Hong Kong Business (December 2015 - January 2016)

Display to 31 January 2016 HK$40

16 Investment Ideas for 2016 Outmaneuver the investment chimps even when the markets go bananas

remembering gopi gopalan Mainland banks

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

Bearish 2016 looms for HK

Asian casinos

Plus:

+ranking

flock to Central

betting big

HONG KONG

FROM THE EDITOR

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

As the year 2015 draws to a close, we want you to welcome the Year of the Monkey with a few investment ideas that will help you reel in heftier returns. We talked to several financial consultants and asset managers and came up with a list of 16 investment ideas that will make you a winner this 2016.

Publisher & EDITOR-IN-CHIEF Tim Charlton associate publisher Louis Shek production EDITOR Roxanne Primo Uy art director Bryan Barrameda editorial assistant Ephraim Bie

ADVERTISING CONTACTS Louis Shek +852 6099 9768 louis@hongkongbusiness.hk Rochelle Romero rochelle@charltonmediamail.com

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In this issue, we also looked into the current status of Hong Kong’s economy and found out that while headline GDP numbers seem encouraging, a deeper look will reveal plummeting investments and souring exports. The combination of tepid regional demand and the gloomy global backdrop has prompted a number of analysts to temper their expectations for future economic growth.

We also did a comprehensive report on Asian gaming and found out that with dozens of new integrated resorts set to open in the coming years, competition is heating up even more.

In fact, an analyst predicts the number of casinos in Asia is expected to increase from 200 to 230 over the next five years.

Find out who will be the winners and losers in this brewing battle.

Enjoy the issue!

Tim Charlton

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We will however take the gains.

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

Interest rate strategy

CNH: Will Qianhai jeopardize Hong Kong’s position?

DBS Group Research

6 Sep 2013

In mid-2012, the China’s State Council approved the development of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone. Four industries were focussed upon: finance, logistics, information services and science & technology services. Particular emphasis was placed on finance, for which the government designated Qianhai to be built into an experimental zone for financial innovation and further opening-up to the outside world.

Back then, market watchers found it difficult to associate the mudflat with such bold plans. We, however, have been optimistic about the project. Specifically, we stated in earlier report that the zone’s development would be kicked off by the launch of a cross-border RMB lending scheme (see “CNH: RMB lending set to cross border in pilot plan”, 16 April 2012). In Jan13, only nine months after the approval has been granted, fifteen Hong Kong banks were authorized to offer a combined RMB2 bn of loans for Qianhai companies. More impressively, the first Qianhai land auction was held in July and construction is planned to start by October. It signals that the zone has already entered into an expansion period.

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

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

Three decades ago, Hong Kong’s manufacturing industry was hit by soaring costs. Factory rents and manufacturing labor wages ballooned 140% and 170% respectively during 1980-90. The city’s international competiveness was being challenged by several lower-cost developing countries in the region. For instance, the manufacturing labor costs in IndoneChart 1: Transformation of HK economic activities sia at the time was only during 1980-2000 one-fourth that of Hong Kong.

30% 90% Shenzhen became an expansion outlet for Hong Kong manufacturers and the timing could not have been better. The availability of abundant inexpensive land and labor in Shenzhen made it possible for Hong Kong manufacturers to move labor-intensive processes across the river. Meanwhile, more skill-inten-

Manufacturing 25%

Service (rhs)

85%

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

5% 0%

65% 1980

1984

1988

1992

1996

2000

Nathan Chow • (852) 3668-5693 • nathanchow@dbs.com 1

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

HONG KONG BUSINESS | JANUARY 2016 1

CONTENTS

INDUSTRY BRIEFING Asian casinos stack up 36 Regional for brewing battle

CoVER STORY

investment choices in 2016 24 16tosmart come out ahead of the monkey pack

FIRST 08 Hong Kong’s GDP numbers are fooling us

09 Mainland banks flock to Central 10 Are HK’s capital markets better than the US’?

gentleman of hong kong media

OPINION

REGULAR

42 Dean Stallard: Why Hong Kong

20 Financial Insight 22 Economic Insight 32 Legal Briefing 34 CMO Briefing

12 Will Hong Kong’s house prices fall

needs to keep tapping into overseas talent pools

44 Ian Perkin: Searching for the Mainland influence

46 Tim Hamlett: Rimsky and

RANKING

harder than Singapore’s?

14 The 5 most expensive

06 obituary remembering gopi gopalan, the

procedural fairness

30 Accountants are still badly

executive MBAs

48 Hemlock: Life goes on

wanted in Hong Kong

16 Professional tradesman at your service in just few clicks

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 | JANUARY 2016 262 Des Voeux Road Central, Hong Kong

For the latest business news from Hong Kong visit the website

www.hongkongbusiness.hk

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

TELECOM & INTERNET

HKBN’s collaboration with LeTV draws investor focus Barclays noted that it hosted investor meetings with HKBN senior management in Hong Kong.

According to a research note from Barclays, much of the attention focused around the collaboration with LeTV, which is expected to boost subscriber acquisitions in 2HFY16.

It should not de-stabilise the current rational competition landscape, though, in Barclays’ view.

ECONOMY

Hong Kong needs to work hard to retain its top city status: report Asia Pacific’s three established world cities risk are being outshone by emerging cities in the region.

According to a release from JLL, Tokyo, Singapore and Hong Kong make up half of the ‘Big Six’ and attract world class corporations.

4 HONG KONG BUSINESS | JANUARY 2016

ECONOMY

Hong Kong’s unemployment rate still stuck at 3.3% According to a research note from Barclays, the Census and Statistics Department stated that the unemployment rate stood at 3.3% in Aug-Oct 2015, the same as that in Jul-Sept 2015.

The underemployment rate also remained unchanged at 1.4% in the two periods. The sectors that saw an increase in unemployment include the professional and business services sector and retail sector.

MARKETS & INVESTING

China’s super wealthy keep injecting assets in Hong Kong It has been noted that China’s wealthy are poised to continue their diversification of wealth overseas.

According to a research note from KGI Fraser, this, combined with wealth management services is expected.

COMMERCIAL PROPERTY

Supply of factory space expected to remain negative until 2017 The government has decided to discontinue the Industrial Revitalization Policy in March 2016, and this has led to an outlook involving supply challenges.

According to a research note from CBRE, the shortage of supply will last until at least 2017, driving up overall industrial rents in the foreseeable future. The end of the scheme may benefit user groups in search of industrial space.

RETAIL

Weak retail sentiment drives down shop rents in core areas by 15.7% Weak retail sentiment in Hong Kong drove down retail shops rents in core areas by 15.7% in the first nine months of 2015.

According to a release from CBRE, it expects that rents will continue to decline in the coming months.

obituary: gopi gopalan

Remembering Gopi Gopalan, the gentleman of Hong Kong media

Gopi Gopalan, former editor of Hong Kong Business magazine, passed away on November 12, 2015 at 80.

G

opi Gopalan was the editor of Hong Kong Business magazine for over two decades, and a gentleman newsman who has left his mark indelibly on the media landscape of Hong Kong. Gopi was born on November 13, 1934 in a village called Pulluvazhy in the southern Indian state of Kerala. Over the course of his career, Gopi worked for different media outlets including the New Delhi-based India Press Agency, Far Eastern Economic Review, Asia Magazine, Manila-based Press Foundation of Asia, and Asiaweek.

In 1982, Gopi resigned from Asiaweek and teamed up with Viswa Nathan, former editor-in-chief of the Hong Kong Standard who had been engaged by Communications Management Limited, publishers of the Hong Kong Tatler. Together, they launched a new monthly journal, Hong Kong Business Today, which was later renamed Hong Kong Business.

A newsman like no other Gopi started as the associate editor and continued after Nathan left in 1984. Geoffrey Thursby, who worked with Nathan as editorial consultant, became the editor. When Thursby passed away a year later, Gopi was named editor. He held that position for more than two decades until retirement and ran Hong Kong Business with a deputy and a thin staff for two decades. Former Hong Kong Business publisher and Edipresse Asia CEO Barrie Goodridge said Gopi was “one of the nicest people I ever met, always a smile, always

6 HONG KONG BUSINESS | JANUARY 2016

a warm greeting and he never missed a deadline. He will be missed by many.”

The Foreign Correspondents Club is where Gopi could often be found with his “gang of four,” his old-time journalist and FCC friends who continue to meet once a month for lunch in Hong Kong. C.P. Ho, chairman - board of governors, International Social Service General Secretariat in Geneva, Switzerland, recalls the gang met regularly to brainstorm ideas for articles for newsletters and magazines or to fulfil projects commissioned by business or individual bodies.

With Gopi gone, C.P. Ho is the only surviving member of the gang. The others were Tony Polsky and Tony Lawrence, both newsmen well-remembered to this day. “I miss Gopi. Those three words sum up all my blessed, happy memories of Gopi Gopalan whom I had come to know during the past 45 years. I miss him for what he was - as a man, as a professional and above all, as a friend.

He was an ‘infectious’ fellow with his ready smile. That smile was his hallmark and made him friends who would go to great lengths to keep him smiling - like contributing articles to his magazine for nothing or just a small fee.”

A treasured friend Gopi’s friends remember him as the life and soul of the party who always enjoyed mingling and laughing with everyone. An old friend of his had this to say: “Remembered always for me in the FCC main

obituary: gopi gopalan bar, a warm smile, plenty of laughs, and a kind word of advice when needed. He was always so proud of his family and his daughters.”

David Macfarlane worked alongside Gopi for seven years as features editor at Hong Kong Business, and said everywhere you went, people would know him. “It really was a privilege to be part of his entourage. Especially when you registered the delight on people’s faces when he entered a room. He was a profoundly intelligent and charming man – even the most respected old school hacks would take on assignments for him for a mere fraction of their usual fees, such was the high esteem they held for him. I’ll sorely miss him, as will many others. But I’ll always smile when I think of him.”

Kapila Bandara, a journalist who worked with Gopi in the early 1990s, said it was Gopi’s modesty that made a lasting impression on him. “He was generous with his wisdom that was tempered by the decades of orbiting the media universe. His observations were precious to me as a young person working in a multicultural environment at the time when we first crossed paths.”

Former Hong Kong Business writer Robin Lynam said that for almost the whole of his freelance career, which now stretches back over more than three decades, he has been writing for magazines edited by Gopi. Not doing so leaves a big gap in his life.

“He was a good friend as well as a good editor, and most of the long term contributors to Hong Kong Business under his editorship were also his friends. Gopi got on well with everyone, and his great good nature was a big part of the reason so many good writers featured on the masthead. Hong Kong Business was run on a tight budget, and none of us wrote for it primarily for the money. Nobody could say no to Gopi though, which is also the reason he was consistently able to get interviews with high profile people in the business world who didn’t necessarily like answering questions from journalists. Everybody liked him and trusted his professionalism and integrity,” said Lynam.

“When I met Gopi my experience in journalism extended a little further than reviewing films for the Hong Kong Tatler. He persuaded me to take on Hong Kong Business’s food and drink column, Tabletalk, and I wrote it for 25 years. The first commission involved interviewing a winemaker, and I told Gopi I didn’t know enough about wine to be able to pose the right questions. ‘Asking questions,’ he said, ‘is how you find out.’”

“I will miss writing for him, and I’ll miss our lunches at the FCC, for which it was almost impossible to pay. Gopi liked to give the impression they were charged to expenses, but I sincerely doubt that many, if any, of them were. He was a generous man, as well as a consummate professional journalist. Many people have commented since his death that he never had a bad word to say about anybody, and it’s true. It’s also true that nobody ever had a bad word to say about Gopi, and there aren’t many people in publishing of whom you can honestly say that,” added Lynam.

at the age of 79. “Within weeks, he was an expert on WhatsApp, sending us frequent messages, some of which was ‘I’m watching TV’ or ‘It’s raining.’ He was always around to listen to his children’s problems, and always made time to spend with them, their children and spouses. And his advice was always good. Most of all he taught us not to worry about the future and enjoy the moment.”

Divya Gopalan, Gopi’s second daughter, said Gopi spent his last birthday turning 80 in true Hong Kong tradition with a junk boat party with close family and friends. He later told his wife and daughters that it was the happiest day of his life.

Nisha added: “I remember him as an eternal optimist. He was always smiling, kind, and gentle. So many of his friends have sent me letters saying that he was ‘a true gentleman.’ He had a very sharp mind and a prodigious memory. He could tell you about the Hong Kong water riots in 1967 in detail, what former Philippine President Marcos said in an interview and what Deng Xiaoping said and did. He attended a press conference of the Beatles when they came to Hong Kong in the mid-1960s and remembered clearly John Lennon’s answer to his question - ‘Will you go to China next?,’ Lennon answered: ‘Aren’t we already there?’”

At his wake at the FCC, one of the original “gangsters” said that if governments were like Gopi, there would be no wars. He was always passionate about journalism and Asia.

