Hong Kong Business (January - March 2021)

Issue No. 61

Display to 31 March 2021 HK$40

INVESTMENT

Hong Kong’s Best Selling Business Magazine

IDEAS FOR WHERE TO GET THE BEST RETURNS THROUGH THE RECOVERY

HOW WORK-FROM-HOME IS CHANGING CONSUMER BEHAVIOURS VIRTUAL AND AUGMENTED REALITIES STANDING OUT IN RETAIL AND E-COMMERCE MOXBANK AND WELAB BANK: HOW TWO DIGITAL BANKS FARED IN A TOUGH 2020 THE TRADE DEVELOPMENT COUNCIL ON HOW SMES CAN GET BACK

TO BUSINESS

2021

C2

HONG KONG BUSINESS | JANUARY - MARCH 2021

FROM THE EDITOR

A

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

PUBLISHER & EDITOR-IN-CHIEF Tim Charlton MANAGING EDITOR Paul Howell ASSOCIATE PUBLISHER Louis Shek PRODUCTION EDITOR Janine Ballesteros PRODUCTION TEAM Alecsandra Denise Tubiera Beatrix Malesido Djan Magbanua GRAPHIC ARTIST Tyrone De Los Santos ADVERTISING CONTACTS Louis Shek +852 6099 9768 louis@hongkongbusiness.hk Karisse Coderes karisse@charltonmediamail.com

fter a tough 2020, Hong Kong Business welcomes 2021 with eight investment ideas to grow your savings and improve your finances this year. Check out the latest update of our annual investment ideas on page 24.

Further, as the era of virtual banking continues, Hong Kong Business had an exclusive interview with Mox Bank and WeLab Bank, which both leveraged on technologies to meet Hong Kong banking customers’ needs. We spoke with Deniz Güven, CEO of Mox Bank and Adrian Tse, Chief Executive of WeLab Bank as they shared their accomplishments and goals. Check out our interviews with them on pages 28 and 24, respectively.

We also had an exclusive interview with the Hong Kong Trade Development Council as they launched a new sourcing platform aimed to better connect local small and medium-sized enterprises (SMEs) with prospective buyers from all over the world. To know more about this, flip over to page 32.

Enjoy the issue!

ADMINISTRATION ACCOUNTS DEPARTMENT accounts@charltonmediamail.com ADVERTISING advertising@charltonmediamail.com EDITORIAL editorial@hongkongbusiness.hk

PRINTING Gear Printing Limited Flat A, 15/F Sing Teck Fty. Bdg., 44 Wong Chuk Hang Rd., Hong Kong.

Can we help?

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

Editorial Enquiries: If you have a story idea or just a press release, please email: editorial@hongkongbusiness.Hong Kong and our news editor will read it.

For Media Partnerships, please email: editorial@hongkongbusiness.

Hong Kong and put “partnership” in the subject line and it will forward to the right person.

Subscriptions email: subscriptions@charltonmedia.com Hong Kong Business is published by Charlton Media Group.

All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Hong Kong Business can accept no responsibility for loss.

We will however take the gains.

Sold on newstands in Hong Kong, Macau, Singapore, London, and New York *If you’re reading the small print you may be missing the big picture    

HONG KONG BUSINESS | JANUARY - MARCH 2021

1

CONTENTS

24

COVER STORY Where to invest your money in 2021

FIRST 06 Remote work spaces to impact consumer life

07 Commercial property market price corrections ‘less severe’ in 2021

08 Cybersecurity concerns rise over WhatsApp new privacy policy

09 Hong Kong’s retail rents to bottom out in H1 2021

10 HK’s ‘zero case’ target may delay border opening

14

LEGAL BRIEFING HIGHER FINES SET FOR HEALTH AND SAFETY OFFENDERS

18

INTERVIEW AMIDST A CRISIS, HONG KONG’S MOX BANK SEES BOUNDLESS OPPORTUNITIES

ANALYSIS

STARTUPS 12 BuyHive’s ‘bees’ to bridge gap in the sourcing industry

28 HK economy set to remain under siege from virus; closed borders

LEGAL BRIEFING 14 Higher fines set for employers who flout health and safety rules

MARKETING BRIEFING 16 The new “realities” changing the retail sector in Hong Kong

35 Tight property supply proves an advantage

39 Hong Kong faces new data centre dearth

OPINION 42 True interpretation of Hong Kong residential market under COVID-19

44 Why Hong Kong needs a corporate wellness paradigm shift now

46 Act now to prevent data breaches 48 Building a Multilingual E-commerce Store

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

For the latest business news from Hong Kong visit the website

www.hongkongbusiness.hk

News from hongkongbusiness.hk Daily news from Hong Kong MOST READ

INVESTMENTS

RETAIL

Goldman Sachs, Morgan Stanley, Hong Kong K11’s sales soared in the JPMorgan to delist HK-listed products second half of 2020 Sales in Hong Kong K11 increased Goldman Sachs, Morgan Stanley, and by 56% in H2 2020 compared with JPMorgan will delist some products the same period in 2019, the K11 due to US sanctions. The planned Group announced. The company also delisting won’t hurt the market and announced an increase of 358% in there will be sufficient investment Gold Card members and an increase choices to meet demand, said Hong of 156% in loyalty program sales at Kong Exchanges and Clearing.

