Hong Kong Business (February - March 2015)

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Luxury properties set for a rebound What’s the secret to

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Rankings

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its IPO surge?

Top 5 home jobs work from

HONG KONG

FROM THE EDITOR

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Hong Kong set off on relatively good footing in 2015, with the housing market experiencing a sharp recovery after what could be termed as a ‘shaky 2014.’

This issue brings a number of other things to be hopeful about, including better performance of mass market projects over luxury homes, and a hedge against sharp falls in home prices for the years to come.

Then we have the IPO surge in 2014, during which Chinese firms flocked to SEHK, raising a record number of funds that we haven’t seen in a long time.

We are also featuring Hong Kong’s top five work from home jobs for those who are contemplating whether getting stuck in an office for eight straight hours would do them good. How about a startup? Maybe you can look through our list of 20 hottest start-ups for 2015, and find some interesting and novel ideas to inspire you.

On the flip side, we also have some of the not-so-good things that Hong Kongers would have to deal with in the short term.

The city’s economy will soon find itself on the road to recovery, but it would have to go through a lot of painful structural and tax reforms before citizens would even feel the developments.

All that aside, this issue also welcomed Hong Kong’s largest law and insurance firms featuring the reasons for these firms’ successes. Speaking of success, we recognized Hong Kong’s top companies in the magazine’s annual High-Flyers Awards.

Enjoy!

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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 | MARCH 2015 1

CONTENTS

Fund-thirsty SMEs cling to thin 22 ANALYSIS strings of hopes for loans

CoVER STORY

Hong Kong’s 20 hottest startups 24 to watch in 2015

EVENT COVERAGE

KONG BUSINESS 2014 32 HONG HIGH-FLYERS AWARDs

FIRST

OPINION

FIRST

06 Rough seas batter Asian

14 Hong Kong’s top 5 work

shipping sector

07 Posh properties set to rebound 08 Don’t be fooled by cheaper

16 Bringing your favourite local

HK assets

10 Why Hong Kong economy won’t get a big fat boost from lower oil prices

12 Chinese shoppers snub HK stores

from home jobs stores online

44 Ian Perkin: Political stability vital

46 Tim Hamlett: Banks to the wall 48 Hemlock: Ripping off grandma the

REGULAR 18 Financial Insight 20 Economic Insight 38 Legal Briefing 40 CMO Briefing

hi-tech way

RANKINGS 28 Hong Kong on the hunt for

corporate lawyers

30 HK insurance industry gears up for

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 19/F, Yat Chau Building, 2 HONG KONG BUSINESS | MARCH 2015 262 Des Voeux Road Central, Hong Kong

to prosperity: CE

new sector rules

For the latest business news from Hong Kong visit the website

www.hongkongbusiness.hk

HONG KONG BUSINESS | MARCH 2015 3

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

economy

Government sets eyes on improving high-value-added industries The recently concluded Policy Address was largely in step with observers’ expectations and addressed three key issues: 1) increasing housing supply; 2) ageing population; and 3) enhancing economic competitiveness.

According to Hang Seng Bank, for the third key issue, policies to help domestic firms cope with competitive pressures will continue to be explored.

economy

Interesting developments on labor in the 2015 Policy Address In the recently concluded 2015 Policy Address, it has been noted that there were few surprises, with the Government again emphasizing that housing “is the most critical of all livelihood issues in Hong Kong” and reiterating its commitment and confidence in solving the supplydemand imbalance.

Barclays has found the initiatives under the labour section more interesting.

financial services

HK overtakes Singapore as Asia’s premier wealth management hub Singapore has been overtaken by Hong Kong in Deloitte’s rankings of the world’s largest wealth management hubs.

Hong Kong shot past Singapore to clinch fifth place in the list, after achieving a stellar 146% growth in terms of managed assets from 2008-2014. Meanwhile, Singapore is classified as a “stagnating” centre despite a strong 24% increase in client assets during the same period.

most read commentary Will your skills be in demand in 2015?

BY DEAN STALLARD Commercial Banking Credit Approvers, Bancassurance specialists, and Construction Lawyers are just three of the professionals in high demand in 2015 as Hong Kong’s employers continue to recruit and candidates look for new career opportunities.

In our latest Hays Quarterly Report for January to March 2015, we explore the hiring trends that are creating staffing demand in Hong Kong right now. So is there demand for your skills?

Fraud 101: How to spot a fraudulent Hong Kong company

BY NICK GRONOW Fraud among companies operating in Hong Kong is prevalent, like it is in many cities across the Asia region, but unfortunately it can seem rife in Asia’s world city given the jurisdiction’s strong connection to businesses in mainland China.

There is no doubt, however, that fraudulent activity threatens the city’s position as a trusted financial hub and gateway to Chinese business, which is why senior management and investors should be vigilant.

Optimising touchpoint feedback in Hong Kong

BY LAWRENCE CHIA As one of the best places to do business in the world, Hong Kong is a paradise for buyers and sellers, producers and consumers.

In general, Hong Kong customers are smart, savvy and know how to shop, and they instinctually know what good – and bad – customer experiences feel like.

But are these experiences being communicated back to brands and businesses? How can your company ensure your customers are enjoying the optimal experience?

FIRST somewhat lower competition on the key East-West route, and a sharp decline in bunker price will give shipping lines a much needed boost in profitability in the near term. Ongoing congestion in the US West Coast ports would lead to the diversion of cargo to the US East Coast and shipping lines may benefit from record freight rates.

HOME SWEET HK

Overseas Hong Kongers have good reason to go home, especially if they have assurance of a good job and faster career path.

Recruiting firm Hays spoke to 385 Hong Kong residents who are either studying or working overseas, but thinking about coming back to Hong Kong for their next career step.

According to the survey, more than half of potential returners said they miss the culture and lifestyle of Hong Kong. 47% are motivated to return in order to live closer to family. 37% feel that Hong Kong has more job opportunities for them, and 32% expect to have a fast career path in Hong Kong.

Global edge “Many returning Hong Kongers understand their worth in the global marketplace,” says Christine Wright, managing director of Hays in Asia. “They are aware that Hong Kong employers – both home-grown and multinational – value their Westernised way of thinking and business experience, mixed with their local knowledge and cultural understanding.

The survey reveals that 63% of the respondents want to work for a foreign-owned enterprise if they return. If and when they do, 24% want to work in Hong Kong’s financial services industry., and 13% want to work in professional services.

“If they were to return home, the majority will only return if they can increase their current earnings.

Hong Kong returners appear to be more motivated by increased salaries than their counterparts looking to return to Singapore (49 per cent) and Malaysia (38 per cent), suggesting they are wary of the high cost of living and housing in Hong Kong,” adds Wright.

6 HONG KONG BUSINESS | MARCH 2015

Stormy sailing

Rough seas batter Asian shipping sector

T

o lose US$1bn would be unfortunate. To lose US$5.3bn, as Asia’s container shipping sector has in aggregate since 2011, could look like enemy action. So what will 2015 hold for Asia’s shipping sector? Parash Jain, an analyst with Barclays, reckons that the coming two years will see the sector breaking with the forgettable past four years, although profits are unlikely to recover to 2010 levels.

“Apart from a record number of large vessels coming on to the market this year, the absence of slowsteaming (perhaps unwinding in certain routes) and a lower scrapping rate will have a negative impact. In addition, the ripple effect from new arrivals shunting smaller ships off the Asia-Europe route onto the shorthaul trade lanes should be more pronounced than ever before. The result would be tough price competition, with rates unlikely to remain steady; in fact we argue that rates will decline in 2015,” says Jain.

Increased alliances One possible outcome is increased alliances among carriers which would allow them to boost prices and profitability. The new alliances will continue to help the lines to lower their slot costs and lead to

The ripple effect from new arrivals shunting smaller ships off the Asia-Europe route onto the shorthaul trade lanes should be more pronounced than ever before.

Growth in new ships declines The big problem for the shipping industry remains in the growth in new ships coming onto the waters.

Barring any slowdown in China, global trade should increase 6.3 % this year compared to 6.1 % in 2014.

On the other hand, Jain forecasts static supply (net of scrapping and slippage) will rise at 8% and 4.5%, respectively, in 2015 and 2016 based on the current order book. “Over 50% of the order book comprises vessels of above 13,000 TEU which means shippers will continue to see impact of cascading into other routes. One of the industry participants warned that the trans-Atlantic route will be the most vulnerable to cascading in 2015.

Needless to say that demand, supply and freight rates are the key drivers of the sector irrespective of the cycle,.”

According to Jain, the industry has been sliced into four big alliances, and it is factors such as average vessel sizes, new generation vessels, frequency (market share) and route exposure which will differentiate one from another in an increasingly commoditised sector. “Our analysis suggests that ‘2M’ (Maersk Line and Mediterranean Shipping Company) and ‘Ocean Three (CMA-CGM, CSCL and UASC) alliances now have a considerable size advantage.

Average vessel size by alliance on the Asia-North Europe and Asi-US West Coast route (TEU, difference vs 2M in %)

Source: Alphaliner, HSBC estimates

FIRST CCL (large) vs. CCL (small/medium) – pricing of large and small flats have converged at inflection points

Note: CCL = Centa-City Leading Index.

Source: Centa-City Leading Index, Barclays Research

Luxury vs mass market homes: Who leads the market?

Posh properties set to rebound

I

t’s as old a question as which came first, the chicken or the egg. In Hong Kong’s case it’s which is the better guide to the housing market, the luxury segment or normal apartments for the regular folk. Iris Poon, an analyst with Barclays, has been pondering this question and reckons that from a conceptual standpoint, the luxury market should lead the mass market.

“Because luxury homes require a larger upfront lump-sum payment and are discretionary in nature, it reasons that luxury homebuyers should have higher income levels

and better access to capital. Thus, when times are good, luxury home prices should outpace mass prices but when times are bad, the opposite should also be true as luxury home prices are likely to drop more,” says Poon.

After looking at the eight-year period from the mid-2003 SARS through to mid-2011, we found that the rise of 229% for the CentaCity(Large) index outpaced the gain of 204% for the CCL (Small/ Medium) index.

Most interesting is what happened at inflection points. When the market started to approach

The rise of 229% for the Centa-City (Large) index outpaced the gain of 204% for the CCL (Small/ Medium) index.

its apex, homebuyers were unable to chase ever-rising lump sums and thus were forced to split their interest into smaller chunks and, therefore, smaller units.

Conversely, as the market fell, prices of smaller starter homes, which were still supported by solid demand from owner occupiers, tended to fall less than prices of discretionary-based luxury homes.

Hong Kongers could expect this trend in the coming year.

“Prices for mass market projects/small-sized units will remain broadly stable in 2015. They should continue to outperform luxury homes/large-sized flats which could see a mild price correction of 5% as their demand is still suppressed by the government’s cooling measures,” says Jeff Yau, analyst at DBS Vickers.

Yau adds that even allowing for an interest rate hike, any sharp fall in home prices seems unlikely for the years to come.

The Chartist: Primary market leads HK’s residential sector in 2015 Hong Kong’s housing market heated up further in 2014, thanks to solid demand from local end-users. According to a report

by DBS Vickers, this coupled with property developers’ reasonable pricing, fuelled a sharp recovery in the primary market activities.

Meanwhile, private residential supply is expected to be higher for the years to come, with an estimated 16,500 units to be completed per annum on average from 2015-17. Coupled with a potential interest rate hike, developers will continue their reasonable pricing approach in launching their new projects in 2015. Therefore, the primary market will remain the limelight of the residential market, with about 16,00017,000 new homes to be sold in 2015.

Yearly primary market transactions - volume

Source: DBS Vickers

Private residential supply

Source: DBS Vickers

HONG KONG BUSINESS | MARCH 2015 7

FIRST

Don’t be fooled by cheaper HK assets

Survey

GENERATION GAP

W

hen your correspondent was a young writer in Hong Kong, the golden rule of housing prices was that as the US dollar strengthened, Hong Kong housing would become cheaper.

This was because given the currency peg to the USD and Hong Kong’s open economy, a weaker USD makes Hong Kong assets and services appear cheaper relative to our neighbours.

So what we should have expected over the last 4 years was a weakening of Hong Kong housing prices, but this didn’t happen. In fact this relationship The USD index continues to strengthen has broken down since 2010, points Louie. out Barclays analyst Paul Louie.

Although monetary easing may have contributed too, another possible RMB appreciation explanation may be the appreciation of While quantitative easing may have played a part, another possible explana- the RMB over the same period.

If one were to look at the chart of tion was the appreciation of the RMB which has made Hong Kong assets seem Hong Kong home prices versus the cheaper than our Chinese neighbours, RMB-HKD, the link appears to pick up where the USD-dynamic has broken he argues.

“Considering the continued strength down.

According to Louie, the question we of the DXY and the recent depreciation pose now is – what happens if the USD of the RMB, we believe Hong Kong continues to strengthen just as the RMB home prices may be approaching a weakens? Will the past dynamic becrossroad and the historical inverse relationship between the DXY and local tween the USD and Hong Kong home asset prices may re-assert itself,” reckons prices reassert itself?