Gopi is survived by his beloved wife Prasanna, his three daughters, Nisha, Divya, and Priya, and three granddaughters, Sarita, Anoushka, and Anya.

A beloved father and husband Gopi’s eldest daughter Nisha Gopalan, who now works as a columnist at Bloomberg News, said Gopi truly loved Hong Kong. It is his adopted home as he saw it through the years of the height of British colonial rule through to the handover. “He enjoyed watching the Occupy movement, and was impressed with the spirit of the young, while continuing to be impressed with how much China has grown over the years to become the world’s second largest economy.”

Nisha shared how Gopi enjoyed his first smartphone so much HONG KONG BUSINESS | JANUARY 2016 7

FIRST half the pace it had been setting in the past decade and a half.

Christian Tuntono, research analyst at Credit Suisse, reckons Hong Kong’s potential growth rate, which was estimated at around 4% over the past 15 years, is to shift down towards 2.2% over the medium term. “We believe a slowing Chinese economy and rising US interest rates will drag the HK economy into a structural downturn in the years to come,” says Tuntono.

He says HK will face pressure on the external and domestic fronts. In the former, stagnation in China’s global trade flows would restrain the growth in HK’s trade and transportation service exports. Travel service and financial services exports will both dip as well.

job-hopping itch

Hong Kong’s millennials haven’t even gotten cozy yet at their current jobs, and yet they are itching to move to a completely different one. The most interesting part? They’re getting what they want. According to a survey by Randstad, four in five millennial Hong Kongers are already looking for a 180-degree turn from their current jobs, despite only just entering the workforce.

Born between 1980 and 2000, Hong Kong’s millennials are characterised by being adventurous, and always wanting to try new things. In turn, Randstad says they’re also less interested in committing long-term to organisations compared to those who were born before them. Millennials are also constantly on the hunt to try a variety of roles.

Overflowing confidence The survey says this overflowing confidence stems from the fact that Hong Kong’s yuppies are confident in their job prospects, with 83% believing they can find comparable work at a different employer before six months pass.

What’s even more remarkable is that these yuppies aren’t fazed by the fragility of labour markets at all. Despite China’s economic downturn, Randstad says this generation is highly mobile, with 33% of 18-24 year olds already looking for another job, followed by 26 per cent of workers aged 25-34.

Randstad also warns that this trend points toward an underwhelming lack of job satisfaction, as less than half of those polled say they’re fulfilled by their current roles.

According to Peter Yu, director of Randstad Hong Kong, this trend should raise a red flag for employers in Hong Kong.

8 HONG KONG BUSINESS | JANUARY 2016

Investments are plummetting in Hong Kong

Hong Kong’s GDP numbers are fooling us

T

he Hong Kong economy may look like it is getting along swimmingly, but do not be fooled by the encouraging gross domestic product (GDP) numbers that have been coming out, analysts warn.

A deeper look will reveal plummeting investments and souring exports, among other factors that suggest the territory may be in dire straits.

“Although the headline number of HK GDP is better than expected, the details show a much weaker picture,” says Natixis analyst Alicia Garcia Herrero. “Lower consumption and investments coupled with a decline in exports in sinking the city’s growth prospects. The imminent start of monetary policy normalization by the Fed is starting to have an impact on housing prices.”

The HK economy is particularly hard-hit by the ebbing of Chinese tourist arrivals, which have been in negative growth since June 2015, following the intensification of China’s anticorruption crackdown and HK’s internal issues. This has heavily hurt retail sales, a key economic driver, across the territory.

Structural downturn There are fears that HK may be entering a prolonged period of slower growth, possibly dipping to nearly

HK’s potential growth rate, which was estimated at around 4% over the past 15 years, is to shift down towards 2.2% over the medium term.

Searching for a silver lining Meanwhile, the domestic sector will be defined by a property market battered by rising HK dollar interest rates, rising new home completions, and the prospect of a weaker labor market. If there is one silver lining, a crash will not likely be in the cards as the sector will remain cushioned by an excessive amount of liquidity in the banking system, even as home prices slide. Tuntono cites how HK’s trend growth has already been slowing down despite support from resilient Chinese growth and very easy monetary conditions.

And as these propelling factors dissipate, trend growth for the territory will moderate further. It also does not help that HK’s fiscal condition does not seem ready to cope with the weaker trend growth ahead. “The downshift in HK’s growth will make a revamp of the territory’s fiscal structure more pressing,” says Tuntono.

Hong Kong’s potential growth rate

Source: C & SD, CEIC, Credit Suisse

FIRST Office requirements of the “Big Five” Chinese banks in Hong Kong and Singapore

Source: Colliers

Mainland banks are flooding the district

Mainland banks flock to Central

W

hile the recent stock market volatility may have caused Mainland banks to worry deeply enamoured by the idea of setting up an office in Hong Kong’s central business district. Mainland banks may bring 450,000 sq ft of new office space demand in Central, says Colliers, but the incoming wave will be led this time by mid-sized commercial banks.

“Chinese banks will continue to expand internationally, thanks to the ‘Going Out’ policy and the latest Qualified Domestic Individual Investor programme,” says Simon Lo,

Mainland banks may bring 450,000 sq ft of new office space demand in Central.

executive director of Asia research & advisory at Colliers, “assuming a second batch of 15 mid-sized commercial banks in China to set up their full offices in the next five years, the impact on Central will be a new demand of 450,000 sq ft.”

Mid-sized banks begin small, initially setting up a local representative office in Hong Kong and leasing around 2,000 to 3,000 sq ft.

Then the banks expand their space by as much as ten-fold in Grade A buildings in Central and Admiralty, says Colliers.

This forecasted demand comes despite stock market turbulence

which affected the pace of take up in the third quarter. Savills says mainland commercial banks are specifically active but more on citylevel institutions.

Overall, the Central office market continues to be dominated by mainland firms, particularly for deals of over 10,000 sq ft, adds Savills.

For relatively smaller spaces, Causeway Bay is emerging as a hotspot. In November, for example, a local bank leased a 6,350-sq ft shop at 2-6 Yee Wo Street in Causeway Bay for HKD 800,000 per month, 33% less than the previous rent paid by telecommunications provider, One2Free, according to Denis Ma, head of research, Hong Kong at Jones Lang LaSalle.

There has been increased take-up in Wanchai/Causeway Bay (36,500 sq ft) as well as Kowloon East (58,200 sq ft) which has helped lower the overall vacancy rate in Hong Kong in October, says Ma.

The Chartist: Primary housing supply is rising, but buyers aren’t noticing Hong Kong is dealing with a steady influx in primary housing supply, but here’s the catch—homebuyers haven’t quite realised it yet. According to Barclays Research, primary housing supply has risen from the ashes of its 56,000 low in 2Q11 to a record high in the third quarter of 2015, with 86,000. But while the supply-demand dynamic had been gradually changing, homebuyers’ mindsets, interestingly, aren’t.

Barclays says potential homebuyers are clinging to the perspective that supply increase will only come through in the long term, but in fact, several large-scale projects are set to be launched in 4Q15. “These include four projects with at least 1,000 units each,” says Barclays, adding that the bigger launch pipeline may possibly help.

Housing starts (in number of units)

Housing completions (in number of units)

Source: Transport and Housing Bureau, Barclays Research

Source: Transport and Housing Bureau, Barclays Research

HONG KONG BUSINESS | JANUARY 2016 9

FIRST

Are HK’s capital markets better than the US’?

Survey

Retirement stresses

I

f there is one advantage to launching an IPO in Hong Kong, it is that certain companies can raise more capital in the territory’s markets compared to the United States, according to researchers.

“Empirical analysis demonstrates that average underpricing is approximately 6 to 14% lower for HK IPOs compared to a sample of matched US IPOs. This finding holds even after statistically controlling for differences in a large number of variables known to influence underpricing such as deal size and issue price setting mechanism. This implies that HK capital markets are more efficient than US markets in pricing IPOs which do not qualify for inclusion in the S&P 500 but do qualify for inclusion in the HSI,” says Alex Frino, Jin Boon Wong and Ivy Zhou in a paper submitted to the Macquarie Graduate School of Management.

These findings come as HK IPO markets have shown stronger fund raising capabilities. As of the end of September 2015, Hong Kong recorded 83 new listings, down 7% compared to the same period last year, but a total of HK$156.3 billion was raised, up 19% compared to the same period last year.

Hong Kong has stronger fund raising capabilities

“This is due to a number of successful listings that raised funds of more than HK$10 billion in the first half.

Retail and consumer goods, finance, medical services and pharmaceuticalrelated, IT-related and new energy sectors were the spotlights of listing activities in Hong Kong, while small to medium-sized fundraising activities continued to dominate,” says PwC. Looking forward, the key for Hong Kong’s longer-term success as a top IPO venue will be to drive more inflow of capital, says Edward Au, co-leader of national public offering group at Deloitte China.

As of the end of September 2015, Hong Kong recorded 83 new listings, down 7% compared to the same period last year.

mobile app Watch

European boutique wine delivered straight to your table When Europeans Mischa Schulze and Thilo Fuchs could not find the perfect bottle of wine they wanted after a long day at work in Shanghai, they thought of an idea. They founded BottlesXO, an on-demand wine delivery service app. With BottlesXO, anybody can enjoy a perfect glass of wine hand-picked from boutique European wineries in just few taps.

“The app’s uniqueness comes from the fact that it is an on-demand service that allows customers to enjoy boutique, family-owned wines at affordable prices. Our hand selected wineries all have a story or narrative behind them, some dating even back to 1435. This brings a very unique quality to our range of wines,” said the founders.

Currently, BottlesXO offers the app’s service to Central, Mid-Levels and Sheung parts of HK but the team plans to roll out further from early 2016 onwards.

10 HONG KONG BUSINESS | JANUARY 2016

BottlesXO founders

It seems that cash-rich Hong Kongers are following the ways of the ant instead of the grasshopper, as the majority has been stressing over saving and investing for their twilight years.

According to a survey by Friends Provident International (FPI), 2 out of 5 of Hong Kong’s affluent are losing sleep over ways to save up funds for retirement.

The survey also found out that 57% of Hong Kong’s affluent respondents consider ‘less than five years’ as the most important timescale when thinking about savings and investments.

According to James Tan, managing director for Asia at FPI, getting the jitters over having insufficient funds for retirement reveal Hong Kongers’ insecurity about their financial future. Tan says this insecurity is also aggravated by recent market volatilities, prompting people to adopt a ‘less rational and short-sighted investment window approach to reach a long-term goal.’

Investing in property The survey also revealed that opinions about investing on residential property are mixed, with 44% believing that these investments are good for the long-term. “Furthermore, 35% believe that it is a bad/very bad time to invest in residential property, while only 23% think it is a good/very good time. This compares to 36% of respondents last year who thought it was a good/very good time to invest,” Tan adds.

Tan says the decline could be blamed on rapidly rising property prices in Hong Kong.

FPI also found out that Hong Kongers have mixed feelings about risk taking.

FIRST

Will Hong Kong’s house prices fall harder than Singapore’s?

H

ong Kong and Singapore are often painted as regional rivals, but the two now seem stuck in the same sinking boat of housing price corrections, although Hong Kong prices are predicted to plummet with more force than Singapore’s in the coming years. Both global financial centres have hit the peak of their housing market cycles, asserts Enam Ahmed, senior economist, thematic research at Standard Chartered Bank, which will lead to Hong Kong prices falling 10 to 20% in the next two to three years, while Singapore’s already weakening prices will likely further erode by 5 to 10%.

“Hong Kong and Singapore are conforming to the 18-year price cycle often seen in housing markets. These corrections should be manageable as economic fundamentals are sound and US rate rises will likely be small,” says Ahmed.

“Expected Fed rate increases are hanging over housing markets in Singapore and Hong Kong, compounded by fears that Hong Kong housing is in a bubble. Prices have already peaked in Singapore and are likely peaking in Hong Kong now,” he adds.

Ahmed reckons Singapore and Hong Kong are still running tight policies but could ease if house prices fall too far, which is what China and Korea have done in order

to boost housing demand and economic growth.

Limiting vulnerability Both Singapore and Hong Kong have used macro-prudential policies to try to limit their vulnerability, says Ahmed, but have only seen mixed success. But between the two, Hong Kong is in a more precarious position. “Singapore does not tick as many boxes in our bubble checklist; in particular valuations are much less stretched than in Hong Kong,” says Ahmed.

The predicted crash in home prices has led to fears of a recession in both territories, but this is not likely in the cards for Singapore or even Hong Kong. “We believe the moderate declines in prices we expect in Hong Kong and Singapore will not cause a recession,” says Ahmed, believing that a moderate fall in house prices has proportionally less impact on gross domestic product than a larger fall.

He also says the Hong Kong and Singapore are partly shielded from the potential negative wealth effects from falling housing prices due to the hefty share of consumption goods coming from overseas.

Still, should house prices adjust more drastically than the forecasts, Ahmed expects both Hong Kong and Singapore will experience a sizeable drag on their

Home price crash unlikely

economies. In Singapore, falling housing prices has contributed to a weaker housing end-market, which in turn is leading to a cooler land market.