K11 MUSEA in the same period.

COMMERCIAL PROPERTY

Sale, purchase agreements of units up 6.6% in December 2020 Total consideration for sale and purchase agreements of building units in Hong Kong rose 6.6% to $70.3b in December 2020 compared with the previous month, according to data from the Land Registry. A total of 7,596 sale and purchase agreements were recorded in December 2020, up 4.9% from November 2020.

4

HONG KONG BUSINESS | JANUARY -2019 MARCH 2021

ECONOMY

China plays key role in Hong Kong’s business growth: study China is said to play a key role in Hong Kong’s business growth, said Randstad’s Market Outlook and Salary Snapshot 2021 study. Randstad points out that they see China’s fiveyear plan to double the economy by 2035 to have a knock-on effect on Hong Kong and itss roadmap will largely depend on both local and global economies.

RESIDENTIAL PROPERTY

Hong Kong residential property prices dip in Q3 2020 Residential property prices in Hong Kong dipped by -1.1%, according to Knight Frank Global Residential Cities Index in Q3 2020. The index said residential property prices declined in the city despite an observed average annual rate growth of 4.7%.

LIFESTYLE

VF Corporation makes the move away from Hong Kong The lifestyle apparel brand is moving its center of brand operations out of Hong Kong and into Shanghai as part of its business transformation plan for Asia-Pacific. According to VF’s chairman Steve Rendle, by placing its brands’ center of operations in Shanghai, the company aims to forge stronger and more relevant relationships with Chinese consumers.

FIRST running errands on lunch breaks or socialising with colleagues after work. With less mobility, consumers are spending more time to emulate the dining, shopping or other leisure experiences in their homes,” the report reads.

Euromonitor research manager Herbert Yum noted that the impact of remote work on consumer life in Asia is more significant than that of the United States or the European Union since work from home is a less common practice Asia.

“It is expected that after the COVID pandemic, the changes shall partially remain and employees in general are more familiar working remotely, as well as adapting to e-commerce shopping behaviour,” Yum said.

OFFICE EXPANSION DEMAND TO REMAIN THIN IN 2021

Rents declined by 4% in Q4 2020

M

ultinational corporations are expected to remain cost-cautious as expansion demand will likely be thin in 2021, according to CBRE forecasts.

Office leasing momentum weakened in Q4 2020, following the reintroduction of measures to contain the fourth wave of local COVID-19 infections, according to CBRE. According to its report, overall rents declined by 4% QoQ in Q4 2020, bringing the annual decline to -17.4% YoY in 2020. Rents in Wan Chai/ Causeway Bay fell the most across the major submarkets, leaving a 20.1% fullyear decline. Hong Kong East was the best performing submarket, with rents falling by 8.3%.

Full-year net absorption registered a negative 2.2 million sq. ft., the largest decline on record.

Overall vacancy continued to climb to 9.9%, the highest since Q2 of 2009, with the underlying 8 million sq. ft. of vacant space as of end-2020, the highest since December 1999.

High availability of vacant space will ensure further rental pressure across submarkets. CBRE expects Grade A office rents to decline by another 5% across major submarkets in 2021.

Moreover, pent-up demand from recent initial public offerings will likely translate into improving leasing momentum in H2 2021. Chinese corporates are expected to become more active this year, provided the pandemic is brought under control and travel restrictions are removed.

“The first half of 2021 will likely see office rents trend down further as high vacancy continues to struggle landlords amidst limited new and expansion demand,”CBRE Hong Kong executive director Alan Lok said.

The market should see a pick-up in leasing demand from Chinese firms as fund raising activity continues to flourish. A full resumption of crossborder people flow, however, is crucial to support a rally in such leasing activities,” he added.

6

HONG KONG BUSINESS | JANUARY - MARCH 2021

Many consumers have started going back to office

Remote work spaces to impact consumer life

T

he implementation of workfrom-home setup amongst many businesses has affected consumer life, with consumers struggling to manage their time amidst a hindered work-life balance, according to Euromonitor International’s latest forecast on 2021 consumer trends.

According to the report, the rippling effect of remote work on consumer life will range from clothing choices to technology spend, eating habits, and beyond.

“Purchase decisions will shift towards casualisation in terms of workwear and beauty routines, but affordable premiumisation will drive food and beverage choices to create restaurant-quality meals at home,” according to the report.

Many consumers also started going back to office, albeit less frequently, as a blended approach to work setup is now expected amongst businesses.

As such, where and how consumers spend around their job schedules are also impacted.

“Loss of commuters and outof-home office limit on-the-go occasions, such as grabbing coffee,

The rippling effect wil range from clothing choices to technology spend, eating habits, and beyond

Engaging consumers amidst blended setup There has also been a noticeable hindrance in work-life balance since the work from home setup was implemented due to the pandemic.

“Lack of a proper switching between office and off-office hours is one of the key factors that hinders a proper work-life balance during remote working,” Yum said This is particularly true in Asia as countries such as China, Japan and South Korea, the concept of more work, more pay or better performance, is planted in most of the employees’ mind,” he added.

To cope with such hindrance, Yum suggests that businesses encourage managers to stay connected with their teams, employees to set offoffice hour alarm, as well as educate and remind employees to take a break regularly.

