 - 840k

420 - 600k 540 - 720k 540 - 840k

840k - 1.08m 840k - 1.2m 780k - 1.2m 840k - 1.2m 840k - 1.2m 840k - 1.2m

340 - 450k 260 - 400k 300 - 430k 320 - 450k 350 - 450k 350 - 450k 350 - 500k

600 - 960k 540 - 780k 600 - 840k 600 - 840k 600 - 850k 600 - 900k 600 - 960k

600k - 1.0m 540 - 800k 700k - 1.0m 650 - 900k 600 - 900k 660k - 1.0m 660k - 1.0m

1.02 - 1.5m+ 900k - 1.2m 960k - 1.32m 960k - 1.32m 960k - 1.4m 960k - 1.44m 1.02 - 1.6m+

1.1m+ 840k - 1.2m 1.2 - 1.5m 1.0 - 1.5m 1.0m+ 1.0 - 1.9m 1.2m+

240 - 420k 240 - 420k

360 - 540k 240 - 420k

480 - 780k 420 - 600k

540 - 840k 540 - 840k

420 - 600k

360 - 600k

660 - 960k 690 - 960k 720k - 1.08m 660k - 1.0m

840k - 1.44m 720k - 1.08m 1.44 - 1.8m 1.5m+ 1.5 - 2.4m

1.0m+ 960k - 1.4m 1.5 - 2.0m 1.4m+ 1.5m+

240 - 300k 336 - 420k

240 - 360k 360 - 420k

300 - 600k 480 - 720k

360 - 600k 540 - 740k

600 - 840k 960k - 1.2m

660k - 1.0m 840k - 1.4m

300 - 480k 300 - 600k

420 - 660k 540 - 720k 540 - 840k

420 - 600k 540 - 720k 540 - 840k

840k - 1.08m 840k - 1.2m 780k - 1.2m 840k - 1.2m 840k - 1.2m 840k - 1.2m

SALARY SURVEY 2019 SALES & MARKETING PERMANENT ROLE Financial Services Head of Corporate Communications Head of Corporate Access Head of Events Head of Internal Communications Head of Marketing Media Relations Director Digital Director Corporate Communications Manager Digital Marketing Manager Events Manager Internal Communications Manager Marketing Communications Manager Marketing Manager Media Relations Manager Product Development Manager Media Relations Executive IT&T General Manager Account Director Carrier Sales Director Marketing Director Sales Director Account Manager Alliances Manager Business Development Manager Channel Manager Digital Marketing Manager Marketing Manager Sales Manager Consumer Markets Sales Director General Manager Brand Director Marketing Director Retail Operations Director Key Account Manager Area Sales Manager Brand Manager Marketing Manager Visual Merchandising Manager PR Manager Content Marketing Manager E-commerce Manager SALES & MARKETING CONTRACTUAL ROLE Financial Services Corporate Communications Manager Events Manager Internal Communications Manager Marketing Manager Events Executive Internal Communications Executive Marketing Executive Roadshow Executive FMCG Brand Manager Marketing Manager IT&T Marketing Manager Marketing Executive Retail Brand Manager Marketing Manager

PERMANENT SALARY PER ANNUM HKD ($) 2018 2019 1.5 - 2.5m 1.5 - 2.5m 1.2 - 1.5m 1.2 - 1.5m 1.5 - 2.5m 1.2 - 1.6m 1.2 - 1.8m 720k - 1.0m 700k - 1.1m 500 - 800k 600 - 900k 600 - 850k 500 - 750k 720k - 1.0m 800k - 1.3m 420 - 500k

1.5 - 2.5m 1.5 - 2.5m 1.4 - 1.8m 1.2 - 1.5m 1.5 - 2.5m 1.2 - 1.6m 1.4 - 2.0m 720k - 1.0m 880k - 1.2m 600 - 900k 650 - 950k 650 - 950k 550 - 800k 720k - 1.0m 800k - 1.3m 420 - 500k

1.6 - 2.3m 1.0 - 1.4m 1.1 - 1.4m 1.0 - 1.5m 1.1 - 1.5m 720 - 900k 800k - 1.1m 700k - 1.0m 700k - 1.0m 540 - 660k 480 - 600k 700k - 1.0m

2.0 - 2.5m 1.0 - 1.5m 1.0 - 1.5m 1.0 - 1.5m 1.3 - 2.0m 750 - 900k 800k - 1.3m 700k - 1.2m 700k - 1.3m 540 - 660k 480 - 600k 700k - 1.0m

1.1 - 1.6m 1.2 - 2.0m 1.1 - 1.5m 1.2 - 1.5m 960k - 1.3m 480 - 720k 480 - 660k 480 - 720k 480 - 660k 480 - 600k 600 - 900k 480 - 600k 480 - 600k

1.0 - 1.5m 1.5 - 2.0m 1.0 - 1.5m 1.0 - 1.5m 960k - 1.3m 480 - 720k 480 - 660k 480 - 720k 480 - 660k 480 - 600k 600 - 900k 480 - 600k 600 - 800k

CONTRACT SALARY PER MONTH HKD ($) 2018 2019 50 - 80k 45 - 60k 45 - 70k 45 - 55k 20 - 45k 35 - 45k 25 - 38k 28 - 40k

50 - 80k 45 - 60k 45 - 70k 45 - 60k 25 - 50k 30 - 45k 25 - 38k 25 - 45k

35 - 60k 35 - 48k

35 - 55k 25 - 40k

40 - 58k 35 - 45k

HONG KONG BUSINESS | JULY 2019

LICENSED BANKS SURVEY

Standard Chartered’s virtual banking team

Virtual bank data scientists are driving bank hiring

Employers are now looking for more data scientists and full stack developers for mobile and web applications that go beyond the traditional set of tech skills.