A BNP Paribas trend analysis of 185 winning sites in the Government Land Sales programme in Singapore since 2007 revealed that the land market was softer in January to October 2015 relative to 2011 to 2013, a three-year period when most bids were outright aggressive, says Chong Kang Ho, analyst at BNP Paribas.

Restaurant Watch

Jinjuu London makes its way to Lan Kwai Fong

Bringing a stylish restaurant and bar from London to Hong Kong in December, Jinjuu presents a sophisticated interpretation of modern Korean dining. With a menu highlighting both classic and street food fare, Jinjuu brings the modern Korean Anju culture of ‘eating while drinking’ to street level in Lan Kwai Fong.

Founded by celebrity chef, Judy Joo, Jinjuu is based on the Korean philosophy that drinking should always be accompanied by good food. Looking back, Jinjuu London was discovered by one of Judy’s partner’s daughter who lives in London. After spending her birthday party there, her father flew in and loved Jinjuu. He then said they had to bring it to Hong Kong.

According to Judy, they have been working when they saw for a hip modern Korean restaurant to bring to HK and they immediately grabbed it.

12 HONG KONG BUSINESS | JANUARY 2016

The Jinjuu Tong Dak

K-Town Mini Slider Buns

White Rice Negroni

Spiced Kimchi Mary

FIRST focuses on strategy and the integrative nature of the business environment in which senior executives operate.

Each year, the programme receives approximately 50 participants who can retain their full-time job responsibilities throughout their EMBA study.

Participants who are interested in enrolling should have at least seven years of post-qualification business or relevant work experience, including five years in a managerial position and hold a responsible, senior management position.

Big-ticket MBAs are getting costlier

The 5 most expensive executive MBAs

G

etting your Executive MBA (EMBA) is a big step forward to further your career, but it also involves a huge financial investment.

Latest surveys show that the world’s most expensive EMBA programmes cost US$100,000 (HK$775,000) or more in tuition and fees. In Hong Kong, we found two programmes even more costly than that.

Hong Kong Business surveyed EMBA providers in the city to come up with the following list of five of the most expensive expensive EMBA programmes based on tuition and required fees. Just in case you are looking for Ivey Business School, kindly take note that its EMBA program is currently being revamped and new details are expected to be announced soon.

1 Chicago Booth EMBA Provider/Local Partner: The University of Chicago Booth School of Business Tuition Fee: HK$1,250,000 Duration: 21 months Chicago Booth EMBA started the programme in Hong Kong last June 2014.

Around 75 students were enrolled for the 21-month programme. One of the selling points of the programme is the class rotations in Chicago and London.

During the 21-month programme, participants will take 18 core courses, a selection of electives and the LEAD course - LEAD is a required course across all Chicago Booth programme and occurs over a number of quarters throughout the study. Core courses are taken in a 14 HONG KONG BUSINESS | JANUARY 2016

pre-set curriculum focusing on business foundations, functions, management and environment. During the second year of the programme, participants can choose from two to four electives taught in Chicago.

2 The Kellogg-HKUST Executive MBA Provider/Local Partner: HKUST Tuition Fee: HK$1,250,000 (US$ 161,200) Duration: 18 months The Kellogg-HKUST Executive MBA programme is designed around weekend blocks allowing students to continue their careers while enrolled in the programme.

The programme include courses under traditional subject areas, providing tools and techniques for solving complex managerial problems. It also puts an emphasis on three specific areas of management skills: behavior in learning organisations, international management and managing groups of co-operating firms for international competitiveness.

The programme begins with one live-in week at HKUST, followed by monthly livein weekends for modules 1 - 5, then two live-in weeks at the Kellogg School and concludes with additional monthly live-in weekends for modules 6 – 10.

3 CUHK EMBA Provider/Local Partner: The Chinese University of Hong Kong Tuition Fee: HK$513,600 Duration: 24 months The CUHK EMBA programme of study

4 Henley Business School Flexible EMBA Provider/Local Partner: Henley Business School Tuition Fee: March intake - HK$246,274 (£21,000); September intake HK$275,592 (£23,500) Duration: 30 months Henley Business School Flexible EMBA is being offered to practicing managers with nine or more years of managerial experience. The programme is structured for participants to continue to work fulltime and to study the MBA part-time. It is delivered through face-to-face workshops, activities involving peer group learning in teams and self study, on and off line. Over the 30-month programme, participants will undergo three stages of course modules.

During Stage 3, participants have to take the Management Research Challenge wherein they will choose to do either a Dissertation or an Integrated Business Project.

5 The University of Hull EMBA Provider/Local Partner: Kaplan Higher Education Tuition Fee: HK$160,000 Duration: 2 years The University of Hull EMBA is offered to all participants who have a minimum of three years appropriate post-graduation work experience. The programme’s structure includes modules about Managing in Organisations, Human Resource Management and Economic Environment, Marketing and Operations Management, Accounting and Finance for Managers and Research Methods and Strategic Management.

The programme can be completed in two years with 18 months of coursework and a six month dissertation period with supervisor support.

startups

Professional tradesman at your service in just a few clicks

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hen two young entrepreneurs from Moscow found that a big problem for homeowners in Hong Kong was to meet reliable and trusted tradesmen for home improvements, they decided to focus all their efforts on finding the solution. People here, they said, still like to use traditional word-of-mouth ways to find a worker, which is really ineffective and slow. In response, they developed a website, Fixme.hk, that allows homeowners to find a really professional and trustworthy tradesman without any hassles, in just a few clicks.

Serge Sechko and Igor Bulgakov, both 27 years old, have been working

in the web development field for many years. While in Hong Kong, they noticed that when people try to find a worker from a newspaper ad, they usually don’t know what they are getting. How experienced, polite and reliable will be a tradesman is always uncertain, they said.

Fixme.hk comes to the rescue.

According to Sechko and Bulgakov, the website takes the worry, stress and uncertainty out of the hiring process.

“No more hassles to deal with lowly educated plumbers, electricians and plasterers. Our tradesmen are rated by homeowners on the quality of service and reliability; simply post the job and get the best tradesmen in your location,” said the founders.

The website works by having homeowners fill out a simple form with their requirements and the best local tradesman with ratings and feedbacks will contact with them shortly.

With USD40,000 as their current funding, the duo plans to extend their business to neighboring places, such as Singapore, Macau, Shenzhen, Taiwan and Guangzhou after they meet their objectives and plans in Hong Kong.

Zero percent commission for property clients

Candid Properties, billed as the first agency in Hong Kong with 0% commission for clients, was started by a 31-year old Briton who was frustrated with existing real estate agencies in Hong Kong. Alastair Hoyne, a former investment banker who moved to Hong Kong in 2009, complains that websites of realtors in the city had very few pictures or 16 HONG KONG BUSINESS | JANUARY 2016

descriptions, which would result in a lot of wasted time viewing properties that for the most part, ended up being unsuitable. Moreover, he adds that the agents who were being paid primarily on commission were driven by their own personal self-gain and not helping others find something within budget.

“It drove me mad that I had done all the searching, found the places myself and all the agents had done was fundamentally open the door to the property. I had to pay them half a month’s commission for nothing!” he says.

As a result he decided there had to be a better process and created Candid Properties, where he aims to give all the property pictures and features upfront. Their agents are also paid bonuses based on their level of service, not just revenues and they charge no commission for people buying or renting.

“Truly transparent” FX is here

Ex-Goldman Sachs investment banker and hedge fund manager, Riccardo Capelvenere, argues that Asian SMEs are under increasing pressure on margins due to compounding factors. Banks, he says, overcharge for FX and international payments especially to smaller companies. Moreover, he adds that SMEs are underserved and provided with poorly designed and unintuitive technology from commercial banks. HK permanent resident, Capelvenere concludes that this is primarily due to a lack of competition, high cost base, legacy technology and lack of creativity in addressing changing client needs.

As such, to provide an easily implementable offering to help them with their cost base and operational efficiency, Capelvenere founded Currenxie, an HK-based peer-to-peer foreign exchange platform offering same-day, spot and forward forex services. It operates an innovative online P2P platform on which clients can transact with each other anonymously, in real-time and at a transparent market mid-price. It is billed as possibly the world’s first ‘truly transparent’ online orderdriven exchange for deliverable FX. “The platform charges an explicit commission for the FX transaction as opposed to a traditional net price methodology at some obscure FX rate.

Currenxie’s rates are more competitive and transparent compared with traditional banking providers, giving SME’s and smaller corporates a level of service and pricing that is traditionally only available to large corporations,” says Capelvenere.

According to Capelvenere, some added future features include a price competitive and easy-to-use payments module for international payments. The goal, he says, is to provide businesses with a cost effective front-to-back integrated solution for their FX and payments requirements including seamless multiple payments functionality with the FX and payments component facilitated at least partially within our P2P marketplace.

According to Capelvenere, Currenxie has US$1million funding to-date and continues to experience strong growth from a first month’s client transaction volume of USD250,000 to the most recent month of USD6,000,000. Currently, they have 20 clients ranging from SMEs to a HK stock exchange listed company. He adds that they are aiming to reach 200 clients by end of 2016.

HONG KONG BUSINESS | JANUARY 2016 17

FINANCIAL INSIGHT: Private Equity

The region has been brimming with investments

Chinese PE firms having a field day in Southeast Asia

PE firms itching to spend their cash reserves outside of China are finding lucrative openings in Southeast Asia’s increasingly volatile markets.

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hen cash-flush private equity (PE) firms scanned possible targets beyond their usual haunts in China, they were pleasantly surprised to find Southeast Asias change from an investment minefield to a flower field. Not only has there been a surge in PE interest among southeast Asian companies due to a constriction in traditional financing options, but the promise of returns has become more fragrant than ever.

“We are seeing record levels of dry powder across Asia.

Private equity and venture capital fundraising in the region continues to remain active with many firms exceeding its target for pan-Asia or country-specific funds. We expect the rise of cross-border transactions to continue and secondary buyouts

18 HONG KONG BUSINESS | JANUARY 2016

A total of 42 PE transactions were completed in the second quarter, an almost 50% increase compared with the same period in 2014 when only 29 deals were completed.

will remain a popular option to refurbish portfolios,” says Kevin Poa, principal at Baker & McKenzie.Wong & Leow, member firm of Baker & McKenzie in Singapore.

While greater China continues to dominate the Asian PE market, 2015 saw a spike in the number of PE deals executed across southeast Asia not seen since the global financial crisis hit. “This reflects the continued increase in appetite that PE is demonstrating across the region,” says EY in a PE report published in September 2015.

The second quarter of 2015 was a particular high point for southeast Asia, with a total of 42 PE transactions completed in that quarter, an almost 50% increase compared with the same period in 2014 when only 29 deals were completed. The level of equity

also ballooned in the same period with a total of US$740m invested, compared to US$475m.

“We are in a period of volatility in Southeast Asia. This creates opportunities for PE investment as companies will need to raise capital, which may not be forthcoming from traditional sources,” says Luke Pais, Asean leader, M&A and private equity at EY. While chasing opportunities, PE firms must be wary of rising asset prices and heavy competition, which could make it more difficult to close purchase transactions.“We are seeing both strategic companies and private equity firms interested in many of the same assets, including direct investments and co-investments made by pension funds, which have a long-term investment horizon,” says Poa. More mid-market deals Poa reckons that PE firms have been gorging on deals in several promising sectors. Singapore and Southeast Asia have been seeing more mid-market deals in the consumer goods and retail space,

FINANCIAL INSIGHT: Private Equity with tech and industrials also holding some promise.

PE firms must also keep an eye out for when Southeast Asia’s real estate gains steam, which may be sooner rather than later. While the sector has seen asset inflation amid weakening currencies and relatively cheap capital availability, prices have started to come off their peak recently.

“A further weakening in asset prices is expected and capitalised funds now look to buy into attractively priced, good quality and fundamentally sound real estate assets,” says Benedict Lim, managing director, real estate M&A at EY. “Southeast Asia is the next real estate hub for value, opportunities and core capital given the asset inventory is in different stages of property cycle and landscape maturity.”

Technology is another sector that could become the next big hotspot for PE investments, and will be an exciting space with lots of deal activity over the next few years, says Purandar Ra, Singapore head, transaction advisory services at EY. “The impact of technology is felt across industries, which see existing business models being disrupted and re-engineered.

There is a lot of capital available to technology companies; and existing brick and mortar businesses are also actively embracing technology for growth,” adds Ra. The EY report says PE funds appear to be principally focused on Singapore when making investments into the Investment activity in ASEAN

Source: Thomson One, Dealogic and Mergermarket

technology sector, with 10 of the 14 investments being made into Singapore-based companies.

Hong Kong’s hot sectors In Hong Kong (HK), the financial and real estate and sectors remain two of the more attractive sectors with a steady number of buyouts and exits.