Businesses can focus on products and services that improve efficiency and productivity without losing the human element. Tools leveraging AI can also enhance group work, social interactions, and even individual time management.

“Improving the overall online working infrastructure and software of the company is the most important step. However, ensuring each of the employees has the right set of equipment and tools is also essential for businesses to keep them engaged,” Yum said.

FIRST cost-effective options, as Central’s rents dropped the worst at 22.7% this year.

Barnes noted that rental fall would be less significant next year compared to 2020, as they expect office rents to drop 5% to 10% in 2021 across all major office submarkets, with the exception of Tsimshatsui.

“Lower rents can increase the city’s competitiveness, potentially positioning Hong Kong as a more attractive location to conduct business,” he said.

Meanwhile, global quantitative easing to the COVID-19 outbreak has eased the pressure on residential prices caused by a soft economy.Capital values of mass residential dropped only 1% in 2020, but capital values of luxury residential dropped 8.2% due to the weak investment sentiment.

JLL Hong Kong chairman Joseph Tsang mentioned that the low interest rate will continue to support housing demand in 2021, but the market activity will remain closely tied to the broader economy and unemployment trend.

“We expect unemployment to spike after the Employment Support Scheme ends. Although market activity is expected to pick up mildly if the Hong Kong-China border reopens, transaction volume will remain much lower than historic levels in times of high economic uncertainties,” he said.

Tsang expects the capital values of mass residential to drop 0% to 5% in 2021, whilst capital values of luxury residential to drop 5% to 10%.

Gross leasing volume is expected to pick up in 2021 as tenants start making longer term real estate decisions.

Low interest rate will continue to support housing demand

Commercial property market price corrections ‘less severe’ in 2021

D

espite the volatile pandemic situation and geopolitical tensions clouding the path to recover in the property market, the price corrections will be less severe in 2021, according to JLL Hong Kong’s latest forecast published yesterday.

According to the report, leasing demand remained subdued with a -2.5 million square feet (sq. ft.) net absorption this year, amongst the highest withdrawal ever recorded in the office market. Vacancy rate in the

overall office market also rose to 8.8%, the highest level since 2004.

“Despite subdued leasing demand in the near term, gross leasing volume is expected to pick up in 2021 as tenants start making longer term real estate decisions. The vacancy rates will continue to rise in 2021, albeit at a slower pace,” JLL Hong Kong head of markets Alex Barnes said.

Moreover, rental decline in traditional business districts was more significant as more tenants sought

CHARTIST: JOBLESS RATE HITS RECORD 6.6% IN Q4 2020

T

he number of jobless across Hong Kong continued to rise in Q4, beating the previous three-month period and hitting a new record, swept away by a fourth wave of infections in the city.

On a seasonally adjusted basis, the unemployment rate increased to 6.6% in October – December 2020, according to data from the Census & Statistics Department. This is higher than the 6.3% unemployment rate in the September – November 2020 period and the 6.1% jobless rate in Q3 2020.

By numbers, total employment decreased by around 0.1% or 2,400 to 3.647 million in Q4 from 3.65 million in September - November 2020. The labour force in October - December 2020 was 3.89 million, about the same as that in September November 2020.

“The labour market deteriorated again due to the fourth wave of local epidemic which started in the latter part of November,” commented Secretary for Labour and Welfare, Dr. Law Chi-kwong.

Unemployment Rate (seasonally adjusted) (%)

Source: Census and Statistics Deparment

HONG KONG BUSINESS | JANUARY - MARCH 2021

7

FIRST

Users will have to accept the updated terms to keep using the app

Cybersecurity concerns rise over WhatsApp new privacy policy

W

ith messaging app WhatsApp set to change its privacy policy, concerns are now growing over data privacy and the security of businesses in Asia-Pacific, especially with employees using unsanctioned social media platforms as their means of conducting business conversations, especially during the COVID-19 pandemic.

WhatsApp has shared certain data with its owner Facebook since 2016, but users previously could opt out. From 8 February, however, users will have to accept the updated terms to keep using the app.

Whilst messages on WhatsApp are encrypted and Facebook will not be able to see these messages and conrent, the former will still have collected data that can be shared to its parent company.

Ernst & Young (EY) consulting leader on Asia-Pacific cybersecurity risk Richard Watson noted that despite the encrypted messages on WhatsApp, employees may unwittingly be disclosing information they are not aware of to third parties, including device metadata, phone numbers, and business information.

“Social media platforms of this nature are often mixed between business and pleasure, increasing the risk of sensitive information 8

HONG KONG BUSINESS | JANUARY - MARCH 2021

being disclosed to the wrong party,” he said.

The use of encryption has increased dramatically in APAC in response to regulation which requires it, particularly upon the need to pass personally identifiable information to third parties.

Many commonly used business software platforms also automatically encrypt the information, which has also contributed to an increased take up.

Watson explained, however, that attackers can still access business data once inside the corporate environment as much corporate “data at rest” is still unencrypted.

Meanwhile, Kaspersky senior researcher Anna Larkina shared that nothing is truly free in social media platforms.

“Unfortunately, the current business model for free services means that, essentially, we pay with our data.

Social networks, some messengers and search engines make money off of advertising, and the more personalized it is the better,” Larkina said.