ith eight virtual bank licenses issued in 2019, it is no understatement to say that a real hiring race is underway for virtual banking talent. HSBC, which topped Hong Kong Business’ list of biggest banks in Hong Kong, saw end2018 headcount rise by 6.9% to 31,000 from 29,000 in 2017. Bank of China (Hong Kong) which is actively participating in the virtual banking race, nabbed second spot with 12,216 employees in Q1 2019, up 2% from 2017. Hang Seng Bank followed at third place with 8,679 employees, up 13%. Standard Chartered’s hiring figures remained flat at approximately 6,000 but still bagged fourth place, whilst The Bank of East Asia grew its headcount by 19.3% to 5,376. Overall, the number of employees at the top 20 banks in Hong Kong surged by 243.1% to 295,005 as of Q1 2019 from 85,981 in 2017. “Virtual banking has definitely been the buzzword of Q3 2018 when a lot of different financial services firms were eager to join the game,” said Eddie Cheng, manager 30

HONG KONG BUSINESS | JULY 2019

The number of data scientist job postings rose from six to 100 in the past two and a half years

at Michael Page Hong Kong, adding that investment banks, local, Chinese retail banks and insurance firms are players that have been most active in tech hiring. Firms, in particular, have been looking for IT directors and IT managers to lead their growing tech teams. However, key tech talents have moved away from the traditional set of skills as the fintech race heats up, especially after banks realised that most of the upcoming virtual banks were backed by the major financial firms. In-demand positions now revolve around data science/analytics, digital strategy, UX/UI, cyber security and full stack development. “We anticipate hiring will remain flat in 2019 and do not expect a sudden surge in volume. Much of the hiring will be on key hands-on positions rather than strategic/management roles. However, candidates in the cyber security, cloud, data science, and development space should remain optimistic,” Cheng added. In a report published in eFinancialCareers, Riley King, senior manager for digital

technology and accounting & finance at Hays, observed a spike in the number of data scientists job postings from six to 100 in the past two and a half years. The most in-demand role, according to King, are full stack developers for mobile and web applications, as banks intensify efforts to enhance their front office trading systems. There is also heated demand from fintechs looking for individuals with expertise in digital payment systems, digital asset management, blockchain and cryptocurrency, according to Hays Asia Salary Guide. “Due to the shortage of local qualified candidates in the current fintech space, both banks and start-ups have been more flexible in relocating superlative candidates from overseas,” according to the report. However, Hays warned that traditional banks could be at a disadvantage due to their drawnout interview processes, lessflexible working environments and packages as compared to what startups can offer. Standard Chartered’s ploy One of the virtual banks licensees, Standard Chartered (SC) admitted that they’ve resorted to recruiting from Europe, US and Australia due to the severe talent shortage in Hong Kong. By forming a joint venture with Ctrip Financial and telco firms PCCW and Hong Kong Telecom (HKT), SC was able to create its virtual banking entity, SC Digital Solutions, which is now looking to elevate their tech hiring process for the upcoming launch of its virtual bank. SC said that they already hired around 100 people and plans to add another 40 in their team ahead of its official launch in six to nine months Harjeet Baura, financial services consulting leader at PwC Hong Kong, echoed the sentiment, adding that virtual banks only serve as a booster for tech hiring. “We expect this trend to continue across the financial services sector for the foreseeable future as traditional banks and insurers,

LICENSED BANKS SURVEY Who are Hong Kong’s virtual banking players?

Source: Moody’s

as well as new virtual banks and insurers, look to capitalise on the wave of technology-led disruption that is impacting all industries,” he said. The rise of virtual banks So far, the Hong Kong Monetary Authority awarded eight virtual bank licenses, namely: Ant SME, Insight Fintech, Infinium, Livi VB, SC Digital, PingAn One Connect, WeLab and Zhong An Virtual Finance. Two of the approved virtual banks are entities backed by some of the largest banks in Hong Kong, namely, Bank of China (BOCHK), Standard Chartered and ICBC (Asia). Ant SME Services is backed by Ant Financial Services Group. Meanwhile, Infinium is formed through a joint venture between ICBC, Hillhouse Capital and Chinabased investment firm Tencent Holdings. Insight Fintech is backed by smartphone brand Xiaomi, which owns 90% of the joint venture, and non-bank financial firm AMTD Group. “We see [virtual banks] as an opportunity to explore new business models, and provide a more appropriate and innovative services to different customers,” an SC spokesperson told Hong Kong Business. “We are embracing digitisation and partnerships to reinforce our competitive advantage.” SC added that its new virtual bank will bring a whole new tech stack and a whole new customer experience, complementing to its main bank.

“Whilst there will be undoubtedly many virtual banks, we believe the main value of banking will always be customer trust,” he added. On the other hand, HSBC, which is ranked as the largest bank in Hong Kong, doesn’t seem to have any plans to apply for a virtual bank license. “We can see no real benefit today in launching a virtual-banking only offering to our customers,” said Ewen Stevenson, group CFO of HSBC, during their Q1 2019 post-results analyst meeting. “We have the biggest mobile bank in Hong Kong.” The bank currently has digital products, such as their PayMe mobile wallet which was launched in 2017. Stevenson described this as the largest peer-to-peer payments vehicle in Hong Kong, and even has plans for it to become a businessto-consumer platform. He also revealed that they are spending US$1b in upgrading their mobile platforms for retail banking across over 20 of their markets. The firm also mentioned that they are in the midst of recruiting for a new digital trading proposition that they plan to offer SMEs. “So we’re not complacent about [launching a virtual bank], but, like most markets where we’re an incumbent. The biggest competition today is not from new virtual startups; it’s from existing competitors,” Stevenson continued. How banks should cope According to a Moody’s report, the growth of virtual banks could leverage on the large number of tech-savvy customers as well on the

HSBC sees no real benefit in launching a virtualbanking- only offering given its strong mobile banking position

cost savings brought by branchless operations. It would also be supported by its parent companies, benefitting from its strong financial and technology resources. “These large banks’ sizable fintech investments will allow them to offer competing digital banking experiences to the virtual banks’ target customers. Additionally, the large banks derive significant revenue from businesses that have higher hurdles for virtual banks to penetrate, including wealth management and most corporate banking business,” Moody’s added. However, Baura of PwC warned that virtual banks must not be wholly reliant on their parentage to gain market share. “A new virtual bank will not come with the legacy of a large organisation and infrastructure of a traditional bank,” Baura said. “The organisations will be extremely customer-centric, with driving and delivering a better customer experience at its heart, and addressing pain points that traditional banks have been unable to solve.” As virtual banks can operate at lower costs, they now have more space to create more competitively priced products and services. This will come at the expense of traditional banks, whose business models’ will be threatened by the combination of a differentiated customer experience and lower pricing. Moody’s said that the banks’ digital race may give midsize and small banks a hard time, particularly those serving small businesses and individual retail customers. Traditional banks, Baura says, must be able to present the same level of digitalisation efforts as virtual banks.