The past few months have seen major deals in these two hot sectors, including, JD Capital acquiring Ageas (Asia), an international insurance business, for US$1.4 billion.

“Due to a strong appetite for insurance and financial products in the region, private equity firms are interested in financial-related companies,” says Alfred Lam, research manager at Hong Kong Venture Capital Association.

Another major deal was Gaw Capital and KIC buying InterContinental HK—a luxury and iconic hotel with a prime location—for US$940 million.

Lam reckons the average occupancy rate reached at 90% and 85% in 2014 and first half of 2015, respectively, which proves the profitability of running a hospitality business in HK. “Despite the velocity of the capital market and economy, I am optimistic of the private equity market in HK,” says Lam, citing that private equity firms in HK advised over US$110 billion capital at the end of 2014.

“Besides, China’s sovereign wealth fund and family offices are very keen on allocating their wealth to the private equity asset class, and hence it definitely can

Due to a strong appetite for insurance and financial products in the region, private equity firms are interested in financialrelated companies.

boost the investment in other countries in Asia as well as HK,” adds Lam. HK is attracting more PE activity after tax exemption on profit was extended to offshore private equity funds in July 2015, with some PE firms transferring their fund management companies to HK. Lam also reckons that John Levack, vice chairman of HKVCA, should lead the charge to implement laws that will allow private equity funds to be domiciled in HK. The power of portfolio activism Given the challenges of the PE market and the uptick in deals across the region, portfolio activism will be one of the key strategies for players to win and create long-lasting value.

“If the downturn taught the industry anything, it is that lasting value comes from active engagement with portfolio companies,” says Varma.

“An activist approach is just one part of a value chain that also includes proactive deal sourcing, effective due diligence and a wellplanned exit strategy. But it is a critical one, especially in the AsiaPacific region, where so many deals have historically involved minority stakes.”

Varma reckons there is no rigid prescription on how to structure a team devoted to portfolio activism. But his firm has found that all effective activist valuecreation programs feature five critical building blocks: Harvest low-hanging fruit quickly, design a robust value-creation plan in Year 1, execute on what matters most, eepen the talent pool and build a top organisation, and overinvest in good deals and turn them great.

“None is sufficient on its own,” says Varma. “but we find that the firms that deploy these building blocks early and throughout the asset’s hold period generate more value and are more likely to produce consistent, marketbeating returns.”

HONG KONG BUSINESS | JANUARY 2016 19

economic INSIGHT: 2016 outlook Hang Seng Bank’s Wong expects mainland China’s impact to be manageable in the short and medium term, but expect the mainland to impact the overall long-term trajectory of HK’s economy.

They also outline the three main implications of global macro environment as follows: Increased market volatility due to policy uncertainty, higher borrowing costs in HK given the rising rate environment expectation, and weaker external demands due to weak US imports & the slowing economy in mainland China.

Uncertainty grips economic predictions

Bearish 2016 looms for HK

The outlook for the Hong Kong economy paints a somber picture for the coming year, as global headwinds mount and uncertainty deepens.

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urprisingly resilient domestic demand has managed to support Hong Kong’s economy, which grew by 2.3% in the third quarter (better than the consensus forecast of 2%), bringing GDP growth to 2.5% for the first nine months of the year.

However, the combination of tepid regional demand and the gloomy global backdrop has prompted a number of analysts to temper their expectations for future economic growth.

Deutsche Bank economist Michael Spencer is expecting real GDP growth of 2.5% and 3.0% for 2015 and 2016 respectively, with growth being fueled by gross fixed investments and government spending. Hang Seng Bank economist Jackit Wong has turned even more bearish, cutting the fullyear 2015 estimate to 2.3% and 2.4% for 2016. Key themes dimming the overall outlook include weak demand from the region, slow global trade, and the lack of credible support from domestic consumption. Tourism could likely help support the economy but 20 HONG KONG BUSINESS | JANUARY 2016

Hong Kong’s economy grew by 2.3% in the third quarter, (better than the consensus forecast of 2%), bringing GDP growth to 2.5% for the first nine months of the year.

the weak global outlook in combination with the anti-corruption drive in China may impact both tourist traffic and spending.

While they may be insignificant in the short run, the global economy’s impact on Hong Kong’s economy in the long term is much more significant. Hong Kong Monetary Authority’s research shows that over a five-year horizon, the Mainland-based trends account for about 65.3% of the shock to Hong Kong’s growth.

Domestic economic growth With external demand not present to buoy the Hong Kong economy, domestic demand will have to pick up the slack. However, one factor limiting the amount of wage growth that can support this domestic demand is the extremely fluid labor force situation currently prevalent in Hong Kong. According to Deutsche Bank’s Spencer, the country’s labour force automatically adjusts to the supply-demand situation, which has limited wage deflation due to oversupply but also capped the upside to wage growth.

Hong Kong’s openness to internal migration and lack of support for the unemployed has caused expatriate workers to simply leave if they do not find work after being laid off. On the upside, even when Hong Kong’s labour market gets to full employment, the country simply imports more workers from China or other countries.

Spencer notes that despite Hong Kong’s unemployment rate hovering around the full employment level (about 3.2%), real wage growth has only been 1% since 2011.

Employment and labour force growth

Source: CEIC and Deutsche Bank

analysis: Financial technology

FinTech has been dominating the banking space

HK banks out to turn FinTech rivals into collaborators The rise of financial technology firms has been a threat for Asian banks, but in Hong Kong, the competition presents chances for collaboration.

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hen FinTech startups began gathering blazing-hot momentum all over the world, it did not take long for Hong Kong banks to feel the heat. FinTech firms promised cheaper, more convenient transactions, especially in the payments space, and packaged these in apps and other digital platforms that resonated well with the modern internetdependent, smart phone-tapping customer. With billions of dollars of revenues on the line, Hong Kong banks are working with their supposed FinTech rivals to develop more innovative products and retain customers whose feet are turning towards the exit door.

The rise of technology firms presents a major threat to banks’ business models, and the consequences for banks can

22 HONG KONG BUSINESS | JANUARY 2016

Across five key retail banking businesses, up to 40% of revenues and up to 60% of profits are at risk of loss by 2025.

be quite dramatic, says Joydeep Sengupta, leader of McKinsey’s Financial Services practice in Asia.

McKinsey estimates that across five key retail banking businesses - consumer finance, mortgages, SME lending, payments and wealth management - up to 40% of revenues and up to 60% of profits are at risk of loss by 2025. “It was difficult for customers to switch banks when dissatisfied,” says Sengupta.

“However, new apps and technology offerings from FinTechs are beginning to break the heavy gravitational pull banks exercise on their customers, one slice at a time, starting with the most attractive slivers.” Offering lower prices and superior customer experience through their sleek apps, FinTech firms are beginning to woo customers in Asia en masse.

Analysts say FinTech has filled up the space that has been left open as banks were forced to focus more on compliance instead of rolling out innovations. Consumers have also begun to turn to FinTech for what experts believe are cheaper and more intuitive alternatives to traditional banking products.

This disruption is nothing new to banks, but the rapid speed at which it is developing coupled with relatively weak business agility has put banks at a disadvantage.

“The problem here is, banks are not quick enough to realise the value in developing such capabilities earlier, before they become focal points of externally led disruption. Bank who fail to catch up with digital disruption will thus lose out,” says Tom Mouhsian, head of customer & growth practice for the ASEAN region at KPMG. Mouhsian believes that banks continue to hold such “huge advantages” over FinTech that it can leverage their established market and capital resources.

Banks would be wise to mobilise these to try to at least adopt new digital solutions and concepts that are coming to market, if they themselves cannot lead in the innovation.

Threat as opportunity Asian banks are responding to the innovation challenge in different ways. Citibank is viewing the threat of FinTech as an opportunity to collaborate with the most innovative companies in the world.

“We see the emergence of FinTech as an excellent opportunity for the banking industry to accelerate and uncover new solutions that can bring about positive, transformational changes to the way people bank. We believe that the best part of innovating is about having the right partnerships,” says Angel Ng, country business manager, global consumer banking at Citibank.

co-published Corporate profile

Bose harmonizes sound and simplicity

The new SoundTouch 10 wireless system lets you listen to your tunes, anywhere.

SoundTouch 10 is so portable that it can be put anywhere in the house. Its unique feature shows that it can play the same music in one room or various tunes in different rooms. All it takes is pressing one of six presets on the remote (which can rate a tune with thumbs-up-or-down buttons) or speaker.

The new Bose SoundTouch 10 wireless music system

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ince its foundation in 1964, Bose Corporation continues to bring about innovative sound inventions.

With a drive for excellence, they have made their mark in the audio industry, bringing music to the ears of their consumers not just in the work place – but in the home as well.

Advanced technology, style and convenience are what the company aims only to achieve. Thus, Bose Corporation introduces its latest release - the SoundTouch 10.

Designed in two colors (black and white), the SoundTouch 10 is a wireless music system with a small speaker measuring 8.34” x 5.56”. Automatically connected to Bluetooth and Wi-Fi, it can instantly stream songs from other worldwide music services, such as Pandora, Deezer, iHeartRadio, iTunes, and InternetRadio.

With the new 802.11n dual-band Wi-Fi, the SoundTouch 10 connection is highly durable with minimal interference and drop-outs. Its added 5 GHz compatibility likewise offers a more reliable streaming option in crowded or enclosed places.

The SoundTouch 10 wireless speaker is also equipped with the new Unidome transducer, a 2.5” powerhouse that produces the highest amplitude of its kind, making it a major breakthrough in Bose engineering.

Listen to music everywhere “There’s nothing else like it,” says John Roselli, general manager of Bose Wireless Speakers. “SoundTouch systems sound incredible, and now they let you listen to anything from your phone or tablet in as many rooms as you want.”

In addition to exploring music from other services, SoundTouch 10 has a special app feature with Spotify that enables direct systems control and the easy search from the Spotify playlist.

“This partnership with Bose enables us to provide users with a ready-to-use music experience in the home,” says Jorge Espinel, Spotify’s Vice-president of Global Business Development.

“This blends Spotify’s favorite features and playlists with Bose’s innovative technology and incredible sound quality.”

Soon to be out in the market is the ReadySet with Spotify which enables

“SoundTouch systems now they let you listen to anything from your phone or tablet.”

using an existing Spotify account (or signing up for one), pre-loading SoundTouch presets with Spotify playlists, and having a SoundTouch speaker arrive customized, programmed, and ready to go.

“We obsess over the big and little details that no one else has,” says Roselli.

“And that includes our integration of Spotify. With SoundTouch, you’ll be able to play it through Bluetooth, from our app or theirs, or at the touch of a button. And that gives the millions of Spotify users all over the world more flexibility and control than they’ve ever had before.”

SoundTouch 20 and 30 Series III SoundTouch 10 wireless music system costs HK$1,680, and is available at Bose outlets and selected authorized Bose dealers. (For SoundTouch systems and prices, visit www.bose.com.hk).

It is part of the Bose product line which includes the new SoundTouch 20 and 30 Series III speakers. The SoundTouch 20 Series III features a rich, room-filling sound, while the SoundTouch 30 Series III is a great performing one-piece solution.

There is also the new SoundTouch SA-5 amplifier that operates weatherproof speakers for outdoors.

Indeed, streaming all-time favorite tunes has never been easier. Gone are the hassles of connecting wires and cables.

Now, users can enjoy listening to endless music anytime – and wherever part of the house they’re in.

Perfect for multi-room listening

HONG KONG BUSINESS | JANUARY 2016 23

COVER STORY

Find out which way to go in 2016

16 smart investment choices in 2016 to come out ahead of the monkey pack Outwit all the other investor chimps and outmaneuver even when the markets go bananas.

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016 is the year of the monkey, and investors would do well to channel the smarts of this zodiac animal as they navigate an investment jungle filled with irresistible European equities and risky tech plays. One caveat is that no one has a crystal ball and if we at Hong Kong Business knew which would be the best investment picks, we would be retired by now. So should you harvest the low-hanging fruit or risk a limb for tastier investment deals? To help you decide, our troop of analysts and traders have gathered and peeled this year’s best investment choices for you. Read on to see which ones you would like to chew on in 2016.

1. European Equities Equity markets in Europe flourished in 2015 on the back of accommodative monetary polices and increasing corporate earnings momentum, and this trend should continue in 2016, says Zal Devitre, head of investments at Citibank. “The European Central Bank has signalled its intention to continue and perhaps augment its monetary stance. We therefore continue to favour equities in Europe ex-United Kingdom,” says Devitre.

He expects stronger domestic demand in 2016 due to lower oil prices and a weaker Euro, which will then help propel European economies and corporate earnings 24 HONG KONG BUSINESS | JANUARY 2016

across the region. He cites consensus estimates that point to double-digit earnings per share growth for European companies from 2015 to 17.