The historical inverse relationship between the DXY and local asset prices may re-assert itself.

survey

Hong Kongers to enjoy higher pay-outs in 2015 A survey by Jobs DB Hong Kong shows that for 2015, 90% of surveyed employers plan to offer a pay rise, compared to 78% in 2014.

The projected rate of pay rise for 2015 is 4%, slightly increased by 0.2% over last year. The average performance bonus size for 2015 is 1.4 months of basic salary.

The Compensation & Benefit Survey was conducted online by jobsDB during October to November 2014, covering a total of 99 companies from 20 business sectors.

Bonus bonanza According to the survey, performance bonus is provided by 77% of surveyed employers, and the average bonus size is 1.4 months of basic salary. In terms of business sectors, the property development sector provided the highest average performance bonus (3 months of basic salary), followed by the financial 8 HONG KONG BUSINESS | MARCH 2015

services sector (2.8 months).

Among respondents who provide performance bonuses, 79% of them issue the bonus once per year. 21% of respondents, most of them from manufacturing and trading/distribution, indicated that they issue performance bonuses twice or more.

Meanwhile, 42% of surveyed employers already offered paternity leave in 2014, 11% more than the record of 2013. Among those who provided paternity leave, 31% of them offered 3 days, 14% offered 4-7 days, and 10% offered more than 7 days. 12% of the respondents plan to offer paternity leave in 2015. It is expected that a further 4% of respondents will install one in 2015. 17% of respondents have implemented flexible working hours in their workplace. Another 16% of the respondents plan to introduce flexible working hours in 2015.

These kids could be coming on too strong, but their flair for innovation is exactly what companies need to survive.

Generation Z, now aged 14 to 19, will be the next generation of workers that today’s employees must start preparing for. A survey by Randstad Workmonitor reveals that only half (50%) of employees in Hong Kong believe their firm is ready to meet the demands of Generation Z. Director of Randstad Hong Kong, Peter Yu, advises business leaders to take into account the nature of a diverse workforce when they plan their human capital strategies.

“75 per cent of current employees expect greater work-life balance than older generations,” Yu says.

Knowledge sharing Generation Z workers are already very comfortable with technology, enabling them to work well in an office environment that increasingly uses online platforms.

However, the survey reveals that less than 47% of the respondents think they can learn a lot from Generation Z in the use of technology.

“Employees from the younger generations should be encouraged to share fresh perspectives, teach new skill sets and cross-pollinate ideas with older workers,” Yu says.

“With so many generations working closely together, this opens up opportunities for greater collaboration, robust discussions that spark innovative ideas and more importantly – it may prevent any skills gaps in the workplace and help build a solid leadership pipeline,” Yu concludes.

FIRST

Why Hong Kong economy won’t get a big fat boost from lower oil prices

T

hose hoping for a cheaper taxi ride or meal out due to lower oil prices will be disappointed. Oil prices make up such an insignificant part of Hong Kong’s economy that the new prices of $50 a barrel will probably add just 0.2% to the economy over 2015, reckons Hang Seng Bank senior economist Ryan Lam. Hong Kong domestic households are estimated to have spent HKD52.7 billion on oil-related products last year, implying that lower energy prices have resulted in a hefty windfall for households.

But there are more important yet often ignored factors to consider when assessing the impact of oil prices on growth. “First, electricity in Hong Kong is mainly generated from coal. Second, the pass-through of changes in crude oil prices to retail fuel prices is generally less than perfect. Finally, consumers may save some or all of the windfall rather than spend it. After taking necessary adjustments and second round confidence effects into consideration, our view is that the sharp decline in oil prices will boost GDP by about 0.2% via expanding domestic demand,” says Lam. The slightly good news is that the dip in global crude oil prices that has occurred over recent months, by itself, would reduce 2015 full-year inflation by a percentage point.

10 HONG KONG BUSINESS | MARCH 2015

Economists reckon headline inflation will ease notably this year, declining from an estimated 4.4% in 2014 to 3.5% in 2015.

Oil prices and economic growth Credit Suisse’s Vincent Chan points out that there are hopes among some sections of the Chinese economy that a lower price could help boost China’s economic growth.

The World Bank has estimated that every 10% decline in oil price will help to boost the Chinese economy by 0.1-0.2%. Given that oil price averaged over US$100/bbl in 2014, if oil price stayed around US$50/bbl in 2015, then based on this estimation, Chinese growth could be boosted by 0.5-1% points.

Whilst China is a net importer of mineral fuel, Chan notes that net imports of these products is only around 3% of China GDP, roughly in line with EU level, but much lower than that of Japan among the key oil importers. “Second, among all types of energy, oil only accounted for around 18% of China’s total energy demand, with coal still accounting for the vast majority. Therefore, unless the drop in oil price causes a significant decline in coal prices, its impact on overall energy prices will be limited.”

In 2015, Chan reckons there is a good chance that infrastructure investment activities would also slow down, given that

Oil price is an insignificant in HK economy

local officials are adopting a more cautious attitude in carrying out new investment projects under the anticorruption campaign (even though those projects have been approved already), as well as the changing of the financing channel for local infrastructure projects (from LGFV loans to provincial government bonds) also created a lot of uncertainties. “All these factors seem to have little to do with the oil price, so even if it falls further, it will have very limited impact on China’s investment activities,” he said.

HONG KONG BUSINESS | MARCH 2015 11

FIRST NUMBERS

Mobile consumption behavior across HK Research Stats

HK Mobile insight

No more ‘shop till you drop’ for Mainland visitors

Chinese shoppers snub HK stores

M

ore Mainland visitors are opting not to get their Rolexes or Pradas in Hong Kong, and this has had a notable effect on the city’s retail sector. In 2014, the HK Tourism Board saw a 1.8% y-y drop in per capita tourist spending to HKD7,975, despite the total expenditure by inbound tourists rising 8.7% y-y to HKD358bn.

This was the first drop in per capita spending of overnight visitors in eight years.

Nomura analyst Katherine Chan notes that the decline in per capita spend should not be a surprise as they have seen ticket sizes decline for both HK and Chinese retailers in the past 18-24 months, having seen a more severe decline in ticket sizes of high-ticket items (e.g. gold & jewellery and luxury brands), as a result of slowing economic growth and continued anticorruption efforts in China.

Chan notes that the number of tourists visiting HK increased 12% y-y to 60.84mn visitors in 2014, but the market still seems a bit lackluster in terms of retail sales, all because of slowing growth in China. But another reason for the unimpressive retail spending is tourist diversion. “The overall weakening of tourists spending in Hong Kong in 2014 and YTD 12 HONG KONG BUSINESS | MARCH 2015

could be due to tourist diversion to Japan and Korea as the decline of JPY and KRW vs. RMB and HKD made those destinations more attractive,” says Chan.

The impact of Occupy Central is also expected to linger for another two months according to some Hong Kong-based retailers.

However, Chan expects to see sales recovery in early 2015 because of the Chinese New Year being a traditional peak retail season.

Joe Lin, CBRE’s executive director for retail services, reckons that Hong Kong’s driving retail force will come from mid-tier brands in 2015. “High margin luxury brands such as watch and jewelry retailers will also be demanding street shops in prime locations although luxury goods sales are expected to decrease.”

Mobile user found accross key locations

The HK Tourism Board saw a 1.8% y-y drop in per capita tourist spending to HKD7,975.

Mobile usage trends accross key locations

Per capita spending – overnight visitors

Source: Hong Kong Tourism Board, Nomura research

Source: Kelly Services

HONG KONG BUSINESS | MARCH 2015 13

FIRST tasks could range from decoding a simple text code to programming languages such as PHP, HTML, C++, Python, etc.

Hong Kong’s top 5 work from home jobs

H

ong Kong Business’ guide to jobs that you can do anywhere, anytime. Who wouldn’t enjoy working while sitting on the couch, or in a favourite cafe? As a growing number of companies are offering freelance jobs, Hong Kong citizens are becoming attracted to the benefits and comfort of working from home. According to Jorge Azurin, regional director for Continental Asia of the job portal Freelancer.com, working from home has several benefits, besides the monetary income. For one, it gives everyone complete control over which projects they accept, and even better, full control over how to manage their time.

“Freelancers have the full liberty to work anytime and anywhere – even from the comfort of their own home, or even their favourite park. Freelancing also allows users to gain a global professional experience and network that takes years to earn in the corporate industry,” says Azurin.

He explains that Hong Kong’s startup ecosystem is growing at a fast rate.

Freelancer.com has noticed that there are more freelance opportunities than permanent employers in terms of numbers. “Chinese employers are more active in outsourcing tasks and projects.

Government support plays a huge role in the success of startup companies – and it’s great to see that more and more businesses have access to government

14 HONG KONG BUSINESS | MARCH 2015

support through the likes of InvestHK and Cyberport,” he says.

Hong Kong Business has partnered with Freelancer.com to identify the five job categories for Hong Kong freelancers.

Freelancer.com connects more than 14,000,000 employers and freelancers from more than 247 countries, regions and territories around the world. Through the marketplace, employers can hire skilled professionals to do work in a range of areas, including software development, writing, design, engineering, science, sales, marketing, accounting, and legal services.

As of December 2014, the best work from home jobs for Hong Kong are: Web development and information technology In the recent years, Freelancer.com’s data reveals a rise in Science, Technology, Engineering, and Mathematics (STEM) projects across the platform. It is no surprise that Website, Information Technology, and Software tops the list of job categories in Hong Kong. As this is a broad term to discuss, Web development basically refers to web sites for the world wide web and to intranet or a private network.

There are times when people mistaken web design as the same as web development and use it interchangeably. But considering the principles and how people get the job done under this two category, they realize that they are two different things. Anyone who’s looking for a web development job,

1

2 Language Translation For Freelancer.com, they offer translation jobs with over 60 languages including simplified Chinese as the most popular with freelancers from Hong Kong with English, French, Hebrew, and even Lithuanian.

Language translation jobs could range in proofreading, transcription and translating a document from one language to another.

Translators are expected to have a translated version of the document which will convey the original meaning considering the cultural and linguistic factors to be able to suit the target readers. If you are fluent in your second (or third, fourth, or even fifth language), language translation might be for you.

Data Entry Data Entry involves transcribing information into another form of medium.

In the most basic level, data entry involve encoding data into the computer’s system.

Jobs involves working with MySQL (a database management system), Microsoft Excel, data processing, email handling, and other virtual assistant tasks. Projects under this job would require the freelancer workers to file, type or encode, copy & paste data from the given materials.

3

4 Design There’s a huge array of graphic design jobs available to freelancers ranging from web design, typography, logo and icon design, photoshop, design for banners, corporate stationeries, fliers, and even interior design.

Aside from having experience in the field of graphic design, graphic designers would also require some experience in handling multimedia projects like website designing.

Other software skills would include Photoshop, Illustrator, InDesign, Acrobat Pro, Dreamweaver and include professional skills in HTML and JavaScript.

5 Writing and Content Most companies are taking note of the importance of content and customer engagement. Jobs under this category range from writing articles, copywriting, ghostwriting, blog posts, academic research, press releases, social media marketing, and etc. Most projects under this category would require articles promoting companies, their products and services.

HONG KONG BUSINESS | MARCH 2015 15

startups

Bringing your favourite local stores online

F

ounded by Jason Ngan, 30, with partner, Brad Lauster, 38, Bindo was created to help local bricks-­and-­mortar stores to operate their businesses more efficiently – leaving merchants more time to develop strategies to achieve online sales growth and nurture relationships within their local communities.

Bindo is a cloud­based point­-of-­ sale (POS) system, with an intuitive cash register which enables local merchants to facilitate multiple types of payments and transactions, and an intelligent inventory system.

The system enables to assists the merchants manage online and offline

sales across multiple locations.

Later this year, Bindo will be releasing Bindo Marketplace, a consumer app that aggregates all the stores and products using Bindo POS onto one platform. The platform’s “hyperlocal” marketplace boasts a strong community of neighbourhood merchants, which will allow consumers to make online purchases from their favourite local stores, and have their orders delivered directly to their doors.

After the rollout of the Bindo Marketplace, consumers will have the ability to shop at any store using Bindo POS, and in turn, every Bindo merchant will reach even more consumers. Additionally, merchants will have an easy way to carry over their offline inventory and products and sell them online.

As of the Spring of 2014, Bindo had raised US$1.8M seed funding from multiple VCs and angels across the US and Asia. Their lead investors were Gary Vaynerchuk, East Ventures, and Metamorphic Ventures. Other investors are seasoned entrepreneurs and ex-­Google tech executives, with decades of experience in payments, e-commerce, and O2O.

Not enough space at home? This may be the answer belongings.

Changing how people interact with their things, Spacebox delivers standard strong boxes to users who order ‘space’. The team then collects the packed boxes for storage. When clients want to retrieve items stored in Spacebox, they simply access the web app through their phones, browse their inventory to select items they need, and request their belongings to be Spacebox was born from brothers delivered at a specific time.