Hang Seng Bank has over 8,600 employees

HONG KONG BUSINESS | JULY 2019

LICENSED BANKS SURVEY Q1 2019 RANKING

BANKS

HONG KONG AND SHANGHAI BANKING CORPORATION

NUMBER OF EMPLOYEES

CEO OR COUNTRY HEAD

Q1 2019

2018

31,000**

29,000*

Peter Wong ****

BANK OF CHINA

12,216

11,971

Yue Yi

HANG SENG BANK LIMITED

8,679

7,672

Louisa W W Cheang

STANDARD CHARTERED BANK

6,000*

Mary Huen

THE BANK OF EAST ASIA, LIMITED

5,376**

4,506

Dr. David K.P. Li

CITI HONG KONG

>4,500*

4,470

Angel Ng

DBS BANK (HONG KONG) LIMITED

4,000*

4300*

Sebastian Paredes

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)

2,966**

2,206

Wu Long

CHINA CONSTRUCTION BANK (ASIA) CORPORATION

2,500***

2,500

Jun Zhang

DAH SING BANK

2,482***

2,482

Hon-Hing Wong

OCBC WING HANG BANK

2,165***

2,165

Wu Beng Na

CHINA CITIC BANK INTERNATIONAL

>2,000**

1,700

Bi Mingqiang

CMB WING LUNG BANK (renamed from Wing Lung Bank)

1,674**

1,581

Zhu Qi

SHANGHAI COMMERCIAL BANK

1,665

1,563

David Sek-chi Kwok

CHONG HING BANK

>1,500***

>1500

Jianxin Zong

FUBON BANK

973

1086

Raymond Lee

630

600

Zheng Wei

CHIYU BANKING CORPORATION

PUBLIC BANK

564***

564

Tan Yoke Kong

TAI SANG BANK

100***

100

Patrick Ching Hang Ma

TAI YAU BANK

15***

Arthur Sai Chun Ko

91,005

85,981

TOTAL LEGEND: *APPROXIMATE FIGURES **AS OF DECEMBER 31, 2018 ***FIGURES RETAINED FROM 2017 DATA ***DEPUTY CHAIRMAN & CHIEF EXECUTIVE

2018 RANKING

HONG KONG BUSINESS | JULY 2019

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ANALYSIS: PROPERTY

Can Hong Kong developers still cash in on the weakening property market? EBITDA will decrease slightly in FY20 as developers’ sales pipeline shrink in response to weak sentiment.

ated companies are expeted to record moderate earnings growth in fiscal 2019 despite the dismal property market, according to Moody’s. The weighted average EBITDA of 10 rated Hong Kong property developers is tipped to grow by a low single-digit percentage in fiscal 2019 from 2018 levels. Excluding two companies’ one-off commercial property sales in 2018, the growth rate in fiscal 2019 would be around 9%. This growth rate reflects robust presales over the last two years, which will boost development earnings. That said, slower Chinese economic growth will constrain local and tourists’ consumption appetite, leading to flat retail rental growth in fiscal 2019. Although corporate expansion has turned more cautious, tight supply of office buildings will support low vacancy rates and moderate office rental growth over the same period. EBITDA will record

a mild decrease in fiscal 2020 as the sales pipeline of some developers shrink. Commercial real estate Grade-A office rents in Central will register moderate growth. A low vacancy rate — 2.2% at the end of March 2019 — and tight supply will continue to drive office rental growth in Central CBD. That said, spot Grade-A office rental growth in Central CBD — where our rated issuers have the most office exposure — will slow to a mid-single digit percentage from around 10% in 20182 as a result of more cautious corporate expansion appetite. This will narrow the room for positive rental reversion and, in turn, drive mid single-digit percentage yearon-year increases in our rated landlords’ overall Hong Kong office rental income in 2019. The cautious business expansion sentiments, especially from Chinese corporates,

The earnings growth rate would be around 9% in fiscal 2019

HONG KONG BUSINESS | JULY 2019

Overall retail rental income growth will stay flat in 2019 compared to mid-single digit percentage growth in 2018.

stem from US-China trade tensions and slower Chinese economic growth. The relocation trend of legal and financial institutions to decentralised areas will progress in a gradual manner, reflecting higher cost sensitivity toward high Central rents. The formation of critical business clusters within new decentralized locations are expected to take time. Slower Chinese economic growth clouds retail sales outlook. China’s slowing economic growth rate will constrain consumption demand, reducing retail sales growth to a low to mid single-digit percentage in 2019 compared to 8.7% in 2018. As such, overall retail rental income growth for our rated developers’ Hong Kong portfolio is likely to stay flat in 2019 compared to the mid-single digit percentage growth in 2018. Retail sales, particularly valuable goods, declined in the first three months of 2019 despite continual growth in mainland Chinese tourist

ANALYSIS: PROPERTY arrivals. Specifically, luxury items such as jewelry and valuable goods sales declined 2.7% year-on-year in the first three months of 2019, underperforming Hong Kong’s overall retail sales decline of 1.2% over the same period. Sun Hung Kai Properties Limited (Sun Hung Kai Properties (Capital Market) Ltd., which has a large and diversified retail portfolio, and Link Real Estate Investment Trust which has greater exposure to mass-end community malls, will be in a more defensive position relative to other Hong Kong rated peers.

Residential market sales are expected to grow 15-20% and hit up to 19,000 units from 15,633 units transacted in 2018.