Buying European equities is a bit of a consensus call, says John Lilley, head of investment strategy at Taurus Family Office, but it is made especially attractive by the impact of the lower currency, the sharp decline in oil prices, and the quantitative easing by the European Central bank. “European equities should have a good 2016, in particular Eurozone equities,” says Lilley. “There are some signs of a recovery in the European economies, and we expect the economic surprises in Europe to be to the upside, which should also support the equity markets.”

2. European Banks Given Europe’s rosy outlook in 2016, Devitre singles out European banks as a sector that investors should consider heavily. Not only are they trading at attractive levels, but they are also properly geared to benefit from the region’s ongoing economic recovery.

3. Russian equity index For investors who can be nimble and have an appetite for risk, buying Russian equity index can lead to big payoffs.

While this investment option may appear appalling at

“There are some signs of a recovery in the European economies, and we expect the economic surprises in Europe to be to the upside.”

COVER STORY first, there are signs of market improvement and there are viable plays to be made.

Russia is an ‘unloved,’ forgotten market facing high interest rates, a recession, a dependency on oil, and European Union and United States sanctions. However, the central bank has started to ease policy, the debt situation is a lot better than in Brazil, and oil prices could be at the lower end of the range,” says Lilley.

4. US Equities – Financials and Technology While European equity markets are set to soar, their counterparts across the Atlantic should show strengths as well, especially in the financial and technology sectors.

“US equity markets have performed well over the past six years,” says Devitre. “Investors should therefore be selective in identifying opportunities. Banks and Information Technology sectors stand out.”

Devitre points out that notwithstanding prospects of slow global growth, the United States economy continues to display healthy momentum as shown in solid payroll gains, construction activity, and consumer spending.He expects the Federal Reserve Bank will look to begin raising interest rates in 2016, a move that will benefit banks as they earn larger spreads on deposits.

5. Tech companies catering to F&B Even among the technology companies, there are budding investment darlings, and 2016 could be the turn of firms servicing the food and beverages (F&B) sector, says Sharon Chong, CEO at Golden Equator Consulting.

“Logistics, manpower and infrastructure management are constant pain points for F&B merchants, and as they look for solutions to bridge the gaps. We are going to see technology playing a big part in alleviating these issues,” says Chong.

Taking Singapore as an example, she says the competitive climate and relatively small physical radius of customers in the country pushes F&B merchants to begin expanding beyond their usual brick and mortar services. Many are exploring ways to increase their sales via efficient delivery and fulfillment options. “This will spur greater innovation amongst tech players catering to the F&B industry, including manufacturing and distribution within Singapore and other countries in the region,” says Chong.

Investors should also keep a close eye on online F&B Gross domestic product for Euro area (19 countries)

Source: Statistical office of the European communities

marketplaces, which Chong says is “another potential superstar.”

Cedric Tinguely

John Lilley

Kieran Calder

Rodney Comegys

6. Global revolutionary companies Ambition is not just for dreamers, but for investors as well, with pioneering global companies becoming one of the must-watch investment options in 2016. “Investing in global revolutionary companies, namely, those operating in Big Data space, companies concentrating on improving health and wellness of individuals, as well as companies facilitating a more integrated global travel system, will have high potential upsides, especially if you are able to spot a unicorn before it becomes one,” says Shirley Crystal Chua, CEO at Golden Equator Capital.

7. Asian tech Betting big on Asian technology companies should be a winning move for investors as the region, with the fast-growing group of countries known as Association of Southeast Asian Nations (ASEAN) dictating the pace.

“Although overall internet penetration in the ASEAN region is currently relatively low, the increasing infrastructure investments and growing middle class will contribute to a significant rise in internet users and tech adoption,” says Chua.

“Specifically, investors are leaning towards financial technology (FinTech) as well as consumer and social technology. The current rate of innovation and revolution of FinTech will almost certainly change the consumer’s day-to-day transactional behaviours and disrupt how financial institutions have been operating over the last few decades,” she adds.

8. Myanmar Among ASEAN nations, Myanmar is rising as an investment hotspot with the country’s improving business operating environment and economic activity.

“With the 2015 elections, Myanmar’s leadership is strengthening, allowing for stronger assimilation into ASEAN. This encourages the influx of foreign companies to help build the country with various resources and expertise to promote accelerated growth. We also expect to see more a liberated and open securities exchange, achieving higher standards of capital market activities and flow of resources,” says Chua.

9. Vietnamese equities Another standout investment destination in ASEAN will be Vietnam. Vietnamese equities, in particular, have been performing quite well for some time now and the country seems bent on picking up the pace of economic growth. “We have been for a while, and remain very positive about Vietnamese equities for 2016,” says Cedric Tinguely, chief trader at Bordier & Cie (Singapore).

“Vietnam’s gross domestic product is growing above 6% and is accelerating. Inflation, which has been a huge challenge in the past, seems to be completely under control. Demography is another big tailwind to the economy,” says Tinguely. “The decisions taken by the government and the central bank all go in the right direction.”

HONG KONG BUSINESS | JANUARY 2016 25

COVER STORY 10. Indian equities For those looking for medium to long term plays in 2016, buying Indian equities holds particular promise.

“We believe that the India story is a medium to long term one, and the stock markets have partially reflected this,” says Lilley.

He reckons a combination of lower oil prices and structural reform will keep the Indian markets well supported in the coming years. Despite the prevalent disdain for emerging markets, investors will still be persuaded to dip into Indian equities, among other emerging market investments, as they smartly differentiate between the stable and the vulnerable economies.

“We believe India will continue to be at the top of their lists for investment destinations,” says Lilley. “Indian stock markets have risen in response to hopes for the new government. Fundamentals are still decidedly positive, he adds.”

11. China equities Like India, China has been battered with negative investor sentiment, but Lilley says buying China equities is a solid strategy in 2016.Acknowledging that the Chinese economy faces many challenges ahead, Lilley points to stabilising economic growth in the fourth quarter and a shift towards a services-oriented economy, away from a manufacturing and exporting focus.

“We think Chinese equities will perform in 2016,” says Lilley.“Structural reforms aimed at boosting consumer demand in China seem to be gaining traction.” Other positive factors for China include ongoing financial liberalisation and moving plans to implement the ShenzhenHong Kong Stock Connect scheme, which will improve access for investors, says Kieran Calder, head of equities, Asia at Coutts.

“And we think it’s likely that the yuan will be added to the International Monetary Fund’s global reserve currency basket in 2016, which should boost the global standing of Chinese assets. Investors can access Chinese equities via China-listed A-shares or Hong Kong-listed H-shares,” says Calder. “Long-term investors may gain a margin of comfort by buying into the H-share market.

The China journey won’t be smooth, but we think lowered expectations will eventually get beaten and H-shares won’t stay at this current level for long,” he adds.

12. Japan In Asia, Japan has shone brightly after corporate reforms and record-high earnings led to an outperformance in 2015. “We expect this can continue next year,” says Calder.Despite outperforming in 2015, Japanese equities remain attractive. They are not expensive relative to global peers, profits are growing fast, and we see further upside in the year ahead.”

Calder notes that managements at a majority of Japanese companies have now adopted targets for return on equity, leading to higher-quality earnings.

In fact, foreigners were mainly net sellers of Japanese equities in 2015, replaced by new and large domestic buyers led by the massive ¥141 trillion ($1.2 trillion) 26 HONG KONG BUSINESS | JANUARY 2016

Sharon Chong

Shirley Crystal Chua

Zal Devitre

Government Pension Investment Fund. A number of other savings and pension funds may follow suit upon seeing the attractions of Japanese equities, including Japan Post companies.

“The top-down outlook for the Japanese economy looks favourable too,” reckons Calder.“The Bank of Japan stands by to provide further stimulus if required, and there is also the potential for fiscal stimulus, either through a delay in a planned increase in sales tax in April 2017, or bringing forward infrastructure projects that are required anyway for the 2020 Tokyo Olympics.”

13. Singapore real estate In Singapore, investment plays in the real estate market may arise in the latter half of 2016. “We remain bearish for at least the first half of 2016,however it is possible that a weak Singapore Dollar, and attractive prices will bring stability at a new(lower) level,” says Lilley.“This ‘capitulation’ by real estate holders has not happened yet, but once it does it could bring significant opportunities at attractive levels.”

14. Brazilian equities and fixed income Strategic investors keen on plays in South America should look towards Brazilian equities and fixed income.

The country has been battered with huge headwinds such as high interest rates, rising inflation, economic recession and political maelstroms – all of which weighed heavily in 2014 and 2015. But for Lilley, “it is possible that we may be reaching a point of ‘maximum negativity,’ where all the bad news has been fully priced in. It is not for the faint of heart, however later in 2016, Brazil may become a very interesting contrarian call.”

15. Active management of portfolios Finally, investing in active management of portfolios may be the most prudent action in 2016, especially if the year throws a lot of curve balls. “2015 saw rising volatility and in 2016 it will be more of the same. There are going to be bouts of significant volatility every few months, so tactical ideas may work well again,” says Lilley.

He recalls the events of 2015 wherein the first half of the year looked good, before turning negative after May for many markets, leading to a sour September when negative sentiment became overwhelming, then followed by nice recovery in markets from mid-September when investors realized that the underlying fundamentals had not deteriorated as much as the markets were signalling. “We suspect that as was the case in 2015, the central banks will be called in again to calm the markets at some point in 2016,” says Lilley.

16. ETFs With increased volatility comes increased risk, so investors looking to ease their worries should consider splashing out on some exchange traded funds (ETFs) in their portfolios. ETFs provide international exposure to an investor’s portfolio and can reduce the concentration risk or home country bias, says Rodney Comegys, principal, head of investments at Vanguard Asia-Pacific.

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Co-published corporate profile: Mercedes Me

Mercedes-Benz goes digital to reach new customers with the Mercedes me Store

Cultivating brand awareness in a fast-paced world, Mercedes-Benz unveils Mercedes me, its new platform aiming to draw the virtual participation of its fans.

B

rand awareness is the primary goal of advertising for any brand, but which market strategy should a market leading brand with a long of history and its fair share of recognition utilise next? Soft marketing is nothing new, and many major brands have employed it successfully by event sponsorships, product placements in big budget films and countless other forms of marketing tactics.

In the last two years, Mercedes-Benz has employed a more proactive strategy. While sponsorships and partnerships are all fine and good, what better than to take the reigns and take control of brand awareness by employing a wide range of media and interfaces to permeate your brand through all the different senses and multiple facets of life?

Engaging customers Enter the Mercedes me Store, a new platform which requires the actual and virtual participation of fans and customers, which is a brand new service that combines elements of what has been labelled as Best Customer Experience.

28 HONG KONG BUSINESS | JANUARY 2016

Expanding internationally Hot on the heels of the successful launch of Mercedes me in Hamburg and Milan, Mercedes-Benz opened its first store in Asia at Tokyo Haneda airport.

At the end of September, this exciting concept has landed in Hong Kong in the heart of Central, inside the convenient location of the Entertainment Building.

Occupying a space of 408 square metres, there is a car lounge which displays special Mercedes-Benz models along with a private consulting lounge for information and personal advice, going hand in hand with a broad spectrum of digital tools and interactive screens. On the other side of the lounge, is a F&B concept operated by its F&B partner, Maximal Concepts Ltd. With the lineup of an international team of culinary experts and mixologists, the

“Mercedes-Benz has set a new standard of personalised assistance for its customers.�

Mercedes me Store delivers an innovative dining experience inspired by Spain, Japan and Peru to Mercedes me’s patrons.

The Mercedes me Store is also an exciting event space which will host a number of special events, fashion shows, F1 race screenings, exhibitions, concerts and corporate functions.

Top-of-the-line showroom Mercedes me Store will also feature race cars, concepts cars as well as iconic classic cars in rotation at its cosmopolitan

Co-published corporate profile: Mercedes Me

showroom.

All of this will be combined within a high-end dining destination offering a unique Mercedes-Benz experience, while delivering a perfect meeting point for business meetings, social gatherings and private events in our city.

The landing of the Mercedes me Store in Hong Kong is part of the marketing and

sales strategy “Mercedes-Benz 2020 – Best Customer Experience.”

This is to reconfigure its sales organisation to bring the brand experience in line with the market’s expectations. The strategy is aimed to increase brand appeal to new target groups while retaining the loyalty of existing customers.

“The Mercedes me Store is also an exciting event space which will host a number of special events, fashion shows, F1 race screenings, exhibitions, concerts and corporate functions.”

Mercedes me Hong Kong Shop C-D, Entertainment Building, 30 Queen’s Road Central, Central +852 2895 7398 HONG KONG BUSINESS | JANUARY 2016 29

HONG KONG’S 25 LARGEST ACCOUNTING FIRMS

Hiring activity is bustling across the finance spectrum

Accountants are still badly wanted in Hong Kong

Increasing regulations and expansions are boosting the need for talent.

I

n the wake of the financial crisis, new regulations and shifts in the organizational role of Financial Planning & Analysis have been fuelling the need for qualified talent to help navigate companies through the increasingly complex business environment.