Lewis and Stuart Cerne’s desire to Currently, Spacebox has $10M total give people in Hong Kong a tool to help funding from their internal funding them transform their homes from and private investors. Lewis says that cluttered to spacious. They aim to they will be looking for an additional trigger a revolution in the way people fundraiser in Q1 2015. use space.

The Spacebox team plans to Founded in September 2014, implement a variety of plans to Spacebox gives users extra space, boost their technology, branding, and in a convenient way and at a very accessible price. Spacebox tears down promotion. Lewis adds that the key challenge for them will be fine-tuning the traditional self-storage barriers, their message for their customers. which limit users’ access to their 16 HONG KONG BUSINESS | MARCH 2015

First fully online lending platform

WeLab has started to bring financial innovation to Hong Kong, and to provide an alternative to the market. WeLab operates WeLend.hk, which bills itself as Hong Kong’s first fully online lending platform, and Wolaidai, a mobile peer-to-peer lending platform for top-tier university students in China. WeLab is a team of innovative banking and technology professionals, utilizing the latest web and social data technology. The team is headed by founder and CEO, Simon Loong, 37, who specialized in risk management and data warehousing technology in his 15-year banking career before founding the company.

In 2013, the team started WeLend.hk, an online lending platform offering personal loans to the HK market with a seamless application experience, short turnaround times, and relatively low interest rates. With WeLend.hk, they are now working on solving sales financing issues with 3HK, a telecommunication giant in Hong Kong, to provide online instalment plans to their customers upon headset purchase.

In September 2014, WeLab team started operating in China as Wolaidai.com, a mobile P2P lending app targeting university students. Simon explains that China is a crowded space for internet finance, but they spotted the unfulfilled loan needs of university students and tailor-made the product to suit the segment.

Since its launch, WeLend.hk has acquired 15,000 members and maintained an accumulated application loan amount of over HK$1.15B. Wolaidai. com was launched for Android and the WeChat platform in September 2014, and has witnessed over 100 percent month-on-month growth for three consecutive months.

According to Simon, they are fortunate to be a well-funded startup with renowned investors from around the world. In their Series A round fundraising, WeLab raised US$20M from Yuri Milner of DST, TOM.com, Sequoia Capital, Ule.com and ICONIQ Capital. Simon adds that their investors not only provided the capital for their operations, but also shared valuable advice and networks with the entire WeLab team.

“It is very uncommon for a HK startup to raise such a big A round fundraising, and within such a short period of time. We are grateful for the support of the investors,” he says.

FINANCIAL INSIGHT: investment banking

US interest rates could dampen the IPO rally

Can Hong Kong sustain its IPO surge amidst volatility?

HK IPO proceeds may see further growth in 2015, but heightened market uncertainty may prove to be a party pooper.

I

f investment banking gurus were to distill their forecast for the Hong Kong (HK) market in 2015, it would be: Sunny with a chance for showers. The generally bright outlook comes from the territory’s especially strong performance in 2014 during which Chinese firms flocked to the Hong Kong Stock Exchange (SEHK) to raise funds through initial public offerings (IPOs).

This momentum along with the Shanghai-Hong Kong Stock Connect coming online should keep attracting issuers and investors. However, factors led by the expected US interest rate increase later this year could dampen the IPO rally.

Catalysts and caution The SEHK has been on a roll, rebounding to IPO activity levels it has not seen in almost half a decade.

18 HONG KONG BUSINESS | MARCH 2015

Hong Kong’s stock exchange raised $29.5 billion, a 42% growth in proceeds over a year ago alongside a 6.9% increase in number of new listings.

IPOs in Hong Kong’s stock exchange witnessed raised $29.5 billion, a 42% growth in proceeds over a year ago alongside a 6.9% increase in number of new listings.

This is the highest annual period since 2010 when IPOs issued a total of $57.5 billion in proceeds, driven by at least eight IPOs above $1-billion listed in HK for 2014, says Elaine Tan, senior analyst, deals intelligence at Thomson Reuters.

Hopes are high that this growth pace will continue through to 2015, especially as the recently opened Shanghai-HK Stock Connect attracts more investor interest and entices issuers to launch cross-border IPOs in the region and, says Elaine Tan, senior analyst, deals intelligence at Thomson Reuters.

Under the stock-linking pilot programme, the SEHK and Shanghai Stock Exchange will establish mutual

order-routing connectivity and trading links to enable investors of their respective market to trade shares listed on the other market. This convenience is widely expected to further encourage market sentiment and attract international funds to sectors with undemanding valuations.

Tan says deal makers in Hong Kong and the rest of the Asia Pacific region were encouraged last year by low interest rates and abundance of cash, and these catalysts are expected to carry through to 2015.

But despite these positive signs, more pessimistic observers believe 2015 can become quite a treacherous year for investment banks, specifically for up-and-comers that are challenging the dominance of the leading three.

“There is an expectation of higher market volatility, connected with anticipated US interest rate rises later in the year,” says Nick Gardiner, head of capital markets at Boston Consulting Group.

“This could cause challenges for firms hoping to raise capital in both the equity and debt markets if ‘emerging markets’ are hit by significant outflows, or the macroeconomic down (particularly in China intensi-

FINANCIAL INSIGHT: investment banking fies,” he adds. Gardiner says firms may try to time their transactions to beat the US rate rise, so he warns of a possible crowded market for new issues in the early months. Chinese securities firms and provincial banks seeking to raise capital in HK will be particularly vulnerable, as concerns about exposures to Chinese property developers resurface.

Chinese banks and securities firms have been making bold moves up the investment banking rankings in Asia (ex Japan). While the top three investment banks in the region were Goldman, UBS and Morgan Stanley the same three leaders as in 2013 - Chinese banks and securities firms now comprise eight of the top twenty in the league table, with CITIC just missing a spot in the top five.

Investment banks will also continue to find it hard to secure large enough margins compared to established Western markets, says Gardiner, so what seems like a mighty resurgence in HK IPOs might not translate to robust profits.

“Asian deals typically involve a larger number of advisors splitting a lower-margin fee pool, so the economics of many deals are challenging for the banks involved,” says Gardiner.

“We expect to see the global investment banks becoming increasingly selective in their business model in Asia, playing to specific industry and product expertise, and continued aggressive competition from Asian regional banks bent on seizing market share.”

Chinese IPOs drive 2014 boom Despite the reservations of investment banks, it will be hard to convince bullish issuers and investors to put on the brakes in 2015 given the acceleration seen in 2014.

Tan says a flurry of Chinese companies completed their IPOs in HK in 2014 and accounted for 82.4% of the IPO proceeds in the city’s stock markets, worth at least $24.3 billion.

This helped the territory capture a formidable 40.8% share of IPOs in the Asia Pacific region. In fact, SEHK ranked second globally for top IPO stock exchanges worldwide in terms of proceeds in 2014, trailing behind New York, but ahead of NASDAQ

and London Stock Exchange. It was not only the quantity but also the size of IPOs that wowed the market last year. Two Chinese IPOs raised $3 billion and above each.

The first was the $3.7 billion HK IPO of Dalian Wanda Commercial Properties Co Ltd, the largest-ever real estate IPO globally, and the year’s biggest Hong Kong-listed IPO. The second was the $3.2 billion HK IPO of Chinese nuclear power plant operator CGN Power.

Should investment banks find disappointment in the HK IPO market, they can turn to the flourishing M&A market as another engine for growth.

Overall M&A activity involving HK companies soared and reached an all time high worth $176.2 billion, a 92.4% increase from 2013, says Tan. Another bright spot for banks to consider, at least based on recent growth, is the HK dollar-denominated bonds which raised more than HK$90 billion ($11.6 billion) in 2014, says Tan, or at least an 18.4% increase in proceeds and is the highest annual period for HKD-denominated bonds since 2012.

Banner year for Asia Pacific Looking at the wider Asia Pacific region, Hong Kong’s investment banking bonanza in 2014 was not an isolated hiccup. In fact it was a banner year for Asia Pacific, excluding Japan, says Tan, with many areas in the region’s investment banking activity seeing its strongest annual results.

While Hong Kong may have shined in IPO and equity capital markets, other countries in the region experienced heavy growth in M&A and debt capital markets.

Overall Singapore M&A, for example, surged 131.5% to $96.9 billion in 2014 from the previous year, surpassing the annual record volume of $70.14 billion reached in 2007.

Singapore companies grew increasingly active with their overseas M&A activity in 2 014 motivated by attractive funding environment and pursuit of growth outside to diversify, says Tan. Acquisitions by Singapore’s state investment firms, GIC Pte Ltd and Temasek Holdings Pte Ltd, drove outbound M&A volume to US$46.4

Elaine Tan

Nick Gardiner

billion in 2014, a 181.5% growth in deal value from 2013. This is the highest-ever annual period for the city-state’s overseas acquisitions.

Spurred on by similar factors as Singapore, overall Asia Pacific M&A grew 56% in deal value to $847.7 billion in 2014 on the back of at least 15 mega-deals worth $5 billion and above with a combined value of $162.3 billion.

Tan says Chinese state-owned enterprise reforms drove the resurgence in jumbo M&A deals. At the forefront is CITIC Pacific’s acquisition of the main assets of its state-owned parent, CITIC Group, for $42.2 billion. Another headline-grabbing jumbo deal is Sinopec’s stake sale in its retail unit to investors worth $17.5 billion.

“China’s venture into SOE mixedownership reform may well continue to be a major source of potential deal activity,” says Tan. In line with Asia Pacific’s M&A growth, acquisition-related loans also ballooned by 24% to $49.7 billion in 2014, the highest annual period since 2008 when loans reached $52 billion.

Tan also attributes the low interest rate environment that prevailed in 2014 as the main driver for this record-breaking volume for Asia Pacific bond offerings. Total bond proceeds issued by Asian companies, in all markets and all currencies, raised $835.4 billion, a 7% rise from 2013.

Asia Pacific G3 (US dollar, Euro, Yen) bond offerings also set a new record in 2014 with a total of $287.3 billion.

China issued two of the all-time largest Asian G3 bond issues from Alibaba Group ($8.0 billion) and Bank of China ($6.5 billion), which raised combined proceeds of $14.5 billion in the fourth quarter of 2014.

Any Hong Kong involvement announced M&A annual volume

Source: Thomson Reuters

HONG KONG BUSINESS | MARCH 2015 19

economic INSIGHT: gdp growth

It will be worse, before it becomes better

HK’s long road to recovery

After a shaky 2014, Hong Kong’s economy is driving to a recovery fueled by external demand and local policy reforms in 2015.

T

he aviation leasing industry of Hong Kong will be seeing clear—and more international-skies ahead once the proposals to create a more competitive tax regime within the industry have been approved.

“The development of this industry will have a major impact on two of Hong Kong’s pillar industries: namely financial services and logistics. We believe this will create significant employment opportunities and therefore greater overall tax income for the Hong Kong economy,” says Simon Cheng, capital markets and accounting advisory partner, PricewaterhouseCoopers Hong Kong.

These possible changes in taxation were raised in Chief Executive Leung Chun-ying’s 2015 Policy Address, and may just be one of the signals that the “Asia’s World City” is off to recovery.

Where is the economy heading and how will it arrive? The map of forecasts is heavily marked by hopes in global growth, microeconomic policy 20 HONG KONG BUSINESS | MARCH 2015

Unless property prices become friendlier and more stable, domestic demand will not fully help revive Hong Kong’s economic performance.

initiatives, and productivity-centered industries.

Reliance on external demand Despite uncertainties in global recovery this year, analysts still believe that its new features will open more doors for Hong Kong. “If Hong Kong managed to shake off the impact of non-economic incidents, the rebound in external demand and a favorable base for comparison should help GDP growth accelerate to 2.8%,

stronger than the 2.2% increase this year but still weaker than the 4% potential growth rate,” according to Wang Chunxin, senior economist of the Bank of China (BoC) Hong Kong.

Although there are no stellar predictions on the growth in international trade this year, with figures expected to rise from 3.1% to 4% for 2015--compared to the 5.3% average in the past two decades,.

A narrower gap in the growth between developed world and emerging markets would allow Hong Kong’s external demand to diversity. Based on the bank’s reports, the International Monetary Fund (IMF) figures show that after ten years, the ratio of growth rates in the developing world to the developed world will decline from 4.25 times in 2012 to 2.17 times.

Effects of structural economic reforms, particularly infrastructure investment, urbanization, monetary easing, and interest rates cuts, are also expected to become meaningful to the city’s recovery. “In 2015, China will strive for growth stabilization and economic restructuring by increasing expenditures in infrastructure and subsidized housing. In addition, household registration reform may be expedited to boost domestic consumption, and more free trade zones may emerge to promote trade and investment,” says Chunxin.

Unless property prices become friendlier and more stable, domestic demand will not fully help revive Hong Kong’s economic performance.

Chunxin attributes weak spending to fading wealth effect. With the looming pressure on property prices and oil price reduction, inflation is expected to fall below 3% after the first six months this year.