Residential outlook Moody’s expects healthy residential volume growth and mild near-term price recovery. The US Federal Reserve’s recent dovish stance on interest rate increases and subsequent improved capital market sentiment will buoy residential market sales, supporting 15%-20% year-on-year growth of primary units transacted in 2019 to 18,000-19,000 units, from 15,633 units in 2018. Pent-up demand will outweigh near-term supply, thereby supporting volumes. Moody’s expect residential prices to register 8%-10% growth in 2019, likely surpassing the last peak registered in July 2018, per Rating and Valuation Department data. Constraints on a steeper-thanexpected price growth include developers’ pursuit of a pragmatic pricing strategy under a looming vacancy tax. Key risks to price and volume assumptions include a sharp deterioration in capital market conditions, tightening of liquidity conditions and monetary policies. Lower development earnings Respondents expect home prices to increase in Q1

Source: Citi

The property market will stage a comeback as home sales recover

Source: Knight Frank

for two companies will not affect their credit quality. The absence of large-scale project pipelines and a decrease in luxury project sales recognition are likely to lower EBITDA of CK Asset Holdings Limited and Nan Fung International Holdings Limited by about 15% and 35% respectively in their fiscal years 2020. Specifically, this reflects CK Asset’s relatively small development pipeline in Hong Kong, and Nan Fung’s absence of large-scale projects ready for recognition in fiscal 2020. However, development earnings volatility will not meaningfully weaken the companies’ respective credit quality and ratings. The impact of CK Asset’s development earnings decline will be more than offset by an increase in recurring income and our expectations of debt reduction, barring a material acquisition. Nan Fung is expected to maintain manageable leverage, anchored by a sufficient liquidity buffer, and stable recurring income. Stabilising metrics Financial metrics will remain healthy, supporting stable credit quality. Rated companies’ weighted average debt/ EBITDA are expected to improve slightly in fiscal 2019 to 3.2x from the 3.3x level in fiscal 2018, whilst adjusted EBITDA/interest will decline moderately to 10.0x-10.5x from 11.3x. All Moody’s rated companies will continue to have adequate financial buffers at their respective rating levels. The improvement in debt leverage reflects a slight increase in their weighted average EBITDA and a mild decline in debt as companies,

such as CK Asset and Swire Properties Limited’s, use disposal proceeds to partially repay debt. Champion Real Estate Investment Trust’s adjusted debt/EBITDA will also improve, because of a moderate EBITDA increase and flat debt. On the other hand, Hongkong Land Holdings Limited’s debt leverage will rise modestly in 2019 because of land premiums payable and capital spending but this remains appropriate for its rating level. Weighted average debt leverage will rise mildly in fiscal 2020 on the back of likely lower property development earnings but steady debt levels. Stable outlooks reflect sufficient headroom within ratings. We expect all 10 rated companies to maintain their ratings and stable outlooks in the next 12-18 months. Most have sufficient financial headroom for their respective rating levels and we expect them to continue a conservative expansion strategy. Their credit quality is also supported by adequate liquidity, manageable debt maturity profiles and stable operating cash flow. Key risks include macro economic shocks, such as a sharper-thanexpected correction in Hong Kong’s or Greater China’s economic growth, which would dampen leasing and/ or corporate expansion demand. An unexpected turn in monetary policy or tighter capital control policies in China may also reverse liquidity trends and interest rate expectations, thereby dampening residential demand. From Moody’s Investors Service Hong Kong property developers’ earnings will be supported by healthy home sales, steady rents HONG KONG BUSINESS | JULY 2019

DIGITAL SHIPPING

Cargo Services Group at the forefront of the freight industry’s digital revolution The way the company approaches the ‘digital shipping’ concept was achieved by perfecting the quotation and pricing capabilities using cloud technologies.

hen CS Global LTL Services Ltd won the recognition for the best digitalshipping services in all of Hong Kong during the inaugural Technology Excellence Awards held at the Conrad Hong Kong on 27 February, it reaffirmed two things: the company’s commitment to providing the most innovative and efficient freight forwarding services to its customers, as well as its growing reputation as the company leading the digital revolution in Hong Kong’s freight forwarding industry. CS Global LTL Services, under the Cargo Services Group, is running a freight forwarding business out of a cloud platform that enables shippers to quote, book, and manage their door-to-door less-thancontainer-load (LCL) shipments online. Launched in May 2018, the service, through an online booking platform, is driven by the vision of seamlessly integrating technological advances and innovation to provide the most efficient, cost-effective, and revolutionary freight forwarding service in Hong Kong. Jessy Zou, General Manager of CS Global LTL Services, said that the idea of launching CS Global LTL Services, was a significant opportunity to fully integrate digital tools and advances in making the business process faster—from providing a

price quotation to the customers, making payments, as well as in completing the delivery. “The shipping industry is going through an age of digital disruption. At one end of the spectrum, we are seeing the ocean carriers and established freight forwarding companies undergoing large-scale digital transformation programmes,” she said. “We are seeing tech startups, assetowning operators, and suppliers alike are using digital technologies to build new partnerships, improve customer experience, and remove operational inefficiencies”

still opt to do offline processes in some of their transactions, the transition is more evident. Industry estimates show that in the next decade, more than 80% of requests for freight quotes will be made and obtained online. “It is imperative for us to establish a stronghold in the internet, and from there venture into new markets, especially in the era of e-commerce,” Zou said. “The way we approached the ‘digital shipping’ concept was to perfect the quotation and pricing capabilities using cloud technologies.”

Digital shift This shift to the digital space, according to Zou, was a welcome development in an industry still dominated by a slow process of manual and “offline” transactions. For a long time, their operations necessitated a lot of manual effort to putting a door-to-door quote together. “The quantity of such requests grew with the group over time, and we had to find a solution to process the demand with greater efficiency,” Zou explained. “Over the years, we have been striving to build a profitable business by being lean and fast. This digital platform is an exemplary manifestation of our adherence to this principle.” Although some companies and firms may

Next phase CS Global LTL Services’ product offering, proving successful, is in for an upgrade that will enable it to stay in the industry’s processes for the long term. With the first phase completed by launching and offering a rating engine with cloud technologies that is able to generate an anywhere-to-anywhere quotation for customers, the next phase of the service, according to Zou, is in investing heavily for the upgrade of the rating engine to better serve the growing demand for their services, particularly from e-commerce platforms and business-to-business portals. “Our advantage is that Cargo Services Group has built up an extensive network of global offices and affiliates, [where] we can draw upon to give our customers the best price [we] can offer for the service required. The question for us was only how to organise the information and quickly package and present a solution.” Zou noted that the product concept didn’t just stop at what a freight calculator usually does. With cloud technology, the company sought to digitalise the customer-facing processes as well, through online payment and the option to submit documents through the online platform. “Upon completion of the second phase, we can significantly cut back the back-end administration work required to just aggregate numbers,” she said. “With such data stored on a digital platform, we can then perhaps branch off to play with pricing strategies or extend the digital experience to other areas of our business, such as port-to-port services.”