She described how Facebook and other companies have been collecting data through its services even before, with most companies being transparent about its policies. These apps only trace “technical and account information.”

Law enforcement on cybersecurity Beyond the concerns over WhatsApp privacy policy change, concerns on cybersecurity is also increasing as employees continue to work from home or choose flexible working arrangements amidst the pandemic, as well as more companies going online to conduct businesses.

DLA Piper associate Yue Lin Lee noted that it has been an area under increasing scrutiny by regulators. She mentioned that the WhatsApp privacy policy change caught the attention of the Privacy Commissioner in Hong Kong. There is no separate law in Hong Kong regulating cybersecurity.

However, if a business is in a regulated industry such as financial services, both the Hong Kong Monetary Authority and the Securities and Futures Commission have recently issued new communications on cybersecurity or updated their existing cybersecurity frameworks.

“The ever-increasing laws and regulations are a clear signal that cybersecurity issues and breach incidents are becoming increasingly commonplace,” Lee said.

She added that despite such occurrence, the risks for companies in areas like human.error, regular software updates, cybersecurity incident plans, and cyber insurance are still the same as before.

Taking holistic approach to data sharing Watson emphasised that whilst some regulations require encryption of data, other regulations forbid it in certain jurisdictions.

“The encryption debate is particularly hot in areas of law enforcement, where you get the tension between users who want communications to be private and law enforcement agencies who want access to that data, generally in the fight against terrorism and crime,” he said.

With this, Lee noted that companies should take a holistic approach in data sharing between businesses, taking into consideration the agreement on data sharing between the parties, what is permissible under the relevant laws, what the company’s communications to the user say and if it is clear enough, and what is actually shared by companies with others.

“It is important for a company’s communication to its users to be clear and transparent, and for this to be followed through in its data sharing agreements with other businesses as well,” she said.

Lee also advised companies to regularly remind employees on safe internet and cybersecurity practices.

FIRST Landlords are reconciled to market conditions and “turnoveronly” deals for 12-month periods

Recovery in tourism will reinvigorate Hong Kong’s retail market

Hong Kong’s retail rents to bottom out in H1 2021

R

etail rents in Hong Kong will likely bottom out in the first half of 2021 following a massive decline in 2020, as the recovery in tourism will reinvigorate in the city’s retail market, according to a report from Savills.

Retail sales fell 27% YoY form January to October, and retail unemployment hit 9.3% in September.

With little capex for expansion retailers are sitting tight until leases are due, as landlords are not accepting surrenders, when many are opting to hand back the keys.

However, food and beverage (F&B) stores continued to take up space as landlords are keen to sign up crowdpulling concepts, often local, to support footfall in major malls. Beyond the

sector, activity levels are very low and the market remains frozen with only a handful of deals concluded in Q4.

Thus, landlords are now mostly reconciled to market conditions and we hear of “turnover-only” deals for 12-month periods, the report said.

With key shopping districts and most malls facing sharply higher vacancies, short-term tenancies of six months or so have been on the rise.

Their typical tenants include sellers of masks, red packets, groceries and frozen meats, concepts which work best in densely populated residential areas. Whilst on the street, landlords have also been opening their doors to local restaurants.

Amidst the fourth wave of the pandemic and a sluggish leasing

market, rental values also tumbled in Q4, with both prime street shop rents and base rents of major shopping centres falling 5.9% QoQ. Prime retail streets such as Queen’s Road Central in Central and Percival Street in Causeway Bay have even seen vacancy as high as 20% in recent months.

Nevertheless, the tourism market is expected to recover gradually over the next three years when the global pandemic passes. With an extremely low base in 2020, visitor numbers are projected to rebound by 150% in 2021 to around 9.8 million.

Based on data during the post-SARS and post-Global Financial Crisis periods, this will be followed by a 123% rise in 2022 to around 22 million, and then 92% to 42 million when the overnight visitor and long-haul markets start to pick up in earnest.

With the return of tourists and their shopping spending, retail sales is tipped to grow 5.5-15.1% from 2021 to 2023.

FocusEconomics also expected that the local labour market will improve gradually once the economy recovers from the damage of the coronavirus.

Savills expects a further drop in prime street shop and shopping centre rents by 2% to 5% in 2021. With the recovery of the overnight/long-haul visitor market and their shopping spending, prime street shop rents may bounce back by 7%-10% and 20% in 2022 and 2023, respectively, whilst shopping centres will recover by 5%10% per annum over the same period.

Professionals seek flexible workspace that values wellbeing: Hays

P

rofessionals are now prioritising flexible working options and employee wellbeing as they look to the new era of work, according to the latest report by recruitment expert Hays.

Conducted to over 9,000 working professionals across Asia, the survey found that respondents are looking at being part of an organisation that values employee wellbeing not only as a crucial element to flexibility, but purpose and connection to their role as well.

In Hong Kong, these results are mirrored with remote working options emerging as a top priority for professionals when seeking a new employer in the post-pandemic future, and employee wellbeing as the definition of purpose in the new era of work.

Majority of respondents (87%) in Hong Kong said remote working options became their top priority following the pandemic, followed by

flexible hours (78%) and employee wellbeing programs (67%).