Stock and property market transactions (HKD billion)

Source: Rating & Valuation Department of HKSAR, CEIC, Hang Seng Bank

economic INSIGHT: gdp growth However, ANZsenior economist Raymond Yeung finds the current spending mood resolvable. “The December’s data suggest that Hong Kong’s economy has not fallen off the cliff. The consumer confidence declined only slightly in December and is not excessively worrisome,” says Yeung, referring to the decline of consumer confidence by 1.1 points to 130.1 in December 2014.

Yeung’s optimism is backed up by the 40% of respondents saying that their families will be better off financially on December this year, with only 8% think that they will be worse off financially.

Microeconomic initiatives Not far from BoC’s estimates, a 2.6% growth in GDP is likely to happen in 2015, according to Ryan Lam of Hang Seng Bank. As the 2015 Budget is about to be released by Hong Kong Financial Secretary John Tsang, Lam does not expect any groundbreaking macroeconomic measures, only programs that will resolve mediumto-long-term structural issues related to rental costs, manpower, and the ageing population. He believes that the government’s fiscal stance will be more about reprioritizing spending than overhauling its fiscal stance.

While the government is posting a budget surplus of HKD9.1 billion for the fiscal year 2014-2015, Hang Seng Bank expects it a staggering HKD42.1 billion due to a favorable fiscal position that might be revealed in the budget announcement.

“More than 42% of government revenue in Hong Kong for the 2014/15 fiscal year is projected to have come from direct taxes. Drilling down into the details, this appears closely re-

lated to rising salaries and profits tax revenue, with the solid performance of listed companies and low unemployment rate creating greater taxable capacity,” Lam explains.

One of the badly affected industries in 2015 was the private sector. The slowdown of the industry, including production and new orders, remained by November when the Purchasing Managers’ Index (PMI) of HSBC Hong Kong stood at 48.8, up from 47.7 of the previous month.

Based on Lam’s report on the Policy Address by Chun-ying, the government is prioritizing highvalue-added industries by exploring policies that will help domestic firms address competitive pressures and allocating funds for relevant projects.

Among the programs in sight are the Innovation and Technology Fund, development of the financial industry, and Guangdong’s proposal for a free trade zone.

This is in line with the development of growth-enhancing policies, which cater to resources that nurture well-being and sustain social safety nets. The government is expected to concentrate on factors that stimulate the labor market, including Hong Kong’s changing demographics, labor force participation, and productivity, and spend more on the workforce than on the older generation.

Lam mentioned that the government is injecting HKD50 billion into the retirement fund of the ageing population, but it is not clear if the government has considered Professor Chow Wing-sun’s proposal of imposing an old-age payroll tax on both employers and employees. “The long-term need to fund age-related spending will ultimately require

The government’s fiscal stance will be more about reprioritizing spending than overhauling its fiscal stance.

larger resources than those currently allocated by the government under its plan,” says Lam. The government has new initiatives to increase the supply of affordable housing, such as developing new houses on 257 hectares of deserted or damaged agricultural and industrial lands and a new subsidized housing scheme. But Lam sees the imbalance in the housing market happening for some time since “land development will be a long and difficult process”.

Tax reforms, anyone?

Loretta Shuen, chairperson of Taxation Committee – Greater China, CPA Australia echoes the same sentiment: “Hong Kong’s overheated property market is characterized by a supply-demand imbalance”.

This is why CPA Australia, one of the world’s largest professional accounting bodies, recommends to Tsang to allow taxpayers a one-time withdrawal from its MPF Scheme to be able to buy a primary residence.

“Any tax deduction could be recouped if, within 36 months of the withdrawal from the Scheme, the taxpayer stops residing in the property or sells it. Our proposal would help taxpayers to save money and use these savings as a deposit for their primary home, whilst at the same time the Government tries to increase the supply of residential property to local home-buyers,” said Shuen.

The accounting firm also proposes that taxpayers be allowed further tax deduction for voluntary contributions to the Scheme by employees, which would be capped at 15 per cent of assessable income or HK$180,000 per annum.

ANZ-ROY Morgan Hong Kong inflation expectations vs underlying CPI

Source: ANZ-ROY Morgan Hong Kong

HONG KONG BUSINESS | MARCH 2015 21

ANALYSIS: hong kong smes

It’s all online

Fund-thirsty SMEs cling to thin strings of hopes for loans If peer-to-peer (P2P) lending platforms start climbing new heights in Hong Kong, will the business environment remain narrow for entrepreneurs?

S

mall and medium-sized enterprises (SMEs) in Hong Kong appear to be holding all the aces as they benefit from the shift in consumer preference to practical lifestyle and one of the lowest tax rates in the world.

However, behind this promising picture are issues that can stall entrepreneurial ambitions. “I think in general, starting in 2008, banks have been extremely cautious in lending – not just to SMEs, but it has been a bit more detrimental to SMEs,” says Farook Jamal of Mark Masons Investments. “It definitely has impact on SMEs’ ability to grow and finance their growth. And I cannot see a big improvement here.”

The pessimism is rooted in the way banks have been selecting companies to lend to, following the credit crunch seven years ago.

“They [banks] do not lend to new

22 HONG KONG BUSINESS | MARCH 2015

In general, starting in 2008, banks have been extremely cautious in lending – not just to SMEs, but it has been a bit more detrimental to SMEs.

companies without a track record.

They would ask for collateral like stock, property, as well as personal guarantees from the promoters. These make it very hard for new SMEs to begin, as well as expand their business,” says Mukesh Bubna, founder and chief executive officer of Monexo Innovations.

Aware that banks now prefer established SMEs, peer-to-peer platforms such as Monexo Innovations have opened possibilities to the part of the market that has been left out.

Another favourable condition for P2P firms is the high rates of interest being charged by traditional money lenders, due to their profit-driven nature and inefficient system.

The P2P process takes place on an online platform, where lenders select the borrower to fund and receive monthly repayments of principal and interest, which are channeled directly

to them. Borrowers with good credit histories pay fair rates.

Bubna says that global peerto-peer lending companies like FundingCircle, UK, OnDeck, USA, and many others, are dedicated to addressing the needs of SMEs. “Overall, the P2P lending industry is predicted (by Foundation Capital) to be US$ 1 Trillion by 2025,” he says. “We believe, with the right education, the Hong Kong P2P market can be as big as US$10 billion in next five years”.

However, Jamal is not as optimistic as Bubna. Since P2P is still in its early phase, the potential is there, but not enough to keep the heads of entrepreneurs above water in addressing the rising costs of running a business. “P2P lending is still a very new concept here in Asia and the amount of loans may not be suitable for SMEs. I think they are more geared towards consumer lendings, and therefore, not sometimes not approachable to a larger amount,” says Jamal.

Despite the perceived reluctance of banks to accommodate SMEs, he believes that these businesses should still function through them, and that this is only possible with the support of the government. The issue of bank lending is only a slice of the pie – the role of the government is also crucial in the other struggles that SMEs are coping with.

Insecure operating environment The Hong Kong rental market offers a range of options for investors, but this does not guarantee investment. Foreign businesses prefer easy access to opportunities to become sustainable and visible in the market.

What makes Hong Kong attractive to investors is its geographical location. “Given its proximity to Mainland China and other major Asian markets, Hong Kong offers a lot of demand for a wide range of industries including business and professional services, creative industries, asset management, tourism and F&B and retail,” says Simon Galpin, director-general of Investment Promotion, Invest

ANALYSIS: hong kong smes Hong Kong (InvestHK).

Mainland enterprises with expansion plans can find opportunities to raise funds and partner with professional services companies in Hong Kong. “With its position, close to the manufacturing base in southern Mainland China, Hong Kong is an ideal hub for multinationals or SMEs to manage their regional – sometimes global – operations,” Galpin adds.

But these doors require a hard push from SMEs. Rental fees in Hong Kong are considered unusually high, and more expensive than in other Asian cities. Bubna notes that, since capital and talent in Hong Kong are both costly, “SMEs try and achieve a lot with little of both. Sometimes this becomes a constraint for growth.”

All of this results in cost containment among SMEs, which also triggers a domino effect on other areas of the business. First is the limitation on physical operations. “SMEs need to operate in an international market.

They cannot survive just on domestic projects, so to operate efficiently, with rising costs, it becomes more and more difficult to operate. So you relocate, and keep on relocating for more sustainable rents,” says Jamal.

Second, it would likely be difficult for businesses trying to control expenses to attract quality talent. Jamal points out that a business which offers less than competitive rates would not get the attention of the right staff and personnel. “It’s a tremendously difficult operating environment in Hong Kong currently. And I cannot see it getting any easier moving forward,” he says.

Innovation If there is a bright side to these challenges, it is the motivation for businesses to continuously innovate and surprise the market. “It puts a lot of pressure on SMEs to be able to survive, and if you want to remain competitive, cost containment is one of your biggest challenges. But that means that it decreases your ability to invest in innovation, to design new products, and your marketing ability, because it leaves less room for that due to high business costs,” Jamal explains. One area SMEs have to look into is the Internet, which is rapidly

Farook Jamal

Simon Galpin

Mukesh Bubna

changing the way business is done.

For Bubna, SMEs have to understand that they need to evolve to meet the new world customers.

Another setback that SMEs have to contend with is the needs of expatriates moving to Hong Kong for employment, including securing places in international schools. There have been efforts from the Education Bureau (EDB) according to Galpin.

These include the allocation of three vacant school premises in 2013, which are expected to provide 1,360 additional school places by school year 2016-2017, and a school allocation exercise dedicated to two vacant school premises and three greenfield sites for international school development.

Galpin mentions that their company has formed an inhouse team which coordinates with schools to get updates on the supply and demand for places, to better help clients who are bringing their families to Hong Kong. The current tax scheme in Hong Kong is probably the only area that continues to be encouraging for those who want to start their own business. InvestHK’s Galpin finds the predictability of the tax rate advantageous. “It makes tax planning, particularly from a tax liability aspect, straightforward and simple”.

The system, however, can still be improved to create a healthy business environment. Bubna suggests that new businesses should be given three-year tax holidays to strengthen entrepreneurship in Hong Kong.

Beneath the surface Commending the ecosystems for

startups in countries such as Indonesia, Malaysia, and Thailand, Jamal finds the government support for small businesses in Hong Kong weak and behind other Asian economies.

He strongly suggests that the government should be aggressive in its funding initiatives and step up to promote innovation and development further in the industry. “We have large government reserves so there’s ample opportunity for the government to step up and be aggressive in encouraging startups to make funding available,” he says.

There is still much to be done, as the survival of SMEs also needs a change of perspective from not only the government but also sectors like the banking industry, that truly understand the contribution of SMEs to the economy.

“Banks should be helping the companies. Banks used to be instrumental in the growth of most Asian economies. They worked closely with SMEs, they helped them to increase their credit over a period of time,” says Jamal.

The resolution of banks to step away from traditional lending activities has paved way for P2P loans.

Although P2P lending is emerging as an alternative funding channel, some analysts believe that it is too early to predict how it will perform.

Jamal raises the issue of the shadow banking system, pointing out that the government should look into this issue, as SMEs still find it difficult to survive due to high lending rates.

Businesses still submit to such practices, because banks are not available for them.

Transparency is key

HONG KONG BUSINESS | MARCH 2015 23

HONG KONG’s hottest startups 2015

Hong Kong’s 20 hottest startups to watch out for in 2015

The city’s biggest up-and-coming startups offer products ranging from platforms revolutionizing the logistics industry to an online marketplace for intellectual property

F

or the fourth consecutive year, Hong Kong Business brings you 20 of the city’s hottest startups worth watching over the next months. Learn more about them and how they are shaking up their sectors with their innovations.

The selected companies started operating from 2012 and continue to strive for success in the industry. These startups managed to make their business flourish from initial funding ranging from $150,000 to $127.93M. Some were created from the founders’ ideas for making living more convenient, while a few were established out of their own experiences. Startups on the list have been ranked according to total funding generated to date.

1. GoGoVan Founders: Steven (CEO), Nick, Reeve, James, Chris Funding: HK$127.93M (US$16.5M); Centurion Private Equity, RenRen - Chinese social network Start of operation: July 2013 24 HONG KONG BUSINESS | MARCH 2015

GoGoVan was born through an inspiration from another of the cofounders’ startup companies – a takeaway box advertising company.

GoGoVan is a peer-to-peer platform for vans.

Its app was developed to connect drivers and users to provide a more convenient and efficient freight service, enhancing the overall logistics efficiency. With the fast-growing market in Hong Kong, GoGoVan’s business has already expanded to Singapore, and its presence will soon be felt in Asian and global markets.

2. lalamove Founder: Shing Chow Funding: HK$77.54M (US$10M); MindWorks Ventures, Sirius Venture Capital, Aria Group, Crystal Stream, Geek Founders Start of operation: December 2013 In late 2013, lalamove started as EasyVan. A year later, with its fast expansion in various cities, they had to face the fact that the name “EasyVan” was too restrictive, as they also provide trucks, lorries, and motorbikes. They therefore decided

HONG KONG’s hottest startups 2015 to change their name to lalamove. They have grown from Hong Kong to 6 cities; namely Singapore, Bangkok, Shenzhen, Guangzhou and Taipei, in less than a year.