“Recruitment activity remains active in the accounting market in 2015 across all levels” according to Michael Page HK Director Rebecca Chan. The rapid development of the broad Asian economy has also led to a rapid expansion of Asian corporates with similarly growing headcount requirements.

Game-changing developments such as Basel III and SIFI (Systemically Important Financial Institutions) require extensive professional to comprehend, implement, and monitor 30 HONG KONG BUSINESS | JANUARY 2016

Businesses are more cautious in approving new headcount given the looming global economic uncertainty. A large part of hiring demand will continue to be driven by replacements.

compliance given that they require a complete rethinking of the way in which organizations operate.

Robert Walters HK’s Andrew Blake notes that he has been seeing hiring activity “across the spectrum of finance responsibilities – treasury, tax, internal audit, financial controlling, FP&A, M&A, etc.” He notes that there is currently a shortage of skilled Financial Accounting & Controlling professionals given that much of existing talent is being drawn towards new FP&A. Given that companies are building their finance departments to increasingly contribute to the decision making process, many professionals have been diverted away from the core controlling & reporting responsibilities.

According to Rebecca Chan, there is a lot of headcount requirement coming from

mainland firms looking to have their global overseas headquarters in Hong Kong.

These firms are focused on credit risk assessment candidates and treasury professionals.

Keith Wong of Randstand Hong Kong notes that Hong Kong continues to be a preferred gateway to China for many businesses, and this will fuel the need for HK-based talent.

Heightening regulations have also increased the need for certain segments within the profession such as compliance, credit risk, and internal auditors.

According to Andrew Blake, the amendment to the Inland Revenue Ordinance and the tax rate cut for Corporate Treasury Centers will spur an increase in demand for professionals to help companies adapt to these new regulations. According to Randstand HK’s Keith Wong, businesses are more cautious in approving new headcount given the looming global economic uncertainty. A large part of hiring demand will continue to be driven by replacements rather than new department headcount.

Who made it to HKB’s list?

In Hong Kong Business’ fourth year of ranking accounting firms based on total number of staff, PricewaterhouseCoopers maintained its top position with a headcount of 3,500. While rising to the second position from the third spot last year is Ernst & Young with 2,350 total number of staff. It is then followed by Deloitte Touche Tohmatsu HK and KPMG with 2,200 and 2,100 headcount respectively.

Generally, this year’s list of accounting firms remained stable except from some firms which experienced a slight increase and decrease in headcount.

Mazars in particular seen a decrease of 25 staff from last year’s 280 to 255. Whislt Baker Tilly Hong Kong seen an increase of 12 people from 268 last year to 280 this year.

HONG KONG’S 25 LARGEST ACCOUNTING FIRMS ACCOUNTING TOTAL STAFF TOTAL STAFF PROFESSIONALS 2015 2014 2015

MANAGING PARTNER

RANKINGS 2015

ACCOUNTING FIRM

RANKINGS 2014

1

PricewaterhouseCoopers

1

3,500

3,500

<3,500

Cassie Wong

2

Ernst & Young

3

2,350

2,200

<2,350

Agnes Chan

3

Deloitte Touche Tohmatsu HK

2

2,200

2,300

<2,200

Derek Lai

4

KPMG

4

2,100

2,000

<2,100

Andrew Weir

5

BDO

5

1,000

1,000

735

Albert Au

6

RSM Nelson Wheeler

6

449

430

255

Wong Poh Weng

7

HLB Hodgson Impey Cheng

7

400

400

<380

Raymond Cheng

8

Crowe Horwath

8

350

350

250

Charles Chan

9

SHINEWING

9

>300

300

>250

Roy Lo

10

Baker Tilly Hong Kong

11

280

268

250

Andrew D. Ross

11

Mazars

10

255

280

226

Stephen Weatherseed

12

Grant Thornton

12

200

200

170

Daniel Lin

13

Cheng & Cheng

12

200

200

<200

Andrew Cheng Hong Kei and Francis Cheng Hong Cheung

14

PKF Hong Kong*

14

126

126

83

Henry Leung

15

Patrick Wong CPA*

15

100

100

<100

Patrick Wong Lung Tak

16

Pan-China

15

100

100

<100

Patrick Ng

17

Wong Brothers & Co.*

17

94

94

<94

Charles C L Chow

18

HLM CPA

18

85

90

<80

Clement Leung

19

Ting Ho Kwan & Chan

19

80

85

20

Stephen Ting

20

FTW & Partners CPA

20

70

68

50

Lawrence Wong

21

Philip Poon & Partners*

20

60

60

50

Philip Poon

22

KLC Kennic Lui & Co.

22

47

47

43

Kennic Lui

23

C K Yau & Partners

23

47

45

37

Joseph Yau

24

CCTH CPA

25

41

35

14

David Yim Kai Pung

25

Lawrence Cheung CPA*

24

40

40

11

Lawrence Cheung Wai-kou, MH JP

Data provided by companies as at August 2015. *Data obtained from previous rankings, media reports, annual reports and other publicly availble materials.

HONG KONG BUSINESS | JANUARY 2016 31

Legal briefing

Can HK add more statutory holidays?

Efforts to increase statutory holidays will be strongly opposed without a paced rollout.

R

enewed efforts to add more statutory holidays will be strongly resisted without a paced rollout, among other ameliorative factors.

If you thought the Hong Kong government has given up on the measure to increase the number of statutory holidays due to strong opposition, then you may want to sit tight because the fight seems far from being over.

Trade unions, among other proponents, are urging the government anew to give blue collar workers their due privileges with legislation that adds five more statutory holidays, up from 12 to 17 to match the number of general holidays.

Analysts recognise the strong momentum backing the measure, but the government will need to throw the right punches to push forward with, including securing public consensus and proposing to stagger the roll-out to help mitigate the cost burden on businesses.

Who will benefit from the change?

Traditional blue collar workers are expected to benefit from the change to increase the number of statutory holidays by five to a total of 17 per year, and momentum for the measure has been gathering support among pro-labour groups.

“The protagonists of the change are the Labour Party and trade unions, who consider the status quo to be discriminatory against employees in traditional

Blue collar workers are expected to benefit from the change to increase the number of statutory holidays by five to a total of 17 . blue collar industries and those employed in restaurants, cleaning, security and retail, for example.

An increase in the number of statutory holidays would also likely benefit the hundreds of thousands of domestic helpers who work in Hong Kong,” says Winnie Ng, head of employment & incentives at Linklaters Hong Kong.

A 2011 Labour Department survey which showed that 1.4 million employees – or approximately half the workforce excluding foreign domestic workers – would benefit from the increase in statutory holidays, notes Rowan McKenzie, partner, employment law group at Baker & McKenzie in Hong Kong.

The survey further revealed that workers in low-paying industries such as restaurants, estate management, security and cleaning services, food processing and production, laundry and dry cleaning services, and retail would be the main beneficiaries of the increase.

Businesses that cater to these workers during 32 HONG KONG BUSINESS | JANUARY 2016

holidays – such as restaurants and retail stores – will also see an increase in revenues.

Rowan McKenzie

Simon McConnell

Winnie Ng

If legislated, what would be the implications for employers?

Employers will have to grapple with higher operating costs related to increased paid holidays for workers. They may also incur higher costs related to manpower hiring and training of temporary replacement workers.

“Increasing the number of statutory holidays would mean that all employers in Hong Kong will be mandatorily required to grant five additional paid statutory holidays. This broad-brush approach will necessarily increase the costs and work burdens to companies, especially small and medium sized enterprises,” says Simon McConnell, partner at Clyde & Co. “It is possible that additional workers may be needed to supplement the reduction in manpower arising from employees taking statutory holidays.”

Small and medium businesses, which constitute 98% of Hong Kong enterprises, will feel the brunt of the measure’s cost increases, says McKenzie, citing government estimates that the cost for one additional statutory holiday amounts to HK$0.37 billion based on the 2011 wage level. But he says that some of the cost will be offset by the revenue that will be generated by the increased number of people spending on those public holidays.

Will the HK government be able to pass the measure and, if so, how fast?

Analysts reckon the government is exploring whether an increase in the number of statutory holidays is necessary, and that a public consensus will likely be gathered first before attempting to broker a deal with businesses and pushing through with legislation.

Given the elections in mid-November 2015, McKenzie reckons the government will be keen to secure the public’s support on any proposal and will have to find a way to balance the interests of employers and employees before formally committing to a course of legislative change.

For McConnell, the possible negative impact on businesses will force the government to tread lightly. “Careful consideration will need to be given in balancing the potential impact on employers and improving the welfare of employees in Hong Kong.

If such a legislative change is to be made, any such increase would preferably be done gradually after broad public consultation,” says McConnell.

Ng says the government is likely to face resistance from businesses, especially given the string of measures that have recently put pressure on their bottom lines.

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CMO Briefing

n “oldie” but a “goodie”—this phrase somehow sums up the status of email marketing in this day and age. The advent of social media marketing has not dampened the prospects for email in Hong Kong, analysts said.

“The humble email address remains the principal form of online identification, and email addresses are required for various forms of online presence— whether that is signing on to social media or even accessing some online portals. In fact, organisations looking to properly exploit the opportunities of social media must recognise how important the email address is in making their strategy cohesive,” explains Stuart Barker, managing director at Emarsys Hong Kong and Australia, who goes on to point out that a Radicati Group report predicts worldwide email accounts are expected to grow to 4.9 billion by end-2017 from 3.9 billion in 2013.

“That represents an average annual growth rate of 6%, so clearly this isn’t a channel on the decline,” Barker notes.

consumers are now accessing more content via various devices.

“Email also adapts well on mobile, and with email sending and receiving ranking highly as one of the top three activities for smartphone users in Hong Kong (80% accessing their emails through their phones), it will remain one of the tools we use to communicate to our customers,” says Chan Cheong Eu, country manager, Greater China-South, Qatar Airways. According to Chan, email “remains an important part of Qatar Airways’ marketing efforts in Hong Kong.” Compared to social media, email allows for better targeted reach, even as social media continues to pull away in terms of generating “buzz.”

“While social media is great in stimulating engagement across broader audiences, there is limitation of targeted reach due to the algorithm of the platform. Email marketing, however, is a direct channel where personalised messages can be sent to each individual customer in the hope of establishing a sustaining communication once a dialogue begins. Email marketing allows better segmentation to make message delivery more relevant and meaningful,” says Carrie Leung, head of marketing at DirectAsia Hong Kong.

A couple of other industry experts, however, are less convinced, as email also has its inherent weaknesses, they claim. “Email as a marketing tool is less and less important. As most emails today are from spam-like senders, it is hard to actually get and feel it is worth much using emails,” warns Joakim Cimmerbeck, founder of eicó paints. “Email marketing has been destroyed by ‘all auto emails’ and the many email lists that are sold and resold. It is a dirty and ineffective mode of communicating,” he laments.

Annmarelle van Schayik, a business developer at HelperChoice, provides a mixed answer. “Yes and no,” she says when asked whether email marketing is still relevant amid the rise of social media. “No, because customers already receive hundred of emails on a daily basis asking them to pay, buy, or register—they will trash yet another one.” However, she quickly notes that social media can complement a marketing push, but not fully replace it, as is the case in HelperChoice.

Does email still stand a chance against social media?

Email has often been pitted against social media, especially in the latter’s rapid rise in recent years.

However, email remains a viable and even preferred channel given its ability to deliver.

“Contrary to popular belief that email is dead, it’s actually effective—high conversion, cost effective, easy to handle, and if done right, can generate a lot of sales leads,” says Cecilia Yee, director of marketing at Flight Centre.

Email also manages to work best in a multiple platform set-up—extremely useful given that

How doe emails effectively reach consumers in the age of social media?

In the meantime, experts agree that the most effective way to harness email marketing for businesses is to do sufficient research to be able to create compelling emails. The customer‘s perspective always comes first, they say.

“Have something to say, make it easily understandable, be personal, and most importantly, always remember that email is merely the first click in a consumer’s decision journey,” Chan says. Barker agrees: data-driven emails “are critical to the success of an email marketing campaign,” he says.

Email marketing thrives in the social media era Social media may have reshaped the marketing landscape, but email marketing is here to stay.

A

34 HONG KONG BUSINESS | JANUARY 2016

Email activities rank as one of the top three activities for smartphone users in Hong Kong.

Regional Industry Briefing: Asian Gaming

Turning the wheel of fortune

Asian casinos stack up for brewing battle Casino competition is heating up even more in Asia with dozens of new integrated resorts ready to pounce on the market, and many are betting big to stay in the game.

W

hen Melco International planned Studio City Macau, it created the most lavish leisure integrated resort in the Chinese territory in response to the biggest challenge for Asian gaming operators in the next decade: Stand out among the onslaught of new casinos and emerge as the chip leader. More than thirty new casinos are expected to open in the next five years, so Studio City Macau spared no expense by doubling the usual number of entertainment attractions, constructing a 5,000-seat multipurpose live event centre and establishing the world’s largest nightclub brand.