Meanwhile, 69% of organisations in Hong Kong currently provide remote working options now, and 57% offer flexible hours.

Whilst most of them (89%) said work-life balance was important, around 48% stated that they would be willing to compromise for a feeling of purpose or connection to their role.

“The seismic shift in the value placed on employee wellbeing will define the new era of work and beyond. Along with the rising sentiment in favour of employee wellbeing, the resounding call for remote and flexible working options, which are also important aspects of work life balance, is unlikely to dissipate in an increasingly volatile world,” Hays Hong Kong regional director Jack Leung said.

Respondents are looking at being part of an organisation that values employee wellbeing

HONG KONG BUSINESS | JANUARY - MARCH 2021

9

FIRST MORE LAYOFFS, CLOSURES IN 2021

HK’s ‘zero case’ target may delay border opening

G

T

he Lunar New Year might not prove as lucrative for businesses this year as the economic situation brought by the pandemic is still severe, according to Hong Kong Financial Secretary Paul Chan Mo-po.

Chan also feared that more businesses will close and layoffs will continue after the Lunar New Year.

He wrote in a blog post that despite the government introducing 300 billion yuan of support and relief under the government’s budget and the Epidemic Prevention and Antiepidemic Fund, the financial support is merely a drop in the bucket amidst the crisis.

“Workers are struggling to survive and are willing to take the initiative to introduce enhanced epidemic prevention measures.

Under the premise of more effective prevention of virus infection, in exchange for the resumption of business and some activities as much as possible, it also gives the public a little more breathing space,” Chan wrote.

According to Chan, in terms of figures, Hong Kong has started to recover and has a likely possibility to have a positive growth in 2021 but the current situation can still be considered severe.

“Take the recent figures released by the Official Receiver’s Office as an example. Last year, the number of bankruptcy applications was close to 8,700, an increase of 6.6% year-on-year; about 450 petitions for compulsory winding-up were filed, an increase of 7.2% yearon-year. In December, the Hong Kong Purchasing Managers Index returned to the contraction range, and the business atmosphere of SMEs also tended to be pessimistic,” Chan added.

10

HONG KONG BUSINESS | JANUARY - MARCH 2021

overnment responses to the pandemic have split countries into two categories, according to a research by Jefferies.

The research said countries that fall under the “suppression” category are those that aim to minimise COVID-19 cases, whilst countries under the “elimination” category are those that aim for “zero cases”.

The United States, United Kingdom, and Brazil are among the countries with a suppression strategy.

Hong Kong, with its almost total ban on inbound travel as only residents are allowed to travel, falls under the elimination category.

Other countries that fall under this category are Singapore, China, New Zealand, and Australia.

Jefferies said countries with strict restrictions will have slower reopening than those implementing the suppression approach. Countries implementing a suppression strategy are more likely to open borders to each other unlike countries with elimination approach as they will find it hard to open even to those with significantly lower COVID-19 cases versus their original peak.

“Imagine a scenario where due to vaccines and social distancing, the very high case numbers in the USA and UK start to reduce. By the middle of 2021, cases in some European countries have fallen to less than 1,000 per day. That’s a marked improvement, but even at those levels, governments that take zero case approaches will not want to be seen as exposing their populations to the risk of inbound infection. As a result, they will very likely keep their travel restrictions and significant quarantines in place for some time,” Jefferies added.

Pressure from the tourism industry Further border closure may also spell disaster for Hong Kong as travel and tourism contributed 17.6% to the country’s gross domestic product

Hong Kong, allowing only residents to travel, falls under the elimination category of government response ti the pandemic

in 2019. In 2020, inbound tourist arrivals drop nearly 98% compared to 2019. Jefferies said countries whose GDP relies on inbound tourists are pressured to open the Countries borders early. Spain and Italy are with strict restrictions will some of the countries that have already expressed willingness to have slower reopening than open borders for tourists. those with the Vaccine offers hope suppression Last year, the air travel bubble approach

between Hong Kong and Singapore was scheduled but was then repeatedly delayed due to a surge in COVID-19 cases.

In an interview with the South China Morning Post last December, Secretary for Commerce and Economic Development Edward Yau said he was not optimistic about resuming talks about the air travel buble between Singapore and Hong Kong. He pointed out that the presence of vaccines may be the solution for the revival of the quarantine-free travel agreements.

Jefferies said that the end of the pandemic may not be the elimination of the coronavirus, but when mortalities from COVID-19 start to resemble influenza in a typical year.

Avocats Hong Kong-based International Law Firm Our main focus Mayer & Associés specializes in the economic migration of companies from Europe to the Asia Pacific, particularly China, and from the Asia Pacific to Europe, particularly France.

Our firm also provides expert legal advice to both corporations and individuals across a variety of dedicated practice areas.

Our values Integrity, good governance, a responsible attitude, and a relationship with clients built on trust without compromising our independence are the values that guide us in all our actions.

Creativity Our experience and our values allow us to provide quality independent legal advice in cases which are sometimes complex and require inventiveness. We are resourceful in finding legal solutions for our clients involved in cross border transactions.

17/F., KINWICK CENTRE,32 HOLLYWOOD ROAD, HONG KONG • (852) 3710 5000

STARTUPS

BuyHive’s ‘bees’ to bridge gaps across the sourcing industry These experts aim to help customers build their ‘hive’ of trusted goods and services.