3. HotelQuickly Founders: Christian Mischler, Mario Peng, Michal Juhas, Raphael Cohen and Tomas Laboutka Funding: HK$43.41M (US$5.63M); GREE, William Heinecke, Koh Boon Hwee, Angel Investors Start of operation: March 2013 HotelQuickly (HQ) claims to redefine the concept of last-minute hotel booking in mobile commerce. Hotel Quickly offers on average a 28% deep discount on the best available hotel rates online. As of June 2014, HotelQuickly has generated over 300,000 downloads, more than 150,000 registered users, and featured more than 3,000 curated hotels in 100+ destinations in 14 different countries. HotelQuickly aims to continue to accelerate its product development, marketing, and hiring.

4. MoneyHero.com.hk Founder: Alister Musgrave Funding: HK$23.26M (US$3M); Nova Founders Capital, Pacific Century Group, Local HK Angel Investors Start of operation: May 2013 MoneyHero.com.hk bills itself as the first financial comparison site in Hong Kong that features an independent comparison portal and a comprehensive product database, on top of useful tools and guides aimed at helping customers save money. According to Alister, MoneyHero.com.hk is all about bringing the power back to the consumers – the power of choice, the power of information – by giving them free access to user-friendly comparison tools so they can compare the most essential financial products, such as credit cards, personal loans, and medical insurance.

5. Ezee Systems Founders: Ashok Jaiswal Funding: HK$19.38M (US$250,000); NEST Start of operation: November 2013 EzeeCube by Ezee Systems is a next generation media box for home users. EzeeCube uses patent pending technology which allows users with different devices to safely store and organize photos in its home cloud.

Apart from organizing photos, EzeeCube also has specific devices such as a Blu-ray player and extra hard drive space, which are stackable onto the main EzeeCube unit. The product can be used through wireless technology, while users can add additional elements to extend EzeeCube into an enhanced digital media player.

6. Sensbeat Founders: Leo Wong, Ben Chan and Conrad Lo Funding: HK$7.76M (US$1M); Angel Investors from US, HK and China Start of operation: 2013 Sensbeat is a mobile startup founded by ‘post-90s’ in 2013.

Sensbeat believes the future of social lies in emotions. Their platform creates a new form of expression, that makes sharing emotions incredibly easy through music. According to founders, they strive to capture the emotions of their users – enabling music story matching as well as to find clusters of people who have similar/ opposite emotions. Recently, the Sensbeat team arrived in Silicon Valley and were accepted into an accelerator called Plug & Play International Accelerator.

7. IP Nexus Founder: Hidero Niioka Funding: HK$6.82M (US$880,000); Guangdong Technology Financial Group (GTF), Angel Investors Start of operation: 2012 IP Nexus bills itself as a global online marketplace for intellectual property, including an IP Exchange for trading intellectual property and a services marketplace where all parties involved in intellectual property development, protection and monetization can share information and offer or source expertise. According to the founder, IP Nexus’ vision is to encourage innovation and the global transfer of technological knowledge by making IP monetization available and accessible to all IP owners, including individual inventors, startups, SMEs, and universities.

8. Klook.com Founder: Eric Gnock Fah, Ethan Lin and Bernie Xiong Funding: HK$5.04M (US$650,000); including angel round and self funded portion, Angel Investors Start of operation: June 2014 Klook is a one-stop shop for locals and travellers to explore and book all sorts of tours and activities. The Klook approach is to directly collaborate with only the best operators at each destination to curate the most unique experiences. Klook also boasts that every selection in the platform is curated to fit the varied travel styles of their customers. Klook’s travel curators verifies and looks out for the most unique activities.

This is made possible through its full suite of in-house developed content management and reservation systems, ensuring the best availability and the best experience at the best price. According to its founders, the Klook goal is to provide their fans and followers the best that each city can offer.

HONG KONG BUSINESS | MARCH 2015 25

HONG KONG’s hottest startups 2015 9. Gatecoin Founders: Aurélien Menant Funding: HK$3.88M (US$500,000); Angel Investors Start of operation: July 2013 Gatecoin, a startup incubated by the Hong Kong Science and Technology Parks and Tsinghua University, launches the ‘first global bitcoin trading platform’ that keeps clients’ cash deposits on segregated accounts to minimize counterparty risk.

Gatecoin bills itself as the first financial institution for digital currencies. The platform targets specifically high-volume bitcoin buyers and sellers, and issues innovative products such as a prepaid card that you can load online with bitcoins. It allows its users to trade bitcoin in USD, Euro, and HKD, using its low latency matching engine. Gatecoin also created the website coincharities.org, which is a Kickstarter-like bitcoin donation platform. Gatecoin just launched the ‘first digital currency exchange platform’ to offer segregated client bank accounts, that will be available in 40 countries on five continents.

10. Spacious Founders: Asif Ghafoor Funding: HK$3.88M (US$500,000); Angel investors Start of operation: August 2013 Spacious helps anyone to find a place to buy or rent. Spacious overlays Hong Kong property listings onto a map, and cross-references them with previous data to indicate if the place you’re looking at is a good deal, or owned by a ‘greedy landlord’. Add detailed neighbourhood guides and you’ve got an effective way of looking for your next place.

According to the founder, Spacious aims to significantly improve the experience of buying or renting a property. The general consensus among property searchers seems to be that the current players are not providing the great customer experience people expect.

“We passionately believe Spacious will change this,” he says.

11. Monexo Innovations Founders: Mukesh Bubna, Sonal Bengani and M. Sundar Funding: HK$3.3M; Cyberport Incubation, Angel Investors Start of operation: April 2014 Monexo Innovations is an online peer-to-peer lending marketplace, bringing together lenders and borrowers. It claims to create a ‘win-win’ situation for both, by giving the lender higher returns and the borrower lower costs. According to the founders, Monexo is unique from two perspectives: first, it brings peer to peer lending to Hong Kong; secondly, their product bills itself 26 HONG KONG BUSINESS | MARCH 2015

as a first of its kind to lend against rental income to property owners.

“Every person in Hong Kong owns or likes to own a property and this is a new product which banks do not offer,” say the founders.

12. iDecorate Founders: Shana Buchanan Funding: HK$2.71M (US$350,000); Angel Investors from Hong Kong and Australia Start of operation: February 2013 From solely bringing wedding products to consumers, iDecorateWeddings have broadened their customer base by becoming a lifestyle brand selling products for home and all kinds of special occasions. Now, simply called iDecorate (trading as iDecorateshop), they offer home entertaining needs and interior decoration and design. iDecorate serves B2C and B2B clients and aims to make designing anyone’s home or special occasion as easy as ordering take-out via their mood-board-meets-shopping cart tool called ‘styleboard’. According to Shana, iDecorate is for people who love beautiful things directly delivered to their doors. Now that they have a new website, many men and women are using it, whereas before it was mostly just women.

13. Joy Sprouts Founders: Suzanne So and Leo Lau Funding: HK$2.52M (US$325,000); Arbutus Capital Partners, Angel Investors spanning in US and Asia including HK, China, Japan, Taiwan Start of operation:

April 2012 Joy Sprouts aims to empower parents to help their young children achieve their full potential with a balanced approach to learning called “Total Development”. The platform provides parents with data driven educational technology that enables a better understanding of their child’s unique learning behavior across key developmental areas. The Joy Sprouts app was launched in December 2014, and got into the Top 21 position in the U.S. Apple App Store for the iPad .

14. praisage Founders: Danny Chan and Karen Au Funding: HK$1.23M; Angel Investors, Cyberport Incubation Program, Cyberport Creative Micro Fund Start of operation: January 2012 Billing itself as the world’s first platform of appreciation, Praisage aims to provide an integrated and independent channel for the public to express their appreciation, enhance the praise quotient (PQ) and promote a culture of

HONG singapore’s KONG’s hottest hottest startups startups 2015 2014 appreciation. Through Praisage, anyone can register as a “Praise-maker” through email or Facebook and share stories of heartfelt service and incidents worthy of appreciation using the platform.

15. Around Founders: Matthew Tam, Antony Wong, Alex Cheng, Mingo Kwan and Jeffrey Au Funding: HK$1M; CatalystVC Group Start of operation: January 2015 Changing its name form Myflat. hk to Around, this startup has built a new innovative marketing platform with a neighbourhood network that helps people connect with their real neighbours. According to the founders, they truly believe in the power of a strong community.

At Around, users can create posts to connect to their neighbours, buy and sell things, find a tutor, and list properties for rent or sale.

16. Rush Hour Media Founders: Jerome Tam and Jake Sharp Funding: HK$800,000; Aylmer Capital Ltd. Start of operation: May 2012 Rush Hour Media is a creative web and branding agency which focuses on web design and development, branding and graphic design work.

It was created to bring responsive and simple web design to Hong Kong at an affordable price. Its services cover web+app design and development, online ticketing systems, e-commerce solutions, digital marketing and branding, print & graphic design and web & email hosting.

“We want to be known as the ‘go to guys’ for anything web-related in Hong Kong, that is the goal,” said the founders.

17. The Graduate Founders: Christopher Schrader and Zachary Nevin Funding: HK$775,240 (US$100,000); Angel Investors Start of operation: August 2013 The Graduate is an online social marketplace that provides educational solutions for prospective clients seeking to create relationships with independent tutors across Asia. The platform believes that there is no replacement for a good teacher.

It seeks to empower rather than replace good teachers, and create a platform to seamlessly unite great educators with great students.

Through the platform clients can search for tutors who fit their needs, as well as allow tutors to run their own independent businesses.

18. JOBDOH Founders: Mary Cheung, Eric Fong and Xania Wong Funding: HK$430,000; Cyberport CCMF and Incubation Start of operation: Private beta since November 2014 JOBDOH is a location based, on-demand mobile platform to book best-fit temporary workers.

By using JOBDOH, it claims to reduce the hassle and inefficiency of going through a middleman.

It focuses on value creation; not just on a financial, but also on a social level. A key goal of the platform is to optimize the task/work matching such that even the economically inactive who desire to be productive can have a way to do so.

19. Affashion Founders: Bosco Lam, Ronald Kwok and Andy Lam Funding: HK$348,846 (US$45,000); Cyberport, HK Science Park, Angel investors Start of operation: 2014 Affashion empowers fashion mcommerce sites built on Magento and Shopify to display dynamic relevant content according to customers’ unique preferences.

Affashion provides a Content Relevant Engine plugin which is fashion and mobile-focused for fashion m-commerce sites. According to the founders, selling apparel and accessories is more than like selling milk and cereal. With Affashion, fashion m-commerce sites are able to auto-customize the shopping experience for every shopper according to his/her profile, taking into consideration trends, style matching, sizing, purchase history, and location. They add that working in fashion along the startup adventure is simply a ‘cool lifestyle’.

20. Zyppos Founder: Guillermo Ginesta Funding: HK$200,000; Angel Investors Start of operation: March 2014 Zyppos is a crowdsourcing platform of travel experts, which users can hire to make sure they have an amazing trip and find the best flights and lowest fares. It aims to reduce the stress of searching for flights using conventional search engines. In just three easy steps of creating your contest of dream trip, experts will then work their magic to find the best flights and finally, you’ll select the best expert’s itinerary that suits you.

Zyppos recently launched its 2.0 version with a complete redesign, new user experience, simpler navigation, and better performance.

According to Guillermo, Zyppos aims to help users focus on the joy of travel, and encourages everyone to start travelling more.

HONG KONG BUSINESS | MARCH 2015 27

HONG KONG’s 25 LARGEST law firms

Busy financial markets are expected to spur legal hiring in 2015.

tive search firm GRMSearch.

Despite state scrutiny, Cooper notes that firms eager to go public and tap the equities market for fresh capital will also be catalysts for legal hiring in 2015.

“Legal firms are all hiring at the moment due to a lot of IPO (initial public offering) work, and also an increase in lending,” Cooper says.

“Regulatory knowledge is highly-prized across the board, and we see this trend continuing, especially with such recent developments as Stock Connect, which require a lot of regulatory knowledge,” he adds.

The Shanghai-Hong Kong Stock Connect, also known as Stock Connect, is a cross-border trading link launched last year, that aims to provide mutual trading access between the Mainland and Hong Kong.

“Stock Connect may well create a lot of business for lawyers,” Cooper says, adding however, “This remains to be seen.” This year, law firms will be challenged to fill the gap posed by a shortfall in lawyers with specific skills, such as Mandarin fluency, Allcock says. However, when it comes to attracting the right talent, law firms may need to sweeten the deal by boosting compensation packages.

f you are a Mandarin-speaking lawyer with a strong financial and litigation background, then you may be just what several Hong Kong law firms are looking for this year. Oliver Allcock, legal and compliance manager at professional recruitment consultancy Robert Walters Hong Kong, observes that nowadays, Hong Kong law firms are generally “in the mood” for hiring.