Elsewhere across Asia, players are engaged in a construction arms race to build bigger and better casinos that they hope will attract not only VIP high-rollers but everyone else who wants to shop, dine out, book a luxury room and watch a spectacle.

Rise of more casino titans The number of casinos in Asia is expected to increase from 200 to 230 over the next five years, says Aaron Fischer, regional head of consumer and gaming research at CLSA, and most of these additions will use the large-scale integrated resort model that dwarfs many of the small existing operations in the region. To illustrate the massive scale of the up-and-coming batch of casinos,CLSA expects a near-doubling of capital expenditure during the period to roughly US$90 billion.

36 HONG KONG BUSINESS | JANUARY 2016

“The number of casinos in Asia is expected to increase from 200 to 230 over the next five years.”

There might be concern whether Asia can handle the crush of large casinos, especially as the Macau market undergoes a shakeup, but Fischer believes the pie is large enough for everyone to get a filling slice. “It’s raining casinos, which is scary, given the slowdown in Macau,” says Fischer. “However, after performing both top-down and bottom-up analyses, we conclude that Asia can comfortably absorb this capacity increase.”

Fischer reckons that comparing the US and Asian markets, the former has c.1000 casinos or three per million capita while the latter only has c.200 casinos or 0.05 per million capita. With more casinos competing, it is expected that revenues will taper off, but not so much to terribly hurt the operators.

In Macau, for example, Fischer expects the average return on invested capital (ROIC) to substantially drop from 34% on existing properties to around 21% for new properties – a rate that still comfortably exceeds the average cost of capital, as well as the global average ROIC for major projects in the US and Australia.

“We also compare gaming ROIC to other tourism investments and note that gaming remains a high return industry and the best way to play the Chinese tourism story,” says Fischer.

The lucrative revenues from the gaming sector has helped drive not only investor interest but also government support, which in turn has opened a number of

Regional Industry Briefing: Asian Gaming markets for new casinos. “Strained budgets mean governments at both the national and local level are looking for new sources of revenue. Rather than slashing services or raising taxes, many are either considering or are already committed to legalising gaming, including Japan and Vietnam in Asia,” says Fischer.

But he reckons that while many jurisdictions are entering gaming, not all will bring fortune to investors. Some markets like Australia appear to have rosy prospects but the likes of Macau may be in for a rougher ride.

Stand out to survive Operators realise that it is no longer enough to build grandiose casinos if they hope to rake in enough revenues.

Asians are expecting casinos to go beyond building magnificent gaming floors, and also offer memorable innovations and stage dazzling one-of-a-kind attractions. Top gaming executives that recognise the changing tastes of Asian customers have no qualms meeting these expectations. “We believe that investing in high-quality integrated resorts, with a significant proportion of non-gaming amenities which requires a meaningful capital investment, is critical to compete over the longer term as supply increases and more discerning customers demand a unique leisure and tourism experience,” says Lawrence Ho, chief executive officer and chairman of Melco International.

Ho says that his company is familiar with taking this more innovative approach through its experience in building crowd-pleasing attractions such as the award-winning, The House of Dancing Water show - Macau’s only cabaret show; Taboo; and Macau’s largest family entertainment centre, Kids City.

The House of Dancing Water, in particular, has been seen by over three million customers, which further cemented the idea that world-class entertainment attractions are playing a bigger role in a market historically focussed heavily on gaming.

Fischer says non-gaming amenities are increasing in importance, not just in Macau to appease the government as it tries to diversify its offerings, but regionally, as a product differentiator. The glut of integrated resorts coming to market has made it essential to differentiate, he adds, and there are many ways an operator can go about it.

“Iconic design and special ‘wow’ features must be embedded into large-scale IR projects. They need to be unique,” says Fischer.“Internals are just as important as Installed capex base by region

Source: CLSA

Melvyn Low

Choong Wai Hong

Non-gaming amenities are increasing in importance

externals; spending too much money on the exterior architecture and spending too little on the interiors is a mistake.” Given these challenges and factoring in the operating environment across each country in the region, investors would do well to avoid Macau, find plays in Australia and approach Singapore with a bit of caution.

Macau plummets With declining returns and profitability across the territory, Macau is losing its investment appeal. Global gaming revenues have fallen noticeably following the crackdown on corruption and money laundering by the Chinese government, says Neil Tisdall, analyst at Scotiabank, and Macau has been particularly affected with its gaming revenues expected to slump by a third this year,which would be its lowest since 2010.

“This represents a dramatic change from recent years, as gaming revenue had surged tenfold since American casinos were granted permission to operate in Macau in 2003,” says Tisdall. He says Macau has been hurt by the exodus of VIPs after the anti-corruption measures enforced by Beijing, forcing them to either curtail their gambling or move their business to casinos in other jurisdictions. This is a hard punch to take, especially for US-based casinos, which depended on VIP gaming for up to a quarter of their total Macau profits. There is little certainty that the situation will ease up anytime soon.

“It is uncertain whether further measures will be taken

by Beijing in addition to the debit card tracking and travel restrictions that have been put into place recently, and how the anti-corruption campaign will affect the slew of new resorts and casinos that are scheduled to open this year,” says Tisdall.

“In addition, new smoking bans in Macau are a further deterrent. If high-stakes gamblers are unable or unwilling to return to Macau, there are comparable casino options in Singapore and the Philippines, home of several multibillion dollar developments,” he adds.

Tisdall reckons that uncertainty will be a continuing theme in Macau as investors and high-rollers alike wait HONG KONG BUSINESS | JANUARY 2016 37

Regional Industry Briefing: Asian Gaming for clarity, but long-term prospects for gaming on the peninsula remain upbeat, given the size of the domestic Chinese market and the rapidly expanding middle class across developing Asia.

Australia forges ahead While Macau goes through some tough times, Australia appears to be flying high, partly on the tailwinds of VIPs transferring from Macau. “We are most positive on the Australian gaming market in the Asia region,” says Andrew Russell, analyst at Macquarie Capital Securities.

“We think Australia has everything going for it at the moment, from gross gaming revenue and EBITDA growth to improving margins and ROICs.” Investors should also smile at the fact that Australian casinos are the highest dividend payers in Asia while the sector remains relatively cheap. Russell says all three Australian casinos pay high dividend payouts – yielding 4-5% each versus Asia average of 2.9% -- and Australia is the second cheapest market in Asia now behind Singapore, to boot.

He says Australian casinos are growing GGR at a strong 10% rate on a high base in a mature market along with improving profitability, driven by a cheaper currency and lower VIP tax rates that have been attracting Chinese gamblers displaced from the Macau purge. “The Australian gaming market is benefitting from a depreciating currency which is leading to more mass and premium mass players from Asia including China and from lower VIP tax rates which is allowing the Australian casinos to pay higher VIP junket commissions,” says Russell.

He reckons the Australian casino sector is well positioned to capitalise on the structural decline of the Macau VIP segment, with several key factors making it one of the primary destinations for Chinese gamblers turning away from Macau. These factors include a lower VIP tax rate in Australia improving the competitive setting to attract junkets, a depreciating Australian dollar which boosts Australia’s attractiveness as a tourism destination, lower minimum bets and qualification for VIP status encourages greater premium mass, offering alternative source of credit for players, excess capacity on domestic casino floors, improved accessibility to Australia from Asia, and greater non-gaming attractions.

Russell cites improved transport accessibility from China as a key industry enabler in the coming years. DurMacau ROIC and capex

Source: CLSA, companies

38 HONG KONG BUSINESS | JANUARY 2016

Singapore gaming remains ho-hum

“Singapore’s market GGR has likely bottomed out after falling by as much as 34% in 2014 through to 2Q15.”

ing 2014, 100 million Chinese tourists travelled abroad, which is anticipated to increase to roughly 200 million by 2020, according to Tourism Australia industry forecasts.

Approximately 765,000 Chinese tourists visited Australia in 2014, but Australia is looking to raise this number, as aviation capacity from China to Australia over the next two years is expected to triple, per an agreement with the Department of Foreign Affairs and Trade.

With droves of Chinese tourists set to bump up VIP revenues in Australian casinos, Russell expects +4.2% CAGR through FY18 in total domestic GGR, with annual growth in VIP turnover of +3.1% CAGR through FY18.

Singapore stops bleeding Meanwhile, Singapore remains ho-hum with a mixed bag of investment factors. It offers solid returns at a cheap price – in fact, the country is the most profitable market amongst Asian gaming countries and is the cheapest on valuations – but one should not overlook that it is a mature market with flat growth, says Agarwal. He says those worried about falling revenues can take comfort from the fact that Singapore’s market GGR has likely bottomed out after falling by as much as 34% in 2014 through to 2Q15.

“Most of this decrease has been driven by VIP GGR, which has fallen by 56%. Mass market GGR has been resilient with only a 6% fall in the same period,” says Agarwal.

“As the number of Chinese VIPs declines, the structure is changing. Singapore market growth in the first few years was driven by Chinese VIPs, to which both the casinos extended direct credit in the absence of junkets. However, given the sharp decline in the number of Chinese VIPs in 2015, Singapore’s VIP GGR has witnessed a sharp 31% decline. Thus, the market composition is now gradually leaning towards the mass market. Singapore’s mass market revenues have been extremely resilient even in a weak market, thus enabling Singapore casinos to make robust margins and profits,” says Agarwal.

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Analysis: growth and property and 2014.

Hong Kong’s reliance on the Chinese economy has been rising over the past decade. Increasing economic integration with Mainland China has contributed to the rapid expansion of Hong Kong’s service exports. China’s membership of the WTO in 2001 helped turn the country into the ‘world’s factory’, and that has led the robust growth in Hong Kong’s trade and transportation (logistic) services.

It’s a troubling stretch for Hong Kong

Long winter ahead for HK Hong Kong may be seeing the beginning of a catastrophic decline.

W

e believe the Hong Kong economy is entering a structural downturn. We have revised down our 2016 GDP growth forecast to 2% from 2.2%, and set 2017’s growth at 2.2%. We believe Hong Kong’s potential growth rate, which was estimated at around 4% over the past 15 years, will shift down towards 2.2% over the medium term.

The downshift in the potential growth rate is likely to have significant implications for the Hong Kong’s potential growth rate

Source: C&SD, CEIC, Credit Suisse estimates

40 HONG KONG BUSINESS | JANUARY 2016

Over the upcoming 13th Five-Year Plan period (20162020), growth is expected to be maintained at around 6.5%.

labor market, property market and the fiscal position, in our view.

Slowing Chinese growth We think the structural downshift of Hong Kong’s potential growth rate will be led by a slowing Chinese economy, and rising US interest rates. On China, we remain cautious about the country’s growth momentum over the medium term, expecting GDP growth to moderate further to 6.5% in 2016 from around 7% this year. A faster than expected slowdown in industrial activities, helped by excess capacity in manufacturing and lack-luster support from infrastructure projects, is likely to be the main driving factor.

Over the upcoming 13th Five-Year Plan period (20162020), growth is expected to be maintained at around 6.5% according to the government.

This would be a sizable step down from the 9.7% average growth the economy recorded between 2000

Persistent property pressure We think Hong Kong’s property market will face three growing headwinds which will exert persistent pressure on transaction volumes and prices: 1.) Rising HKD interest rates.

We think the USDHKD peg will very likely remain over the medium term despite rising US interest rates. We expect HKD interest rates to go up in tandem with USD interest rates, and that should affect the property market in two ways: A narrowing yield differential between Hong Kong’s rental yield and mortgage rate; and a rising HKD deposit rate would encourage capital to stay in the banking system.

2.) Rising new home completions. Under the active policy of the Hong Kong government, we expect housing supply to continue to increase in the coming years. Housing completions in Hong Kong fell to a trough of 7,157 units in 2009.

3.) Prospect of a weaker labor market. With the service sector weakening, we expect Hong Kong’s labor market to soften, putting more pressure on wage growth.

The latest data show that employment growth in Hong Kong has weakened to almost flat on a year-on-year basis, dragged down by the contraction in labor demand in tourism-related sectors (retail, accommodation, food service) and professional services (finance, insurance, real estate). By Christiaan Tuntono, research analyst, Credit Suisse

HONG KONG BUSINESS | JANUARY 2016 41

OPINION

DEAN STALLARD

Why Hong Kong needs to keep tapping into overseas talent pools

Overseas talent offers different skill sets

H

ong Kong’s worsening talent gap and shortage of highly-skilled local professionals is driving employers to continue to look for overseas candidates.

In our 2015 Hays Asia Salary Guide, 72% of employers in Hong Kong claimed they would consider sponsoring or employing a qualified overseas candidate. So what roles are employers considering overseas talent for?

According to feedback, the areas that employers find it difficult to recruit for, and are therefore more likely to consider overseas candidates for, include sales, engineering, IT, and technical roles at the junior to mid management level.

Where overseas employees can thrive In engineering specifically, Hong Kong employers will sponsor skilled overseas candidates provided they have good management capabilities as well as client-facing and business development skills.

They must also be able to lead and manage teams within consultancies.