“There’s a digital wave sweeping the freight forwarding industry.”

CS Global LTL Services receiving the Technology Excellence Award for digital shipping services

HONG KONG BUSINESS | JULY 2019

HUMAN RESOURCE BRIEFING

WeWork launches charge-by-minute service WeWork Go users need only scan a QR code upon arrival to start working and access the co-working giant’s wide range of workplace amenities, indicating the next stage of evolution in the shared workspace model.

here was a time not so long ago when hotels of a certain nature and less discerning clientele charged for rooms by the hour. Certainly, they wouldn’t think of charging by the minute, but that is exactly where the office space market is going. A cheap place to work, perhaps, but in the swipe right culture of instant gratification, there is something enjoyably transitory about being able to check into a serviced office and pay for your time by the minute. WeWork, the world’s largest operator of serviced offices, will launch charge-by-minute services in Hong Kong starting from Q3 2019 after making its debut in Shanghai. WeWork Go users can search for nearby WeWork locations and see the availability of hot desks in each space. They can also start using the spaces by simply scanning a QR code upon arrival, and they will then be charged by the minute.

Over the last six months, we’re seeing more and more of the medium to large sized businesses and multinational companies dipping their toes into flex space. Although coffee shops used to be the go-to for on-thego employees seeking refuge from clinical work cubicles, rising noise levels at such public spaces have provided a less than ideal work environment. Both small and medium business (SMEs) and multinationals are now venturing into the co-working segment which provide them both with coffee, and the peace they need to get their jobs done. “So if it’s similar to a price of coffee, or they just have to pay a bit more, but you get peace to actually do the work you need, it could be quite attractive. I think it’s quite a smart move,” said Michael Glancy, director of Hong Kong Markets at JLL. “If you need to pop in for one to two hours to a couple of things and then move on, you might not necessarily want to sign up for a one month membership.” Olga Yung, regional director for Michael Page Hong Kong, echoed the sentiment, adding that the new charging scheme will provide a supportive and flexible environment for firms requiring a workspace with no strict leasing commitments. “Imagine someone starting up their new business and perhaps needing a space to host meetings, meet with investors and brainstorm with their team. This is the perfect scenario for them where they can clock in and clock out whenever they want,” Yung explained. Co-working boom Whilst only making up an estimated 3% of Hong Kong’s property market, co-working spaces have been on the rise in the last three years. WeWork opened its first Hong Kong location up at Tower 535 in Causeway Bay in February 38

HONG KONG BUSINESS | JULY 2019

Olga Yung

Michael Glancy

2017 and now counts eight operating locations spread out across Wanchai, Sheung Wan, Sai Ying Pun, Taikoo, Kwun Tong and Central in its Hong Kong portfolio. Glancy estimated that there are 10 to 15 other major co-working players across Hong Kong, with close to 50 smaller operators running a similar setup. “The industry is evolving quite quickly. When WeWork and other co-working spaces originally set up, I think most of us thought it was for new startups and small businesses, and people with backpacks and skateboards,” Glancy said. “Over the last six months in Hong Kong, we’re seeing more and more of the medium to large-sized businesses and multinational companies dipping their toes into flex space.” Big banks such as HSBC, Standard Chartered and Morgan Stanley are big users of flexible space. And they are not just renting out three to four desks. In September 2016, HSBC rented more than 300 hot desks at WeWork’s Tower 535 location to house its digital and transformation teams. Standard Chartered also designed and created its innovation lab, eXellerator, with WeWork to house its new business unit, SC Ventures. Although location plays a substantial factor on pricing, desk prices can range from $10,000 to $23,000 per month in Central, whilst in areas such as Kowloon East, desk costs could be around the $5,000 to $7,000 price range per month. According to WeWork’s website, starting prices range from $4,800/month for a hot desk to $8,200/month for a private office at its Tower 535 location. Prices may just continue rising in response to heated demand. “We forecast that the demand for flex space is going to continue, but in terms of the bigger picture, what we’re seeing developing quite quickly is that landlords are taking a real interest. We’re forecasting that flexible workspace will hit 30% in the next 10 years,” Glancy added. Hong Kong alone could see close to three million sqft of co-working space online by end-2019, with WeWork accounting for a significant chunk of the industry’s overall footprint.

WeWork Go will launch in Q3

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LEGAL BRIEFING

Small firms tap deep pockets for big disputes Cash-short companies that run into a dispute can gain access to funding partners - such as publicly listed firms and high-net worth individuals in China - who are willing to foot the bill but also split the rewards.

ith the introduction of arbitration funding on February 1, Hong Kong’s small businesses can now access deep pocketed partners to help finance their contract disputes. How will this work and who will benefit? Hong Kong Business reached out to top lawyers who assessed the implications of the regulation. Q: Who is likely to use arbitration funding ? The construction industry for one, where often there are a myriad of small sub-contractors who can be affected when a dispute arises between the main contractor and developer. Without deep pockets to fight their claims themselves, many of these sub-contractors are put under severe financial strain. Under the new laws, they can find funding partners who will foot the bill and split the rewards. King & Wood Mallesons Partner Paul Starr notes that accessibility to third party funding is likely to free up otherwise encumbered cash flow for these industry participants and has the potential to increase the number of claims brought in arbitration, allowing meritorious claims to be brought that might not have been able to without the support of such funding. Third party funders