“The attraction of the Hong Kong Stock Exchange (HKEx) to both PRC (People’s Republic of China) and international companies creates many opportunities in the corporate M&A (mergers and acquisitions) and capital markets space, while Hong Kong’s position as the APAC (Asia-Pacific) hub for arbitration, commercial, and regulatory litigation will continue to drive the demand for contentious lawyers,” Allcock says.

Financial services firms in particular will likely recruit more lawyers

Who made it to HKB’s list?

Mayer Brown JSM has once again topped Hong Kong Business’ ranking of the 25 largest law firms in the city, based on total number of legal professionals. Data compiled from individual company surveys and media reports show that Mayer Brown JSM is ahead of its closest competitor Deacons in staffing numbers by just 3 legal professionals.

Though the top 5 law firms weren’t shaken from their top spots, it’s very noticeable that Deacons have increased its legal professionals’ strength by 7.5%, adding 14 professionals to last year’s 186.

This year’s list also welcomes three new entrants; namely Norton Rose Fulbright with 73 legal professionals debuting at number 11, Holman Fenwick Willan in the 14th spot with 63 legal professionals.

What can these lawyers with their briefcases steal?

Hong Kong on a hunt for corporate lawyers

I

28 HONG KONG BUSINESS | MARCH 2015

Firms eager to go public and tap the equities market for fresh capital will also be catalysts for legal hiring in 2015.

as the government maintains its tight regulatory grip on the sector.

“Legal departments in financial services firms will be looking for professionals in derivatives, funds, and private banking mainly at the mid-level mark, as these are the products most utilized by banks,” notes Allcock. However, he adds that the major driving force in the financial services industry is regulatory and compliance law, as the entire industry continues to be under scrutiny of governments and regulators alike.

Heightened demand for lawyers Even the government itself could use more lawyers as Hong Kong ramps up its anti-corruption efforts this year, says another analyst. “Continued regulation of financial services and a more stringent approach to corruption will mean the need for regulatory, advisory, and investigative lawyers will continue to be high,” says Ben Cooper, executive director at execu-

HONG KONG’s 25 LARGEST law firms

The 25 largest law firms in Hong Kong Company Name

2013 Ranking

FOREIGN/ LOCAL

2014 LEGAL PROFESSIONALS

2013 LEGAL PROFESSIONALS 203

Elaine Lo

Managing Partner

1

Mayer Brown JSM

1

Foreign

203

2

Deacons

2

Local

200

186

Lilian Chiang

3

Baker & McKenzie

3

Foreign

179

181

Milton Cheng

4

Linklaters

4

Foreign

178

173

Marc Harvey

4

Clifford Chance

5

Foreign

178

165

Peter Charlton

6

King & Wood Mallesons

6

Foreign

164

154

Zhang Yi and Hayden Flinn

7

Allen & Overy

8

Foreign

99

98

Vicki Liu

8

Herbert Smith Freehills

7

Foreign

98

108

Julian Copeman

9

Reed Smith Richards Butler

9

Foreign

87

93

Roger Parker

10

Woo Kwan Lee & Lo*

10

Local

86

86

William C.Y. Kwan

11

Norton Rose Fulbright

-

Foreign

73

72

Phillip John

12

Hogan Lovells

11

Foreign

69

69

Owen Chan

13

Li & Partners

12

Local

67

59

Robin Li

14

Holman Fenwick Willan

-

Foreign

63

63

Paul Hatzer

15

Clyde & Co

19

Foreign

59

42

Michael Parker, MD, APAC

16

Skadden, Arps, Slate, Meagher & Flom

20

Foreign

58

41

John Adebiyi

17

Stephenson Harwood

14

Foreign

57

52

Voon Keat Lai

18

Latham & Watkins

-

Foreign

56

50

Simon Powell

19

Robertsons

23

Local

52

38

Michael Lintern-Smith

20

Jones Day

15

Foreign

49

49

Robert Thomson

21

Wilkinson & Grist

17

Local

48

48

Chan Chi Kin Raymond

22

Orrick, Herrington & Sutcliffe

15

Foreign

45

49

Xiang Wang

23

Gallant Y.T. Ho & Co

18

Local

41

43

Amanda Liu

23

Eversheds

21

Foreign

41

39

Stephen Kitts

23

Simmons & Simmons

13

Foreign

41

53

Paul Li

Data provided by companies *Obtained from their websites and/or media reports.

TOTAL

2,291

2,214

HONG KONG BUSINESS | MARCH 2015 29

HONG KONG’s 30 largest insurance firms

Times are changing

HK insurance industry gears up for new sector rules New insurance regulatory schemes are deemed postively challenging.

F

or a country renowned for being a global financial leader, Hong Kong’s regulations on the country’s insurance industries have been falling behind for a substantial period of time. However, when the insurance regulatory legislation was drafted and finally introduced in 2014, it constituted a major paradigm shift for the industry.

The new regime is one of the most significant changes to have taken place in decades, and with tighter licensing regulations clamping down on insurance activities, Hong Kong insurance companies are preparing themselves to face the serious challenge of adapting to the new rules of the industry’s playing field.

“With various economic challenges likely to continue in 2015, our aim is to serve our customers even more effectively with the strength of our

30 HONG KONG BUSINESS | MARCH 2015

When the insurance regulatory legislation was drafted and finally introduced in 2014, it constituted a major paradigm shift for the industry.

underwriting capabilities and through enhanced distribution,” said Shaun Stanfield, chief underwriting officer for QBE Insurance – Asia Pacific.

This was demonstrated in last year’s successful launch of ‘QBE Qnect’, their newest online insurance platform that allows intermediaries to perform direct transactions, alongside ‘QBE Business Insurance Solutions’ (BIS), a new commercial insurance product developed for Hong Kong’s SME market.

Friends Provident International (FPI) saw a challenging, yet positive shift in the industry, and continued to strengthen their business operations by rolling out new regional administration platforms and building teams of experts based in Asia, creating bigger impact in the process.

“With the new insurance regulations… the industry is adjusting to a new operating field with new rules, and we will see a new landscape that

will benefit customers, “said James Tan, FPI’s managing director for Asia. “Fortunately, FPI managed to build good traction last year and is entering 2015 with a strong proposition in place.” In September 2014, insurance company FWD Hong Kong & Macau continued to grow their online platforms and mobile apps, even opening a Shanghai representative office to tap into the mainland’s life insurance market.

David Wong, FWD’s CEO in Hong Kong & Macau and Executive Vice President in Greater China, is confident about what the new regime will bring. “We are supportive to the change and believe impact to the market is short-term.

Indeed FWD was among the very few insurers that managed to offer revamped ILAS plans upon the new guidelines’ implementation on 1st January,” he shared.

Insurance company ACE Life, who has previously received the “Company of the Year – Insurance” award, among several others, is also optimistic about the potential for growth. “Our life insurance growth has been increasingly driven by our more flexible insurance and financial solutions... Another key element for sustained insurance growth is maintaining good governance in the industry,” said Allan Lam, ACE Life’s country president.

Despite the major changes, it is clear that the Hong Kong insurance industry is well-prepared for the impact – in fact, it is met not with dismay, but with anticipation.

Who made it to the top 30?

HSBC Life topped the Hong Kong Business’s ranking of largest insurance companies in the city according on their 2013 gross premiums.

Data compiled from Office of the Commissioner of Insurance show that HSBC Life, classified as Life or Long Term Business – offering life insurance products – is ahead of its closest competitor AIA International by $1.66m.

AXA General has the highest total gross premiums amongst all the General - Direct & Reinsurance Inward Business companies and ranked fourteen overall.

HONG KONG’s 30 largest insurance firms

The 30 largest insurance firms in Hong Kong INSURANCE COMPANY

CLASSIFICATION

gross premium 2013

1

HSBC Life

Life or Long Term Business

$ 32,885,818

2

AIA International

Life or Long Term Business

$ 31,229,124

3

Prudential (UK)

Life or Long Term Business

$ 24,548,601

4

Manulife (Int’l)

Life or Long Term Business

$ 17,564,645

5

China Life

Life or Long Term Business

$ 17,537,129

6

BOC Group Life

Life or Long Term Business

$ 13,233,484

7

AXA China (Bermuda)

Life or Long Term Business

$ 12,324,783

8

Hang Seng Insurance

Life or Long Term Business

$ 9,585,642

9

FWD Life

Life or Long Term Business

$ 6,880,290

10

AXA China (HK)

Life or Long Term Business

$ 5,719,279

11

MassMutual Asia

Life or Long Term Business

$ 5,285,637

12

Ageas

Life or Long Term Business

$ 4,858,083

13

Sun Life Hong Kong

14

AXA General

15

Zurich International

16

Generali Int’l

Life or Long Term Business

$ 4,320,229

General - Direct & Reinsurance Inward Business

$ 3,501,126

Life or Long Term Business

$ 3,095,932

Life or Long Term Business

$ 3,043,205

General - Direct & Reinsurance Inward Business

$ 2,615,013

17

Zurich Insurance

18

Friends Provident Int’l

Life or Long Term Business

$ 2,435,646

19

Standard Life Asia

Life or Long Term Business

$ 2,431,288

20

Bupa

Life or Long Term Business

$ 2,094,191

21

MetLife

Life or Long Term Business

$ 2,083,264

22

ACE Life

Life or Long Term Business

$ 1,869,792

23

Aviva

General - Direct & Reinsurance Inward Business

$ 1,801,847

24

BOC Group Insurance

General - Direct & Reinsurance Inward Business

$ 1,783,708

25

CTPI(HK)

26

AIG Insurance HK

27

QBE HKSI

28

Asia Insurance

29

CNOOC Insurance

30

Dah Sing Life

General - Direct & Reinsurance Inward Business General - Direct & Reinsurance Inward Business General - Direct & Reinsurance Inward Business

$ 1,782,030 $ 1,712,738 $ 1,423,023

General - Direct & Reinsurance Inward Business General - Direct & Reinsurance Inward Business

$ 1,415,920

Life or Long Term Business

$ 1,369,144

$ 1,409,444

*Data compiled from the Office of the Commissioner of Insurance.

HONG KONG BUSINESS | MARCH 2015 31

High-Flyers 2014

Outstanding Enterprises and Business Leaders

Over 100 executives attended the prestigious Hong Kong Business High Flyers Awards 2014 held last January 20, 2015 at the Azure Restaurant Slash Bar at Hotel LKF in Hong Kong. This year marks Hong Kong Business’ 11th year of recognizing the companies that have the most outstanding commitment to excellence. “It is with greatest pleasure that we award these companies for their exemplary performance,” said Tim Charlton, Hong Kong Business’ publisher.

List of Honorees Ageas Insurance Company (Asia) Limited AIG Insurance Hong Kong Limited Altruist Financial Group Limited Canadian International School of Hong Kong Fujitsu Hong Kong GODIVA Chocolatier Henley Business School HSBC Life (International) Limited Hyperlink Holdings Limited InterContinental Grand Stanford Hong Kong Lan Kwai Fong Hotel @ Kau u Fong MassMutual Asia Ltd. MENCE Mercedes-Benz Hong Kong Limited OZO Wesley Hong Kong Rhombus International Hotels Group The Cityview Thomas Mayer & Associés TransUnion Limited Sound Concepts Ltd Wharf T&T www.Crystallize.Me Ltd Zchron Design

32 HONG KONG BUSINESS | MARCH 2015

Life Insurance General Insurance Financial Planning International School Leading ICT Solutions Premium Chocolatier MBA Outstanding Enterprise Award Eminent Immigration Consultant Luxury Hotel Boutique Hotel Innovative Insurance Company Weight and Age Management Automobile Modern & Lifestyle Hotel Leading Hospitality & Hotel Management Green City Hotel Law Firm Consumer Credit Reporting Company & Innovative Financial Service

Professional AV Consultancy Fixed Network and Broadband - Telecommunications Crystal Lighting / Gifts / Arts Interior Designer

HONG KONG BUSINESS 2014 HIGH-FLYERS AWARDs

Tim Charlton, Editor-in-Chief of Hong Kong Business magazine

Networking cocktail

Hong Kong Business magazines at the event

Alvinos Micromatis of HSBC Life (International) Limited

Brenda Li of Ageas Insurance Company (Asia) Limited

Jover Pong of AIG Insurance Hong Kong Limited

Tim Kaiser & Barbara Dacho of Canadian International School of Hong Kong

Lorraine Leung of Fujitsu Hong Kong

Carmen Chiu of GODIVA Chocolatier

Neil Logan, Marc Day & Paul Mais of Henley Business School

Samson Cheung of Hyperlink Holdings Limited

HONG KONG BUSINESS 2014 HIGH-FLYERS AWARDs

Sharon Tam of InterContinental Grand Stanford Hong Kong

Rebecca Kwan of Lan Kwai Fong Hotel @ Kau u Fong

Mence Tsoi of MENCE

Mael Vastine of OZO Wesley Hong Kong

Alex Wu of The Cityview

Eric Mayer of Thomas Mayer & AssociĂŠs

Samantha Lee of Wharf T&T

Award recipients

Peter Yip of MassMutual Asia Ltd.