Another area where employers are looking for overseas professionals is finance technology.

Employers are specifically looking for business analysts and project managers since they only need English language skills.

However, most banks prefer not to provide visas; they prioritise residents based in Hong Kong, followed by overseas candidates who have

42 HONG KONG BUSINESS | JANUARY 2016

BY Dean Stallard Regional Director of Hays in Hong Kong

working rights in Hong Kong, then moving people internally from other offices. Their last resort is to consider expats.

In general, in skill-short areas job opportunities are available for expatriates.

Technical skills, experience, and qualifications are the main priorities for employers when hiring foreign workers. Due to Hong Kong labour laws, employers have to demonstrate their requirement for an overseas candidate based on the particular skill set.

While overseas talent is still considered for skills in short supply locally, employers demonstrate a strong preference for a candidate already based in Asia.

In general, the cost of recruiting an expat from Europe or The United States exceeds the cost of recruiting a candidate from a neighbouring Asian country, although it does depend on the relocation package on offer such as flights, allowance, housing, visas, and health insurance.

Therefore, employers prefer candidates who are on the ground in Asia.

Such candidates also have Asian language skills, cultural understanding, and Asian work experience. These ‘soft skills’ also help to explain why employers are wary of a candidate who has yet to commit to living in Asia, since cultural understanding, adaptability, stability, and bilingual skills all help smooth the transition for the new employee and increase productivity for the business.

Overseas knowledge and skills Other key considerations include what expatriates can bring to the organisation. For example, normally expats will bring across overseas knowledge and management skills that are not common among local candidates.

It’s for this reason that qualified overseas returnees are highly sought after in skill-short areas when a suitable local candidate cannot be sourced. These candidates have the dual advantage of not requiring an expatriate package and already possessing an understanding of the local culture and business behaviour.

These candidates are even more highly valued than Western expatriates since they combine their Westernised way of thinking and experience of how business is done overseas with local cultural understanding.

ECONOMICs

Ian Perkin

Searching for the Mainland influence

F

aced with continuing global uncertainties and more modest growth expectations on the Mainland, the pace of growth in the Hong Kong SAR economy continues to slow. In the September quarter of this year, gross domestic product (GDP) grew a real (inflation-adjusted) 2.3% compared with a year earlier, down from 2.8% on the June three months, according to the Government’s Third Quarter Economic Report, issued on November 13.

Growth in the current (final) quarter of the calendar will slow to 2.1% year-on-year, with the average full year expansion coming in at 2.4%, in line with the 2.5% achieved in calendar 2014. Hong Kong SAR growth will continue to be weak well into the New Year, with the pace of expansion limping along in the opening six months of 2016 and not much recovery in the second.

While hardly a stellar result, Hong Kong’s third quarter GDP growth did show some resilience in the face of negative external events, both economic and political. Global economic and trade growth in the September three months continued to be slow, with expansion in the US being outweighed by continued weaknesses in Europe, Japan and elsewhere.

Uncertainties piling up Political events from Europe (refugee arrivals), the Middle East (Syria and Iraq), to the US (Presidential primaries, Congressional changes and the timing of future official interest rate increases) and the South China Sea (rival claims) also added to uncertainties.

The September three month period was also the quarter in which confidence was shaken in the Mainland economic outlook by the Shanghai share market collapse (and government reactions to it), a modest devaluation of the Yuan and worries about growth targets.

It did come before the Mainland’s downgrading of growth expectations to 6.5% growth annually in the 13th five-year plan (2016-2020, but the prospect of slower growth from across the border may weigh on future confidence.

President Xi Jinping, attending the G20 summit in Istanbul in mid-November, has since confirmed that China’s growth this year will be 7% and that the country will account for one-third of world growth. Given the September quarter events, the local Hong Kong economy, boosted mostly by domestic consumption, performed better than might have been expected ahead of the quarterly report.

Private consumption spending increased 4.3% over a year earlier after much more robust growth in the opening six months of the year (5.7% on average). There are some worrying signs here.

Private spending in the third quarter was only 0.1% higher than the preceding June quarter and was the worst quarterly outcome since the final three months of last year.

This suggests that private consumption will have difficulty supporting the economy in the current three months to December and may be weaker in 2016.

Government consumption spending also grew at a slower pace in 44 HONG KONG BUSINESS | JANUARY 2016

IAN PERKIN Independent Economic Consultant perkin888@hotmail.com Hong Kong GDP Growth 2015-2014 (% change year-on-year) 2015 Q1

2015 Q2

2015 Q3

2014 Q1

2014 Q2

2014 Q3

2014 Q4

2014 Annual

Real

2.4

2.8

2.3

2.7

2.0

2.9

2.4

2.5

Nominal

7.0

7.6

6.0

5.2

6.7

5.3

4.8

5.5

Deflator

4.4

4.6

3.6

2.5

4.6

2.3

2.3

1.9

CPI

4.4

3.0

2.3

4.2

3.6

4.8

5.1

4.3

Source: HKSAR Government

the third quarter, coming in at 2.6% growth compared with 3.3% in June and 3.6% a year earlier.

Given constraints on the Government budget (the deficit in the first six months of the financial was close to $HK68 billion) there is unlikely to be much recovery here in the short term. It was, however, a slump in investment that provided a drag on growth in the third quarter, with gross fixed capital formation down 6.5 per cent on a year earlier (and was, in turn, down 1.7% on 2014).

Status of investments Building and construction investment showed relatively good yearon-year growth of 4.2% for the quarter (although down from 13.2% in the second quarter), but machinery and equipment investment slumped. It was down 10.2% on a year-on-year basis and that was on top of a 11.2% drop in the same quarter a year ago. This component of GDP also includes investment in intellectual property products and may indicate expectations of slower growth ahead in the services sector of the economy.

Given the uncertain outlook in the global economy and trade (and the adverse impact of geopolitical matters), Hong Kong’s external trade performance in the third quarter was lacklustre. As the Government’s third quarter report described it: “The external environment was highly unsteady, with the global economy showing the worst performance since 2009.”

Exports of goods were down 3.6% year-on-year for the quarter and services exports also slipped 1.9% on the year. Goods exports were off 4.1% and imports down 0.3%.

With the external situation weak, the prospect of a softening in domestic consumption and a drop in investment spending, the local economy can expect growth of 2.1% in the fourth quarter.

OPINION

tim hamlett

Rimsky and procedural fairness tim hamlett Former Editor of Sunday Standard and Associate Professor of Journalism

I

finished reading “Torture Team”, by Philippe Sands recently.

The book has been out for a few years – indeed it had been hanging around my bookshelf for a few years – and it starts slowly. But after a while it pulls you in and you have trouble putting it down. There are two interlocking stories: one is of how the Bush administration managed to convince itself that the War on Terror was not, legally, a war, so people captured as part of said war were not covered by the Geneva Convention, the international agreements outlawing torture, the US Constitution, or the US Army’s code for the treatment and questioning of prisoners.

Interwoven with this is the author’s personal journey. He is, despite the curious spelling of Philippe, a senior English lawyer who became interested in the topic because he was defending a British soldier accused of mistreating prisoners in Iraq. One of the points made as part of the defence was that the British Army was pressed by the Americans to use more drastic methods of interrogation, which the Americans were already using themselves.

Clashing cultures Mr Sands then traced this back through Abu Graibh, to Guantanamo, and eventually to the White House, where large numbers of the administration’s legal advisers had happily signed up to the idea that “enhanced interrogation” was not torture and in any case the victims were not entitled to the sundry legal protections from torture available to US citizens.

So there is a sort of detective story, and some interesting interactions between the inhabitants of two legal systems which, despite their common roots, have very different cultures. Not everyone’s cup of tea, but an interesting book if you find the law interesting. The underlying theme of Mr Sands’ inquiry is about the obligations of lawyers generally.

It seems that lawyers, especially lawyers appointed to posts in the gift of politicians, sometimes lose their bearings, and produce interpretations of the law which are eccentric if not perverse.

The lawyers who justified the Nazi treatment of the Jews were eventually, in some cases at least, tried in a sort of special supplement to the Nuremberg war crimes trials. Mr Bush’s lot were roundly rebuked by the Supreme Court, though nobody has actually faced a trial. No doubt similar mishaps have happened less conspicuously elsewhere.

Which brings me to the day after I finished the book, when we were all presented with the spectacle of the Secretary for Justice, Rimsky Yuen, announcing that the first court appearances of the Magnificent Seven policemen alleged to have beaten up Ken Tsang, and the same Mr Tsang alleged to have committed common assault and resisted arrest, were on the same day. And this had been deliberately arranged by the Department of Justice in the interests of “procedural fairness”.

I do not suggest that Mr Yuen is in any way 46 HONG KONG BUSINESS | JANUARY 2016

morally comparable with German lawyers in the 40s or White House lawyers in the aftermath of 9/11. But something similar in the way of self-deception seems to be going on here.

Because procedural fairness has nothing to do with it. Fairness does not, and has never, required that offences committed on the same day should be tried on the same day.

What procedural fairness requires In any case the first appearance is merely a preliminary ritual. There are discussions about bail and trial dates. The actual trials will be in different courts and as Mr Tsang will presumably have to appear at both in different capacities they will need to be on different days.

What procedural fairness does require is that cases should proceed as fast as decently possible. Justice delayed is justice denied. The anxiety, stress and expense of facing an upcoming trial are not supposed to be part of the punishment.

If Mr Tsang’s first court appearance was delayed in order to have it coincide with that of his seven alleged assailants then that was not an example of procedural fairness.

Quite the reverse. As the case of the Seven has apparently been turned into a legal spectacular while Mr Tsang’s appears rather minor and simple, we can I fear infer that the latter was deliberately delayed so that it would collide with the former.

A clash of cultures

OPINION

Hemlock Life goes on

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

N

ot a week goes by without one of Soho’s tacky, cookie-cutter concept-theme restaurants closing. Most are instantly forgotten and replaced by new plastic, trendy, derivatives run by accountants with a death wish.

Others, whose owners must enjoy being ravaged by landlords, reopen on an adjoining street.

People who eat in these places are suckers, seemingly unaware (or not caring) that the extreme rents make decent-value-for-money food economically impossible. One of a tiny handful of exceptions was Life Café, which will close its doors before the weekend is over.

It was one of the few Soho places to have actual character: a sort of 60s-70s, beanbags, solidwood, menu-on-blackboard, eco-yoga thing, over three floors including a rooftop. It was the only place with a recognizable owner everyone could put a name to – Lamma hippy-businessman Bobsy. The food clearly came first. Not contrived, food-as-punishment vegetarian, but very tasty and enjoyable fare that happened not to include (or need) meat or processed ingredients.

Struggling with high rents The Standard reports that Life’s closure is due to high rents. The current boss Moosa Alissa produces some corporate PR-speak about how the restaurant business requires ‘continuous growth in scale and revenue’ for survival, which is not realistically possible and explains the constant churn of outlets in Soho.

Maybe a tawdry Korean-tourist-friendly Caliburger (‘branches in Dubai, Saudi, Kuwait’) will move into the space. They could use the slogan, ‘A taste of the after Life’.

In a wistful obituary for his creation, Bobsy recalls pioneering gluten-free and quinoa in Hong Kong. We now know, of course, that avoidance of gluten is a silly fad, and that quinoa is basically barley for people with a massive grudge against poor Bolivians. Yet while high rents may be forcing restaurants out of business, parts of Hong Kong are being invaded by sterile and unappetizing-looking organic health food stores (including the Just Green chain, co-run by ‘continuous growth’ Moosa).

One of the unexpected side-effects of gentrification in Hong Kong Island seems to be this explosion of inane food fads. Alongside Coke and lime soda, little Thai places have for decades sold 48 HONG KONG BUSINESS | JANUARY 2016

coconuts, from which you drink with a straw if you like that slightly gloopy soapy taste. Now, all of a sudden over the last year, we have been swamped with pricy Coconut Water in dazzling cans and cartons, promising no end of miraculous benefits. Which are, of course, baloney.

A blooming fad A quick stroll around Western reveals dozens of new natural healthy faddy stores springing up out of nowhere, offering bizarre teas, obscure seeds, outlandish oils, a peculiar thing about apple vinegar, and – courtesy of wise men from the Himalayas – kombucha. And who needs coconut water when you can have birch tree sap?

Because leaving the stuff inside birch trees where it belongs doesn’t create a big enough carbon footprint, presumably.

And then we’ve got the noble and ancient Inca civilization’s great gift to mankind’s nutritional needs, the potato.

And when not appropriating Peruvian culture and heritage with misspelling and cardboard cutouts of llamas (as not found on Lamma), they also sell maca powder, because – how on earth did we ever get by before that came along?

Nonsensical pseudo-science food fashions aside, don’t forget: high-rents, mark-ups, value for money. The way things are going; these places will be driving all the real-estate agencies and expat housewives’ nail-pampering salons off the streets within a year, and all the Caliburgers.

New natural healthy faddy stores opening