Accessibility to third party funding is likely to free up otherwise encumbered cash flow for industry participants can also assist impecunious contractors or sub-contractors in managing resources during a project. With such assistance, the contractor or sub-contractor can avoid having to allocate or find funds to deal with the claim. Simmons & Simmons consultant for dispute resolution Eric Chan said third party funding is equally relevant to businesses with sufficient funding, but would like to invest the funds in other projects, as opposed to funding an arbitration – recognising that legal costs could escalate quickly. “There is certainly a potential that the availability of third party funding could lead to an increased number of arbitration claims, although based on our experience in Europe and Asia, third party funders tend to be quite selective about the cases they wish to fund,” he explained. Q: Who are arbitration funders and what do they need? Starr notes some funders are publicly listed, some are backed by high net worth individuals whilst others have lines of credit available to them. The nature of a funder’s financing structure can affect not only its ability to maintain necessary funds but may influence its approach to management of claims. A funder must maintain capacity to pay all its debts and cover its aggregate funding liabilities for a minimum of 36 months, as well as maintain access to at least $20m of capital. Simmons & Simmons’ Chan added that there are not many local funders in Hong 40

HONG KONG BUSINESS | JULY 2019

The construction industry is likely to benefit greatly from this bill

Paul Teo

Eric Chan

Kong and he envisages that some third party funders which operate in the Mainland will also target Hong Kong, given the expectation of increased interactions in the Greater Bay Area. “Based on our experience, it is very important for the prospective funded party to provide all the key information to the funder, to increase the likelihood that the funder will accept the case,” he added. Q: What should companies do to prepare for third party arbitration funding? Baker McKenzie Arbitration Partner Paul Teo said that companies must get a firm understanding of how third party funding works, what funding options there are and in what jurisdictions they are available. In particular, companies need to understand what types of commercial claims are particularly suitable for third party funding and how the cost of self-financing such claims compare to the benefits of obtaining outside funding such as increasing cash-flow and shifting some or all of the financial risks associated with pursuing a claim to the funder. In addition, companies need a proper understanding of the typical risks such as conflicts of interest, unfair terms. Companies also need to familiarise themselves with the implications of defending claims against funded claimants. This is because before a funder has reached the conclusion that the prospects of the claim are sufficiently strong to fund it, it has made a careful assessment of the merits of the case and whether the claimed amount is realistic. Hence, the fact that a claimant is funded can increase the pressure on a respondent to settle. When choosing a seat of arbitration, it is important for companies to take into account the legal framework governing third party funding. For example, Hong Kong permits third party funding but has imposed various safeguards to manage the risks typically associated with third party funding such as protection of legal privilege and confidentiality, ensuring that funded parties retain control over the arbitration.

MARKETING BRIEFING

Why are local brands failing to connect? A study found that foreign brands still dominate Hong Kong consumers trust scores, but some innovative strategies like meme-based marketing and experiential campaigns appeal to locals more than others.

ong Kong may be Asia’s world city, but when it comes to brand preference, it seems locals distrust homegrown brands more than locals in other countries. A study by advertising firm McCann found that in Hong Kong, only 7% of consumers would prefer a local brand over a foreign one, compared to the global average of 56% of consumers who favour their homegrown champions. APAC locals love their own more with 59% opting for the local choices. The question for homegrowns is why they are doing so poorly compared to their international rivals. McCann Worldgroup Hong Kong CEO Brandon Cheung and strategy director Karen Chan told Hong Kong Business that one reason is that foreign brands have been more innovative in their marketing. “Attempting to take advantage of mainland Chinese’ spending power and to ensure that their brand is top of mind amongst mainland Chinese who are in Hong Kong, global brands have in recent years been more proactive in marketing and in connecting with people in the city. This has, to a certain extent, been washing out local brands, which often are of a smaller scale and have a tighter budget,” they said. It could also be that consumers in Hong Kong prefer global brands due to the availability of more choices and better quality. Rupam Borthakur, Hong Kong CEO, Insights Division at research consultancy firm Kantar, believes that the global over local mindset in Hong Kong has taken root because residents have been exposed to global brands for a comparatively long time than their regional peers. “As a result, [they] are more discerning than consumers in other Asian markets: they appreciate quality, understand product nuances and trust brands that offer innovations that address their needs. Meme-based marketing One marketing trend experiencing growth in Hong Kong is ‘real time response’ or ‘newsjacking’ advertising. “Brands

Ztore’s marketing campaign

HONG KONG BUSINESS | JULY 2019

Brandon Cheung

and consumers alike often take advantage of a certain event or ironic incident, and re-create their own version of the event to poke fun at it. These memes or posts often go viral very quickly and are a great budget-friendly way for brands to stay current and top of mind,” Cheung and Chan explained. They said IKEA is a brand that has done this particularly well, noting that someone had to saw off part of a mattress to fit it into his room because he had bought the wrong size from a furniture store that did not accept returns. “In response to that, IKEA quickly put out a post saying that there is no need for sawing even if you don’t like it, because they offer a 100-day trial period,” they continued. Another advertising strategy is integrating creative messages in properties to optimise the impact of communication, the two said. Finally, nothing beats

Karen Chan

Global brands have been more proactive in marketing. This has, to a certain extent, been washing out local brands, which often are smaller scale and have a tighter budget. Rupam Borthakhur

experience. They noted that brands have been leveraging experiential marketing and creating more events and activations, citing Hong Kong Tourism Board’s Art Month Campaign, which turned MTR cars into mobile galleries that can reach out to millions of commuters daily. “From pop-ups to total transformation of physical space, brands are riding on consumers’ desire for experiences.” Who’s got it right so far? Brands like Hang Seng Bank, Vitasoy, and Go Go Van all have very high trust ratings in comparison to global competitors in their fields, cited Kantar’s Borthakur. When these brands are looked at in the context of their category, their strong position is clear, but this may not be obvious from a broad-brush comparison of global versus local. “They need to find how their brand purpose can address the needs of modern Hong Kongers, leverage their local roots, and combine the two to communicate the message effectively,” added Borthakur. E-commerce startup Ztore is manifesting this, according to Cheung and Chan. “Ztore’s mission is to preserve the Hong Kong local culture and has actively made connections to carry on the fast disappearing traditions and champion local businesses’ familiar intimate services through modern technology. Their recent campaign championed their mission by structuring Ztore’s services around emotional needs.” If anything, these trends of hyper local, experiential and almost nostalgic marketing prove that Hong Kong may be one country, but when it comes to marketing there are definitely two systems.