Jenny Chan of Rhombus International Hotels Group

Lawrence Tsong of TransUnion Limited

HONG KONG BUSINESS 2014 HIGH-FLYERS AWARDs

Louis Chan of Zchron Design

Guests with Louis Shek

Networking cocktail

Guests enjoying the networking cocktail with their peers

High Flyers Awards guests

Glenn Turner of Altruist Financial Group Limited

Peter Larko of Mercedes-Benz Hong Kong Limited

Raymond Chui of www.Crystallize.Me Ltd

Lan Kwai Fong Hotel @ Kau u Fong delegates

Guests of High Flyers Awards

Louis Shek, Marianne Avilla, Julie Nunez, Kinki Yeung, and Tim Charlton of Hong Kong Business Magazine

HONG KONG BUSINESS 2014 HIGH-FLYERS AWARDs

Lan Kwai Fong Hotel @ Kau u Fong delegates

High Flyers Awards Crystal Trophies

Gift bags for delegates

Hyperlink Holdings Limited delegates

Networking cocktail

Jover Wong of AIG Insurance Hong Kong Limited

High Flyers Awards guests

Crystal trophy

Welcoming guests

legal briefing

Recent competition law heats up HK

The new competition rules promise a fairer playing field, but lawyers and analysts believe that the new law’s effectiveness is still subject to intense debate.

W

hen the Hong Kong Competition Commission and Communications Authority published the draft guidelines under the Competition Ordinance last October, many wondered if the days of unfair, anticompetitive business practices in Hong Kong were drawing to a close – or is a level business playing field something easier said than done?

Analysts agree that the guidelines provide, at the very least, some form of basic framework for businesses, given that Hong Kong has relied mostly on common and criminal law to tackle anti-competitive offences, and a statutory competition law is at present limited only to two sectors: telecommunications and broadcasting. But most are still doubtful of how the guidelines will affect Hong Kong businesses.

What are the positive aspects of the new Competition Ordinance guidelines?

For one, “there is now a competition law regime for Hong Kong,” says Padraig Walsh, a partner at Bird & Bird, referring to the Competition Ordinance. “It goes from nothing to something.”

“The intention of the Competition Bill (now the Competition Ordinance) was to enhance economic efficiency and the free flow of trade by promoting sustainable competition. This is achieved, by, firstly, deterring companies in all sectors of the economy from entering into cartels

“The need for businesses to do their own competitive assessment, for example, may prove to be “time-consuming, and may increase compliance costs.” and other forms of anti-competitive agreement, and secondly, by preventing companies with market power from unfairly exploiting consumers to attempting to exclude competitors,” says Adam Ferguson, a registered foreign lawyer at Eversheds.

“The introduction of the Ordinance will bring Hong Kong [in] line with other major Asian economies, including the Mainland,” he adds.

On the other hand, where do the Competition Ordinance guidelines fail?

“The broad nature of the prohibition and the current lack of clarity about exactly how the Competition Commission intends to enforce the rules means that it is not always obvious how the prohibitions might apply to a given type of conduct or industry,” says Ferguson.

As a result, interpreting the guidelines may be an added liability for firms. The need for businesses to do their own competitive assessment, for example, may 38 HONG KONG BUSINESS | MARCH 2015

prove to be “time-consuming, and may increase compliance costs,” says Nathan Dentice, a partner at Reed Smith Richards Butler.

Adam Ferguson

Adrian Emch

Marc Waha

Padraig Walsh

Nathan Dentice

How do the Competition Ordinance guidelines compare to its overseas counterparts?

“The rules are not as sophisticated as the other developed economies,” notes Walsh, citing, for instance, the Ordinance’s merger rule which only covers telecommunications carrier licenses.

“Elsewhere, this would apply across different sectors,” he says.

The Ordinance’s second conduct rule, which cracks down on business deals that overreach their market clout, also proves to be unclear, “as its wording is a patchwork of different inspirations (mainly UK, EU, and Australia), which may lead to some confusion as to which businesses will be subject to the rule and what will be expected from them,” argues Marc Waha, a partner at Norton Rose Fulbright.

Adrian Emch, a competition law partner at Hogan Lovells, says a “cookie-cutter approach” to the creation of Hong Kong’s Ordinance guidelines actually fails to draw the best of foreign regulations.

“Whatever you think about this, the new regime provides the familiarity and comfort of international norms, yet also incorporates some of the questionable measures from overseas competition law and practice,” he says.

With the guidelines’ actual implementation seen later this year, how should Hong Kong businesses respond?

“Businesses will have to understand how the regulations operate, implement the principles, and make changes to the way that business is done,” says Walsh.

Under the new rules, will the Hong Kong government now yield more powers in order to deal with unfair businesses?

Yes, according to Emch. “Now, businesses need to be prepared, as the Commission has full-blown dawn raid powers, as well as the resources to handle complaints and investigations,” he notes.

How long will it take for the new guidelines to significantly impact Hong Kong businesses?

Major changes will be seen after at least only half a decade, Waha says. “Typically, the introduction of competition legislation takes a long time before having wholesale effects across markets,” he says. “It may take at least five to 10 years before effects are felt across the board,” Waha adds.

“The current law is only a new beginning. A lot will depend on the resources and approach of the regulator,” adds Walsh.

CMO Briefing

What’s the secret to making viral ads?

Hong Kong’s creatives and marketers reveal their preferred approaches to this mysterious craft.

W

hile Ocean Park Corporation’s Marketing Director Perry Chung certainly hoped that their company’s TV commercials would draw in audiences, he didn’t expect that two of their outputs would go on to garner over a million views combined. Chung attributes the success of the videos to a straightforward approach, saying, “A single twist or a simple script would generate massive viral effect as long as it captures public attention for a reason. Successful videos need not be long.

Powerful videos are normally not very commercial, only featuring products and selling messages. Consumers just hate product pushers.”

They’re lucky. Only 15 percent of video advertisements manage to go viral, according to a 2010 study

by Millward Brown. Yes, the shocking truth is that, even though the advertising industry along with their clients spend millions, if not billions, of dollars on video ads and other brand recognition material, less than a handful of their countless creative outputs have gone on to become instant hits with their target audience and beyond.

With a multitude of factors at play, how have advertisements such as Old Spice’s “The Man Your Man Could Smell Like” with Isaiah Mustafa, Volvo Truck’s “The Epic Split” featuring Jean Claude Van Damme, and The Dove Campaign for Real Beauty gone on to be liked, shared, and tweeted over and over again, while other ads have tanked?

Ads that place emphasis on making audiences feel good about What exactly makes an ad viral? themselves are For Dione Song, Zalora Marketing Director, there is no more likely to magic formula for determining the success of a video. take off.

She says, “I do not think there is a foolproof method for 40 HONG KONG BUSINESS | MARCH 2015

creating viral ads, as human reactions and responses can sometimes be unpredictable, as we have experienced from numerous instances of virality coming out of rather mediocre ads.”

Meanwhile, Goods of Desire founder Douglas Young suggests that an advertisement is more likely to be a ‘miss’ than a ‘hit’, explaining, “I think the audiences have an immune system to ads. They automatically switch off when they see one.”

However, Young acknowledges that there is a way for ads to gain traction with their audience – by immediately grabbing their attention. “An ad needs to convey the message in the split second between the viewer first seeing it and the moment he or she switches off.”

For today’s smarter audience, a simple, clear cut point delivered by a brand-appropriate image is best. Babies for care-oriented products, businessmen for enterpriserelated wares, and yes, even sexuality for mature audiences, all do wonders when it comes to attracting attention. The key is to have a simple message tailor-made for a specific demographic and psychographic.

“I think an effective ad is one that projects a very focused image so the message transfer is instantaneous,” says Young. “There are too many ads that try to do too much by including too much information.”

How can ads make the audience respond?

Once an ad has piqued its target’s attention, it should then be able to retain it and make the audience want to act on it. Hard sells can only go so far before losing traction, and as such, emotional and relevant content are the key to getting audiences engaged.

“I think what viral ads all do is evoke a strong emotional response and most interestingly, it doesn’t always have to be positive,” says Song. “Instead, they oftentimes elicit extreme emotion – extreme degrees of happiness, sadness, shock, or disgust – because it is precisely these extreme emotions that motivate viewers to act on them by either sharing, commenting, liking, or sometimes even hating.”

Sylvia Lee, Hang Lung Properties’ head of Central Marketing, agrees with Song, believing that the more audiences relate to an ad, the more inclined they’ll be to react. Ads that place emphasis on making audiences feel good about themselves are more likely to take off.

According to Lee, the adv “has to relate to one’s personal beliefs or make one feel good about oneself.

Some viral campaigns work because they touch the heartstrings of people. Take the Coke personalized ad campaign and the Ice Bucket Challenge for example.

It’s about ‘me, me, me’ for the former, plus the feel good charity of the latter. It’s the perfect call for the narcissist in all of us.”

An advertisement’s primary function is to elicit brand recall, and knowing the above factors will definitely help start an ad off on the right foot.

“In general though, the success of ads depend heavily on content, relevance, and connection, as a strong motivation is required to really get viewers out of passivity,” concludes Song.

HONG KONG BUSINESS | MARCH 2015 41

Event coverage: MEF GEN14

Participants showcase their expertise at the exhibit

The future of innovation: What’s next after Facebook and Twitter?

We attended the MEF GEN14 and found out that a video version of Twitter might be on its way.

A

fter five years of the sociallocal-mobile and cloud hype which gave us Facebook, Twitter, Dropbox, and iCloud, is the Internet over yet? This is just one of the hottest topics debated by a panel of invited guests at the recently concluded MEF Global Ethernet Networking 2014, or MEF GEN14, held in Washington, DC last November. The event gathered for the first time senior professionals involved in the Ethernet services and technology ecosystem, to talk about some of the latest trends in the industry.

Panelists agree that the social aspects of the Internet are fuelling many innovations. Nan Chen, president, MEF/co-founder and executive vice-chairman, CENX, says that the tech sector has just begun innovating across verticals in general. “Whether it’s social, mobile, cloud or anything else, we’ve seen the first round of innovation on the Web – and yet most

42 HONG KONG BUSINESS | MARCH 2015

“Whether it’s social, mobile, cloud or anything else, we’ve seen the first round of innovation on the Web.”

of the applications there have two characteristics. They’re sort of best effort and very loosely coupled across industries.”

Chen believes that a lot of work is required to create richer ecosystems for sectors such as healthcare, that may have real demands on the network.

Furthermore, consumers’ concerns cannot be ignored in realizing these ecosystems. Sanjeev Mervana, senior director of SP Marketing at Cisco, notes that most innovations in social networking are being driven by consumers.

“When we look at innovations in social applications, such as Snapchat and the possibility of video Twitter, we see the younger generation of consumers finding value and driving the use of these specific technologies and applications to build a new social online society. Of course this bleeds over to how enterprises interact

socially, as well. So, I think innovation is being looked at from both the consumer side… as well as from an enterprise perspective.” Mervana adds that for an end consumer, it does not really matter where the innovation is coming from. As long as it is simple to use and solves specific consumer needs, it has a chance for adoption.

Consumer innovations Grant Lenahan, executive director of Innovation at Ericsson, suggests a possible video version of Twitter.

“There’s been a lot of research from people years ago, like Tom Allen at MIT, on managing the flow of information. There’s a more recent book on “social physics” that quantifies the same concepts, and says if you don’t bring people physically together, they don’t communicate as well; they don’t share ideas. I’m wondering if communication actually gets better

Event coverage: MEF GEN14

Nan Chen, President, MEFCo-Founder

on Twitter. Broadband, almost live interaction – even though it’s done over bits and networks – may allow us to simulate human interaction electronically.”

On reinventing the entertainment and media experience, Mike Tighe, executive director of Data Services at Comcast Business, says that they are looking at the cloud as their new platform, or as their new entertainment operating system which will enable them to make changes to the entertainment experience daily.

“I joined Comcast two years ago, and I’ve really seen how the cloud has really reinvigorated the company.

What they’ve done is they’ve taken the [smarts] that used to exist in the set-top box and moved them out to the cloud. So we used to be able to make one or two changes to the set-top box a year, now we can make five to ten changes a day to improve the experience and offer new feature functionality.”

Tighe points out that they are now attracting top talent as the company moves to cloud as a platform to build a media and entertainment experience, which allows people to consume content any way they wish.

“We’re actually competing for talent that would normally go to Facebook and Google, but because we’re enlisting people to work in this entertainment operating system and entertainment experience, we’re recruiting that type of talent in the company.”

Cloud innovations Panelists also agree that the cloud is clearly not done yet. In fact, to meet the evolving need of the cloud service providers and users, a cross-industry alliance has been formed – the Clou-

dEthernet Forum (CEF). According to James Walker, vice president of Managed Network Services at Tata Communications and the president of CEF, the purpose of the group is to produce standardized implementations of interfaces between the carriers, DCs, and cloud service providers, enabling the creation of highly scalable, adaptable cloud infrastructures.

In other words, it wants the cloud to be available uniformly across cloud providers through multiple carriers of Internet – and, as a result, faster, better and cheaper.