Minesh Pore, BuyHive CEO

D

espite several countries slowly opening their borders, small and medium-sized retailers still find it difficult to travel just to source goods internationally.

Even with the prevalence of online marketplaces, finding trusted sources of goods still takes time especially if you do not get help from experts.

That gap is exactly what BuyHive and their network of “bees” are trying to bridge.

“BuyHive aims to provide trust and transparency to the sourcing industry by providing a trusted marketplace for trade, where BuyHive takes full accountability on behalf of the buyer and provides a network of freelance sourcing experts for hire, which can help buyers make informed buying decisions,” cofounder and CEO of BuyHive Minesh Pore said in an exclusive interview with Hong Kong Business.

The startup wanted to solve the problem of trust and transparency in sourcing to improve buyers’ outcomes as they help resolve issues such as the lack of sourcing experience and resources, choosing the wrong supplier, and getting the wrong products.

The name BuyHive is a combination of the words ‘buy’ which refers to their solution that helps retail sellers buy successfully from suppliers, and ‘hive’ which refers to the network of freelancers called ‘Bees’, who are busy working on behalf of the buyers 12

HONG KONG BUSINESS | JANUARY - MARCH 2021

BuyHive connects buyers to sourcing experts to help them find trustworthy suppliers

to find quality suppliers.

“We imagine that the Bees are helping to build the ‘hive’ (aka the retail business) for our buyer customers,” Pore said, explaining the business model.

BuyHive connects buyers to sourcing experts to help them find trustworthy suppliers or what they call Freelancer Assisted Sourcing. BuyHive matches the buyer with a relevant sourcing expert, who will then work on collecting the necessary product and supplier information and upload it onto BuyHive’s platform, where it goes through quality control and is converted into a sourcing report which can be downloaded by the buyer.

The e-commerce platform is where the suppliers found by their freelancer network are vetted by the team. Those who pass BuyHive’s standards are invited to join the e-commerce platform Buyers can also use the platform to find and order products in bulk, and buy testing/inspection services, logistics services, trade finance solutions, insurance etc., and do financial due diligence. Once the order is placed and paid for, BuyHive takes accountability for the order and works with suppliers to make sure products are delivered as per the platform commitment. And for larger or more complex orders, BuyHive can manage the entire project for the buyer—from production to delivery, Pore added.

BuyHive charges buyers a fee per day for freelancer use starting at $2,317 (US$299), whilst charging a fee ranging from 5%-10% per transaction for the ecommerce platform. However, Pore stressed that suppliers can’t pay to join nor to rank high on their platform.

So far, BuyHive has not taken any external funding but is now talking to several investors to raise capital.

“We are reaching out to investors who have relevant domain expertise and have invested in companies that are synergistic in nature, which can help BuyHive scale up either with technology or market penetration strategies,” Pore said.

With the e-commerce platform already live and the freelancer platform ready to take off in Q1 2021, BuyHive’s next step is to be the most trusted sourcing platform in the market within five years.

“We will stay ahead of the competition by penetrating the major sourcing markets and main consumer product categories with our solutions, with a global network of freelance sourcing experts with broad product experience in all of these markets, and a trusted and transparent online marketplace with the full range of products from vetted suppliers in these markets,” concludes Pore.

HONG KONG BUSINESS | JANUARY - MARCH 2021

13

LEGAL BRIEFING

Higher fines set for employers who flout health and safety rules This could lead to higher business costs and insurance premiums, court watchers have warned.

H

ong Kong’s Labour Department is proposing higher fines for offenders of the Occupational Safety and Health Ordinance.

This could lead to higher business costs and insurance premiums that may result in raising market entry barriers and reducing competition, according to Angela S. Y. Yim and Regina G. B. Ng of Mayer Brown law firm.

The two main pieces of occupational safety legislation in Hong Kong is the The Factories and Industrial Undertakings Ordinance (FIUO) and the Occupational Safety and Health Ordinance.

Occupational Safety and Health statistics in 2019 showed that there was a decline in the number of occupational injuries recorded at 32,872 from a record of 35,964 in 2018. The injury rate per 1,000 employees was said to be 10.8 in 2019 compared to 11.8 in 2018.

Out of the 32,872 occupational injuries 16 were fatal.

Occupational injuries refer to injury cases that resulted in death or incapacity to work for over three days and reported under the Employees Compensation Ordinance.

An update is long overdue as Hong Kong lags on fines and penalties for occupational safety and other health breaches Most industrial accidents in 2019 were in the food and beverage sector with 4,425 accidents for that year.

Accident types range from contact with hot surfaces or substance, slip, trip or fall in the same level, and injury by a hand tool.

Yim and Ng said though industrial accidents in Hong Kong have declined steadily over the years, the number of fatal industrial accidents has been hovering at around 20 cases annually for the past two decades.

The point of concern for the Labour Department is that one-third of the defendants are repeat offenders of the OSHO in cases of serious injury.

There are three categories of offenses under the OSHO: minor offenses, serious offenses to very serious offenses that have a maximum fines between, $10,000, $50,000 and $200,000 respectively. Offending individuals may be imprisoned for a maximum of 12 months. “Very serious offenses are those that are very likely to cause serious consequences such as death or limb amputation and those that are related to a major failure in safety management systems or use of prohibited carcinogens.”