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OPINION

ERIC MAYER

The most significant tax reform in China

he new Individual Income Tax Law, which came into force in China on 1st January 2019 (“New Tax Law”), is a strong response to the strong criticism and social discontent under the previous legislation. The New Tax Law will not only bring great satisfaction to the entire population of mainland China, but it will also benefit foreigners greatly. Legally speaking this new legislation brings certainty as for the first-time tax residency is defined, and economically speaking it is favourable to all. Mainland Chinese vs Foreigners Mainland Chinese citizens and foreigners are treated differently because the former are all deemed to reside in China for one single reason: the “hukou” which is a compulsory registration system of all Chinese citizens which gives them benefits and rights in the geographical area to which the hukou is connected. The hukou makes them all domiciled in and tax residents of China. Set up in 1958 under Mao Zedong, the hukou is essential to all Chinese citizens, and to be able to cease to have their tax domicile in China, Chinese citizens need to renounce to all the rights and privileges attached to their hukou before leaving the country for good. A clear definition of tax residency The definition of tax residency consequently concerns mainly foreigners, which benefit from a clear legal definition as follows: To be a tax non-resident of China, an individual must comply with the following two requirements: o not to have a domicile in China, and ostay less than 183 days in China. To be a tax resident of China, an individual needs to meet either one of the following two criteria: o to have a domicile in China, or o to stay more than 183 days in China. All Chinese citizens holding a Hukou will be considered as domiciled in China. Foreigners will be considered as domiciled in China if they reside habitually there for family or economic reasons. The number of days in China is calculated by reference to a civil year as the tax year in China is from 1st January to 31st December, unlike Hong Kong. Days spent outside of China in a particular year are deductible only under the following circumstances: a stay of less than 30 consecutive days outside of China will not be counted unless the total number of days spent out of China is more than 90 overall. Non residents may avoid taxes Non-residents need to pay taxes only on China-sourced income. They can, however, avoid having to pay taxes at all if their Chinasourced income meets the following three requirements: 44

HONG KONG BUSINESS | JULY 2019

ERIC MAYER Managing Partner Thomas, Mayer & Associés

• It corresponds to a remuneration paid by a foreign entity; • the non-resident individual receiving the remuneration spends less than 90 days in China (extended to 183 days for residents of Hong Kong and of other territories having concluded a Double Taxation Agreement, as applicable); and • the remuneration is borne by a foreign entity which does not have a permanent establishment in China. Foreigners can enjoy untaxed offshore income The principle is that tax residents must pay taxes on their worldwide income, but the following “6-years rule” makes it practically easy for foreigners to avoid paying taxes on their offshore income (nonChina sourced income): • individuals who are tax residents in China and do not leave the country for 30 consecutive days (or stay less than 183 days) during 6 consecutive calendar years will be taxed on their offshore income from the seventh year; • conversely, a tax resident of China who is out of China during 30 consecutive days or more (or stays less than 183 days in China) during any calendar year will interrupt this 6-years period, which will start running again from scratch the following year, and his offshore income will not be taxed in China. In other words, to avoid having to pay taxes on offshore income, a tax resident of China needs to make sure he is not in China for 30 consecutive days or less than 183 at least every five years. Other key points of the New Tax Law include: • a smaller number of income categories; • widening of the lowest tax bands; • many new possible deductible expenses, especially for Chinese citizens who couldn’t deduct family charges under the previous legislation; • new strict tax filing requirements, including withholding obligations; • new anti-avoidance rules for individuals; and • establishment of an information exchange system between different government agencies. To conclude, the New Tax Law will satisfy greatly both Chinese citizens and foreigners. With the widening of the lowest tax bands in great proportions and by introducing a great number of deductible expenses concerning mainly family costs, the New Tax Law will satisfy the entire population of China that will be happy to pay much lower taxes. The most innovative and interesting part of the New Tax Law is however how its new tax residency definition combined with its 6-years rule renders China as attractive as Hong Kong for foreigners wishing to have the possibility of enjoying tax-free offshore income. It seems the territory may have inspired the drafters of the law, thus bringing closer the two systems.

OPINION

TIM HAMLETT

Mammoth bills and false economy: It’s time to reconsider Hong Kong home ownership

TIM HAMLETT Former Editor of Sunday Standard and Associate Professor of Journalism

eo Goodstadt’s latest book, A City Mismanaged, makes few concessions to those of us who read for entertainment. But it is worth a visit if you really want to know what went wrong with post-handover Hong Kong. Future historians will find some of this story difficult to believe. In the 80s, there was a great fashion under the Reagan and Thatcher governments for the idea that almost all state activity was inefficient, and society could only benefit from providing the maximum of freedom for market forces. Over the years the flaws in this line of thinking became obvious. In the countries where it originated, Ayn Rand – a proponent of rational egotism – is now regarded as a daft bat and the Chicago School of Economics as a shared delusion with few points of contact with reality. Privatisation is not the answer to all questions and the fad for market forces easily degenerates into government in the interests of the rich. These lessons, however, somehow failed to find their way to Hong Kong, where a succession of Chief Executives succumbed to freemarket fundamentalism, and in the process dismantled much of Hong Kong’s already far from generous welfare state. Goodstadt blames some of this on the ministerial system. Those who reach the top of the Hong Kong civil service are generally both intelligent and competent. Those who catch the eye of the Chief Executive (and pass the surreptitious vetting by the Liaison Office) generally are neither. He adds that tinkering with the boundaries between bureaux has left some of the new bureaucratic empires unmanageably big, while still managing to leave important issues straddling two or more secretaries. But the basic problem, he argues, comes down to a misreading of the Basic Law, which actually gives Hong Kong people the right to the same services and rights as they had before, a point overlooked in favour of the clause about balanced budgets. He points out that the central government seems a bit puzzled by the ministerial masochism it encounters in Hong Kong, and occasionally urges our local leaders to focus on local social problems. He tracks the consequences of neglect and parsimony in four areas: health, social welfare, education and housing. In this last, he adopts an interesting perspective and I found myself thinking heretical thoughts. It was an axiom of the Thatcher years in Britain that people should be encouraged to own their own homes. And to this end, a lot of public housing was sold to occupants at knock-down prices. This idea was imported uncritically to Hong Kong, and the provision of public housing was curtailed in the hope that private production of flats would take up the resulting slack. It did not, of course, and public housing is now back on the to-do list. But it still seems taken for granted that the desirable housing solution for those who can afford it is an owned flat in a large tower block. Mr Goodstadt points out that this approach leads to long-term 46