Tighe adds that, while MEF has done some ‘tremendously’ good work in allowing service providers to seamlessly interconnect, it hasn’t accomplished the same thing for connecting a network provider to a cloud provider.

“So every cloud provider we want to connect to is an individual one-off process; it’s slow and it doesn’t scale.

But we’re hoping the work that the CEF does will enable standardized interfaces, so we can rapidly interconnect with cloud providers and are able to offer these cloud-based services to our CIOs.” Innovation versus evolution With all the new products and services coming our way with the advent of the Internet, Walker cautions that we need to differentiate between innovation and evolution, as he believes that something completely new doesn’t come along often.

Evolution, he explains, is building or re-innovating on something that has already existed. He thinks that this has become more frequent, and that true innovation is much more rare. “Innovating the way you run

“While MEF has done some ‘tremendously’ good work in allowing service providers to seamlessly interconnect, it hasn’t accomplished the same thing for connecting a network provider to a cloud provider.“

your business, innovating how we work with each other, that to me is slower. It’s less visible, it’s less actionable at the moment.”

Mervana agrees that while a lot of innovation has happened, not everything has been utilized or commercialized – so people didn’t know about the innovations and no one consumed them commercially.

The idea of innovation along with evolution, he believes, makes a lot of sense. “We can look to Facebook for an example. They innovated a mobile platform for their users while evolving their business practices to support their innovations.”

Mervana also adds that the isolation aspect of threat defence will also play a huge role in the innovation process, with lessons learned from the recent hacking of celebrities’ iCloud and their nude photos leaked.

“There’s a lot of innovations that are leveraging open source aspects to build an approach. Once an attack has occurred, from a threat defence perspective, you have to think how you can isolate that very quickly and perhaps stopping it from spreading.”

Meanwhile from the consumer’s perspective, Mervana believes that everyone will now start talking about standardising the Internet of Things amidst significant interoperability issues stemming from a vast amount of available communications protocols.

By Gloria Krisana Gallezo

The audience pays close attention to the speakers

HONG KONG BUSINESS | MARCH 2015 43

ECONOMICs

Ian Perkin

Political stability vital to prosperity: CE

H

ong Kong SAR Chief Executive Leung Chun-ying’s third annual policy address to the Legislative Council (Legco) on 14 January was generally assessed as taking a tough line on political reform and the so-called pro-democracy protests. But this was hardly revelatory. Mr Leung had little choice. He is not only SAR Chief Executive; he is also Beijing’s chosen man in Hong Kong and chief defender of the Basic Law and all that flows from it (including the method of choosing the next SAR Chief Executive in 2017).

In the face of the dramatic public protests in Hong Kong in the latter part of last year over the need for changes to the “selection process” for the next Chief Executive, and Beijing’s own stance that the Basic Law must be adhered to, Mr Leung could do little but stand firm. But the ‘hard line’ assessment is only the most obvious part of the story.

More subtle (though not much), was the manner in which Mr Leung used economic issues (and future general community prosperity) to press his case for adhering to the Basic Law and the proposed method of choosing the next Chief Executive (preselection of candidates by a committee followed by a general vote).

In doing so, Mr Leung showed political skills that few would have guessed he possessed when he took office. Of course, there were some sections of the media that deviated from the ‘hard line’ assessment of the speech. Xinhua, predictably, concentrated on the ‘social issues’ contained in the speech (health, welfare and an ageing society); others highlighted the Legco walkout by pro-democracy legislators, and still others, Mr Leung’s reference to “anarchy” if the law did not prevail. [As a former journalist trained on tabloid newspapers I would have gone with the “anarchy” angle. It’s a highly emotive word, it’s short and fits easily in a headline, and it gets the message across immediately.]

To quote the Chief Executive: “As we pursue democracy, we should act in accordance with the law, or Hong Kong will degenerate into anarchy.” Far more important, though, was the way Mr Leung used the Hong Kong community’s preoccupation with economic growth and ever-growing prosperity to make his case to toe the ‘party line’ (for the want of a better phrase) on political development.

In pursuing this line of argument, he was playing the game of ‘wedge politics’ – attempting to split an already marginal group even further from the mainstream – by emphasizing the need to maintain the health of the economy and the prosperity of the mainstream community. “Safeguarding the rights of Hong Kong residents under the Basic Law and ensuring a proper understanding of the obligation to obey the law are the key to maintaining Hong Kong’s prosperity and stability as well as its international status,” he said.

The danger in this is that it starts to sound very Mainland, where the Party and the government are promoted as the only ones who can assure stability and prosperity for the community. But it may be that the words betray their ultimate source. Mr Leung certainly offered Hongkongers a stark choice – prosperity or protests; the 44 HONG KONG BUSINESS | MARCH 2015

IAN PERKIN Independent Economic Consultant perkin888@hotmail.com Hong Kong SAR Government Budget balance 2014 v 2013 First 8 months of year (all $HK million) Items

8 months to Nov 2013

8 months to Nov 2014

Nov 2013

Nov 2014

Revenue

240,279.9

273,270.4

46,512.9

57,128.8

Expenditure

-263,986.2

-250,691.4

-30,943.7

-30,980.1

Gross Surplus (Deficit)

(23,706.3)

22,579.0

15,569.2

26,148.7

-

9,687.8

-

-

Net Surplus (Deficit)

(23,706.3)

12,891.2

15,569.2

26,148.7

Fiscal reserves at Nov 30

710,207.8

768,607.9

-

-

Repayment of bonds and notes

Source: HKSAR Government statistics

Basic Law or anarchy. He also, understandably, lauded his own government’s achievements since 2012. “Since taking office, the current-term Government has progressively fulfilled the pledges in my Manifesto on housing, poverty, elderly care and environmental protection, he said. “The related initiatives have begun to deliver results. “By promoting economic development and taking forward the constitutional development in accordance with the law, we will have a greater capacity for implementing policies to improve people’s livelihood.

After outlining some new initiatives in key policy areas – of which there will be much more detail in next month’s 2015-16 budget from Financial Secretary, John Tsang – Mr Leung highlighted the Government’s fiscal strength. “Hong Kong people are hardworking, law-abiding and tenacious,” he said. “Hong Kong is backed by our country and gathering momentum of development. “Given the strong fiscal position of the HKSAR Government, we will be able to take full advantage of the opportunities ahead and make right choices as long as we adhere to our values, maintain our confidence and stand united.”

The Hong Kong SAR government’s budget situation is certainly robust, giving the Financial Secretary, John Tsang, plenty of flexibility as he puts the finishing touches on his 2015-16 budget to be delivered to Legco on 25 February.

Latest figures for the consolidated account show the government’s fiscal situation is in rude health following a surge in profits tax receipts in November and continued flat expenditure (see accompanying table).

There was a surplus of HK$26.1 billion in November alone, bringing the cumulative year-to-date surplus to HK$22.6 billion, or a net HK$12.9 billion after a scheduled repayment of bonds and notes.

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HONG KONG BUSINESS | MARCH 2015 45

OPINION

tim hamlett

Banks to the wall

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

T

he back page of the Post’s Business section is now the only part of the paper still publishing thoughtful and controversial material, so it seems churlish to complain about any of it. I have managed to restrain myself in the face of the little campaign being waged against 7-11, which is apparently unpopular in Lan Kwai Fong.

Barflies realize that the local bars retail for $60 a drink which you can buy in a supermarket or a convenience store for five bucks. So the more frugal ones are in the habit of tanking up with a few carryouts on the pavement outside a 7-11 before they hit the hang-outs for big spenders.

This is no doubt very upsetting for Fong bar-owners, but as a reason for changing the law on alcohol licensing which affects the whole territory it seems a bit thin, not to say parochial.

More provocative, though, was a long piece this morning by one Peter Guy, who is described as a former international banker. In it he laments that American banks are being subjected to regulation designed to limit risk taking and over-generous salaries. “Arbitrarily limiting bank pay,” he says, “will drive away the smartest and most innovative people away (sic) from finance.” To which I think the shortest answer is: thank goodness.

Why banking?

We have seen what the smartest and most innovative people can do and it produced a global financial catastrophe. Bring on the mediocrities. They can hardly be worse.

A somewhat longer answer would be that arbitrarily limiting – or indeed limiting in any other way – bank pay will not drive away the smartest and most innovative. It will drive away the people whose main motivation is greed.

There are plenty of smart and innovative people in the world who are not bankers. I realize that people in the business itself need to convince themselves that their extraordinary pay levels reflect some magical quality of which they are the sole owners. But this is nonsense. People choose their careers for a variety of reasons. Perhaps if banks were not besieged by applicants who want to retire as millionaires in their 40s they could recruit some people with more idealistic aims in mind.

And this brings us to the matter of regulation generally, which in Mr Guy’s view is turning banking into a boring dead-end job. There is no mystery about this. Bankers used to be trusted. Mr Guy notes that the public now “respects lawyers more than bankers,” an alarming thought.

Your banker used to be someone like your doctor or lawyer, who are bound by a code of professional ethics to put their

clients’ interests before their own.

Your lawyer’s recommendations should not be influenced by the prospect of fat fees, and your doctor is not allowed to prolong your illness to increase his income. Bankers used to be the same.

Times have changed If you read the works of Michael Lewis, Greg Smith or Neil Barofsky, it is clear that, at least in American investment banks – the ones Mr Guy is worried about – the client is no longer the recipient of faithful service. He is a sheep to be fleeced.

Bankers will happily sell you an instrument which is not only not in your interest; it has specifically been designed to fail so that they can make money by betting against it. Caveat emptor, as swindling TST camera shops used to say.

Bankers are now regulated for the same reason that the members of other disreputable professions are regulated – because if left to themselves they get up to mischief. This is perhaps not the sort of thing that local bankers wish to read.

Other denizens of the Business section might find it quite entertaining, though.

Playing the cards right

OPINION

Hemlock

Ripping off grandma the hi-tech way

I

t’s been a while since Hong Kong had a big juicy financial rip-off scandal (as opposed to minor day-to-day ones). The last serious case was the Lehmans Minibonds saga of 2008 onwards, in which local retail banks sold derivatives designed for institutional investors to aging and illiterate customers.

The investors lost everything when the US investment bank and issuer imploded. The Hong Kong authorities bullied the local banks into compensating the victims, who in the admirable manner of the city’s downtrodden elderly and frail, had embarked on a deafening campaign of moral blackmail, besieging bank branches and banging drums.

Banks must now record conversations with clients and make them sign tons of paperwork before letting them near many investment products.

This time it’s Bitcoin. Investors (if that’s the right word) with MyCoin claim to have lost HK$3 billion.

The Bitcoin-trading company looked well-organized at first in its marketing activities, but it now seems it was a multi-level, Ponzi-type scam from the start.

Bitcoin is outside the normal financial universe and is not subject to government regulation (our Monetary Authority warned people away and disclaimed any role in overseeing it).

It is a virtual or quasi-currency, and the big deal is that it is supposed to be more secure or somehow superior to the paper stuff printed by nasty governments.

It is issued following a process that sounds ludicrous: ‘mining’ by solving complex mathematical problems with computers. The problem-solving contributes to the system of authenticating Bitcoin for use in transactions, which take place only on-line.

An attempt at ‘hip’ Bitcoin is not created by any government or backed by anything. This seems to make it trendy and symbolically alluring for members of a sort of cyberlibertarian-chic sub-culture (think teenagers who hero-worship Julian Assange or Edward Snowden a bit too much, style themselves ‘anarcho-capitalist’, and perhaps read Neal Stephenson).

Like gold, it also appeals to the skeptical/paranoid who live in fear of ‘fiat’ currency and see the US Dollar as doomed to fizzle away into nothing. In practical terms, Bitcoin is supposedly hidden from the authorities, which adds to the anti-state thrill, but also of course makes it a perfect means of exchange for drug 48 HONG KONG BUSINESS | MARCH 2015

dealers and other law-breakers.

The only time I recall seeing Bitcoin potentially in use up close was at Mr Bing, the purveyor of excellent Beijing-style crepes with outlets in Wanchai and Central. It had a Bitcoin ATM, and welcomed payment in the quasi-currency.

Mr Bing’s outlets closed down a few months back.

The sign in the old Central branch says it is undergoing renovation – as does the sign at MyCoin’s Tsimshatsui office, according to the Standard. This may mean nothing.

Role playing We will now see how Hong Kong’s grandmothers and property-mortgagers got roped into MyCoin. We will all be amazed to learn that, along with gullibility, realestate and insurance agents seem to have played a role.

And it is unlikely the government can do anything to arrange compensation. With Lehmans Minibonds, the vendors had broken no law yet still had to pay the penalty; this time, it looks like crooks were at work and have long vanished.

It would be interesting to know whether Bitcoin plays a part in the laundering of Mainland money. And to see what sort of too-late-now action the Hong Kong authorities take in response to the MyCoin affair.

Meanwhile, more than ever, I will be waiting for a convincing reason why normal, welladjusted non-criminals who are not part of the fashionable cyber-hipster milieu will need or want anything to with Bitcoin.

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

For the love of currency