These fines are comparatively low compared with other countries such as Canada who has a maximum fine at around $9m.

14

HONG KONG BUSINESS | JANUARY - MARCH 2021

New fines may stifle small businesses

Angela S. Y. Yim

Regina G. B. Ng

Last December, the Labour Department issued a consultation paper on increasing the penalties for occupational health and safety offences.

They proposed 215 offence provisions be reassessed, with the seriousness of 145 offences raised and 70 lowered. The department proposed almost threetimes the previous amount for their new fines. They range from $30,000 for minor offenses, $150,000 for serious offenses, and around $600,000 for very serious offenses. With consideration to the affordability of fines from employees’ perspective lowered the fine of $600,000 of the provisions concerning employees down to $150,000.

In early consultations, the department mulled a maximum fine of 10% turnover without a cap but some oppositions voiced that this may be too heavy a burden for small businesses.

The Labour Department said it aims to submit the amendment bill to the Legislative Council as soon as it is possible so that the amendment exercise can be completed within the term of the current government for immediate commencement.

Yim and Ng observed that there has been a trend with the department on taking a tougher stance on occupational safety and health offenses with the aim to lower industrial accidents.

Even with concerns that the imposition of higher penalties might have adverse effects for the smaller businesses, Yim and Ng agreed that an update for the ordinance is long overdue, with Hong Kong lagging behind other developed countries in relation to the fines and penalties for occupational safety and other health breaches.

They stated that though it is encouraging to see the department taking action, there is no data to prove a correlation between higher penalties and fewer industrial accidents.

2

1

HONG KONG BUSINESS | JANUARY - MARCH 2021

15

PA201382

註：1.只適用於總貸款額（包括現有貸款餘額）HK$50,000或或以下並親臨分行提取指定私人貸款之客戶。2.客戶凡於推廣期內申請及提取指定私人貸款達12期，即可獲享以淨貸款額1%計算之 現金獎。申請指定私人貸款之業主可獲享之最高金額為$8,000；而非業主可獲享之最高金額則為$6,000。推廣期由2021年1月1日起至2021年2月28日止（包括首尾兩日）。優惠須受條款及細則 約束，並不可與其他優惠同時使用。本公司有權隨時終止有關優惠或修改其詳情及條款及細則而不作另行通知。貸款及優惠詳情，請向本公司查詢。安信信貸有限公司擁有對貸款審批及任何 爭議之最終決定權。

MARKETING BRIEFING

The new “realities” that are transforming the retail scene in Hong Kong Augmented and virtual reality technology is giving consumers exciting shopping experiences in their own homes and has helped them form new shopping habits.

The “new normal” in the retail sector has led to a huge decrease in footfall amidst safety restrictions and a huge economic downturn.

Since the onset of the pandemic, retailers have innovated ways to manage their operations in an uncharted territory and to hook consumers despite a recovering economy.

They have mainly relied on immersive technologies such as augmented reality (AR) and virtual reality (VR) to give consumers the perfect shopping experience in the comfort of their homes.

According to the latest report on consumer trends by Euromonitor International, technologies like AR and VR have helped consumers form new habits around shopping and socialising.

Brands like Nike, UNIQLO, and SK-II have already implemented both AR and VR technology by offering virtual foot size checking function for sneakers, in-store magic mirror to try on apparel items, as well as an AR-featured pop-up store.

Euromonitor International research manager Herbert Yum has noted that the use of AR and VR boomed in e-commerce in 2016, when companies like Sony and Google launched VR gears, allowing the virtual experience in gaming and other platforms.

Delivering virtually enabled at-home experiences remains imperative to drive e-commerce sales and gather data amidst the recovery of the retail industry, the research company also noted. Being able to try on and experience the product itself is crucial in making a purchase, especially for consumer goods.

“For consumer goods that product or service experience acting as a more important factor when making purchasing decisions, virtually enabled at-home experiences would then be an effective tool to fill such incapability of online shopping, hence helping drive e-commerce sales,” Yum said.

As such, businesses are using these technologies and processes to encourage consumers to safely visit onsite as well with the help of smart devices.

Virtual experience help drive e-commerce sales

16

HONG KONG BUSINESS | JANUARY - MARCH 2021

Herbert Yum

“Adopting mobile reservation systems, QR codes for touchless menus and payments, and in-store virtual fitting rooms are strategies companies are taking to minimise human interactions,” the Euromonitor report stated.

They can also offer services such as personal shopping appointments through video conferencing, VR travel experiences, and crafting personalised goods through artificial intelligence.

Moreover, consumers are also seen to be growing accustomed to the inclusion of immersive technologies in their retail experience.

An Accenture survey found that consumers in Asia Pacific are some of the greatest advocates for immersive technologies in the world - with an average of 68% more likely to buy from a brand that focuses on better experience using immersive

AR and VR are in its “rapid developing phase” as most consumers are still having their “novice experience” with the technology technologies like AR and VR. The survey also found that nearly three in five consider experiencing products before purchasing to be their top motivation for trying immersive technologies.