HONG KONG BUSINESS | JULY 2019

Hong Kong Parkview

problems. The owners are jointly responsible for the shared parts of the building, including the outside walls. Sooner or later expensive maintenance bills will come rolling in. In some cases, unhindered by the Independent Commission Against Corruption the price of the work is artfully inflated to enrich the contractors. But even if it isn’t, a bill in the region of HK$200,000 is not uncommon, and this is a very large lump to extract from an ordinary middle-class family. Goodstadt notes that the owners of flats in Hong Kong blocks tend to put off maintenance. But this is probably inevitable. The owners’ joint committee will be composed of volunteers, and one of their main motivations for serving will be to keep costs down. Even if this is not the case, however diligent the owners and conscientious the government’s supervision, a high-rise block is going to be prone to occasional mammoth bills rather than the steady drip produced by a suburban semi. So I wonder if this preoccupation with ownership is really a good idea. A survey of 12 developed countries conducted by a team at Harvard University found a wide variation in rent and owning attitudes. The proportion of the population living in rented homes in 2016 varied from a low of 25% (in Spain) to highs of 50, 55 and 60% (in Austria, Germany and Switzerland respectively). The report noted a tendency for owner-occupiers to prefer single-family dwellings, while a large supply of flats in blocks was reflected in a large population of renters. I infer from this that there is nothing wrong with renting a home, and no particular merit in owning one either, especially if you are in a large multi-storey block with the prospect, sooner or later, of a large bill to, say, replace the lifts. I realise that encouraging renting would require some dramatic changes in the way the government supplies and taxes land, and would eventually lead to legislation to curtail excessive landlord exploitation. It would also disturb the cosy arrangement by which a small coterie of developers enrich themselves by paying huge land prices and building flats for sale at commensurately high mark-ups. Well, wouldn’t that be sad!

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OPINION

HEMLOCK

How to get rich from being poor in HK

s you can tell from the public crucifixions of politicians with illegal extensions on their homes, Hong Kong gets emotional about people who wangle living space without suffering the requisite financial hardship. It doesn’t have to be a luxury villa with an unauthorized swimming pool – public-housing tenants with middle-class levels of wealth are widely detested. Behold the lady living in one of those impoverished, suicide-ridden Tin Shui Wai estates who owns four apartments worth HK$11m. The popular outraged mouth-frothing reaction is: how dare rich people use housing intended for the poor? But in a way the question is: how dare poor people leverage access to cheap housing in order to get rich? The reason some public-housing tenants are relatively well-off is precisely because they have escaped the clutches of the private-sector landlords and developers – and have therefore been able to accumulate wealth. You hear stories of university graduates who work five years at McDonalds to qualify for a public-housing unit. It is a tribute to their economic rationality. Once you get the ultra-cheap home, you can get a better job – no-one will come and meanstest you. Whilst all the other suckers are spending 50% of their income on rent or mortgage, you can save, buy a BMW and send your kid to school overseas. Thanks to the way the government has mismanaged the land/housing issue, the suckers’ private-sector flats are even smaller than your public one. If you have any savings in HK dollars, DON’T read this. It’s on Hong Kong’s looming mega-collapse, by hedge-fund guy J Kyle Bass of Big Short fame. Some of his points are questionable. Among his other calls have been the (ever-) looming collapse of Japan and the wondrousness of (pre-default) Argentine bonds. Problem is – that doesn’t mean he’s wrong. If you need cheering-up after that, and for fans of ‘Separated at Birth’, here’s an embarrassment of HK look-alike riches. Some are horrifyingly accurate. On the culinary front… For as long as I can remember, eating at Thai restaurants has always involved scornfully/irritably discouraging everyone else from requesting pad thai. My free-thinking instincts tell me that the unnecessarily sweetened noodles do not belong. At last – I am vindicated. The stuff is “not historically a traditional dish in Thailand … [but] imposed upon the populace almost 80 years ago as a cornerstone ingredient of a nationalistic agenda”. Whilst we’re in Southeast Asia, decent

HONG KONG BUSINESS | JULY 2019

BY HEMLOCK www.biglychee.com Email: hemlock@hellokitty.com

Urban settlements in Kowloon

civilized people have attacked the Sultan of Brunei for approving (in theory) stoning to death for adulterers and gays. Here’s a different angle: why not instead blame the Brunei public who demand it? Great moments in ‘One Country, Two Systems’ Can you imagine if Cathay Pacific (or SQ, BA, UA, etc) suddenly had two rival CEOs, each claiming to be true leader of the airline’s management and supported by the board? That’s the situation at Hong Kong Airlines. Ironically, this comes after the carrier had been losing senior managers at such a rate that it looked like no-one would be left. You could be forgiven for asking why a clean, efficient and professional civil aviation regulatory authority like Hong Kong’s would give these folk a licence to operate an airline (plus bankrupt subsidiary HK Express) in this city. Here’s a clue. HKA is part of HNA, a sprawling, overextended, debt-laden Mainland Chinese group famous for vacuuming up assets worldwide at any price and for its unclear ownership. So it’s all about ‘Belt and Road’ rah rah ‘glorious motherland’ ‘Bay Area Opportunities’ rah rah rah! Presumably, civil war will now break out within the company. Think Libya, but an airline. Staff will split into two factions. Conflicting groups of pilots and cabin crew will seize their own aircraft, and ground crew will ambush buses on the apron to pressgang passengers onto their side’s plane. When an HKA flight is cleared for landing, two A320s will try to nudge each other out of the way to arrive first. I declare the long weekend open with some more reading on Mainland corporate affairs. Who really owns Huawei? Could it be the Chinese state? Yes it could.

“The reason some public housing tenants are relatively well-off is precisely because they have escaped the clutches of the private-sector landlords and developers and have therefore been able to accumulate wealth.”