Given the necessity of AR and VR in the midst of the “new normal”, the technology is most likely to be seen further in the retail experience as it becomes integral to the daily operations of retailers. Whilst the trend of immersive technologies is rising, Yum described AR and VR to be in its “rapid developing phase” as most consumers are still having their “novice experience” with the technology.

“Untapped potential is huge as the technology advancement on future AR and VR hard and software would be the key determinator of the future growth of this segment,” he said.

However, Yum mentioned that integrating the virtual world in physical spaces would increase the cost for businesses, with those reliant on a high number of physical retail networks suffering the most amidst a drastic push in the setup cost.

“This is particularly important to Asia cities such as Hong Kong, Singapore, Shanghai and Tokyo, where the rental and labour costs are relatively higher than other major cities in Asia,” he said.

Yum advised businesses, especially those struggling, to rethink and transform the composition of their retailing channel and the role for each, before allocating a significant amount of resources in such integration.

HONG KONG BUSINESS | JANUARY - MARCH 2021

17

INTERVIEW

Amidst a crisis, Hong Kong’s Mox Bank sees boundless opportunities The neobank has outlined a bold plan to kickstart a new generation of virtual-savvy customers.

T

he current crisis may have upended operations of Hong Kong’s banking industry, but for Hong Kong virtual-only lender Mox Bank, it is also a time that is rife with opportunity.

“We saw that as a result of COVID-19 outbreak, that more and more people are living their lives virtually or online—whether it’s online shopping, for work, study or entertainment,” Deniz Güven, CEO of Mox Bank, told Hong Kong Business in an exclusive interview.

“We believe the pandemic has made many more consumers in Hong Kong to adopt and be comfortable in living their lives virtually, whether it’s shopping, dining, learning,” he later added.

The plethora of prospects that the new normal has opened for digital financial offerors aligns with Mox Bank’s proposition, whose name reflects the endless opportunities it plans to create with its customers—which the lender cheekily refers to as “Generation Mox.” Unlike other virtual banking propositions in APAC, Mox does not only target a single generation or segment, but intends to focus on providing personalised banking services for each individual customer’s life stages.

“Our research spoke of wanting savings and spending advice, based on their life stages, not how much they already have. They want advice to help them track and achieve their life goals. They want even better security and fraud monitoring in these times of e-commerce. They want more services and rewards out of their banks, and this is what we will initially focus on,” said Güven. He also revealed that prior to its beta launch, the bank—whose parent company is the British multinational finance giant Standard Chartered, in partnership with PCCW, HKT, and Trip.com—conducted surveys with over 2,000 people to learn more what they desire from the neobank.

Mox’s first project is launching Asia’s first all-in-one numberless bank card in partnership with Mastercard—a physical card for spending and ATM cash withdrawals and without any printed card numbers, expiry date, or card verifications. Instead, these could be accessed from the Mox banking app.

Hong Kong Business had a chat with CEO Güven to learn more about Mox Bank’s entrance in Hong Kong’s banking industry as well as its vision of growth for the bank in the coming years.

What was the idea behind the name “Mox”? How does the name of your bank represent how you want to position yourself in the banking industry?

Many folks have asked how we came about with our name 18

HONG KONG BUSINESS | JANUARY - MARCH 2021

Mox Bank’s research found customers were keen for savings and spending advice, based on their life stages, not how much they already had.

Deniz Güven, CEO, Mox Bank

and logo. Well, it was actually quite a simple journey. We researched, asked potential customers, we went through more than 2,000 naming suggestions, before we found the one we all like—Mox. Mox can mean many things. It reflects the endless opportunities we can create—Mobile eXperience; Money eXperience; Money X (multiplier), eXponential growth, eXploration. It’s all up for us to define, together. As for our logo and our visual design, they are inspired by the round shape of a Hong Kong dollar coin, which is also a nod to our roots. We take pride in being one of Hong Kong’s newest virtual banks, complementing Standard Chartered’s heritage of being Hong Kong’s oldest note-issuing bank with over 160 years of experience in serving the community.

What are your thoughts in being one of Hong Kong’s newest virtual-only banks? What is your outlook for the local virtual banking industry?

We are excited about the opportunities ahead. Despite the many retail banks available in Hong Kong, with the many online banking services available to consumers, we believe there are still gaps in banking services that people need today. Currently, there is an underserved customer base in Hong Kong.

We’ve been listening to what customers want, and we’ve

INTERVIEW been researching on what’s missing in banking. We spoke with over 2,000 people and they all tell us they want new and better experiences. They spoke of wanting savings or spending advice, based on their life stages, not how much they have. They want advice to help them track and achieve their life goals. And we saw that as a result of COVID-19 outbreak, that more and more people are living their lives virtually or online—whether its online shopping, for work, study or entertainment.

What’s important to note is that Mox is connecting banking into people’s everyday lives and shaping a new model that just might reflect the future of banking.

Banking has to be simple, intuitive and even delightful, to consumers.

What is Mox Bank’s charm point? How do you plan to establish your foothold in the industry amidst competition from other lenders?

We are in the business of trust and we take pride in being a subsidiary of Standard Chartered Bank and its heritage of over 160 years in serving the community. Our differentiator from other VBs is our customer experience and the partners we have, bringing new ways of rewards and spending. You need partners to build an ecosystem and diversify distribution channels, particularly for the service-led bank that Mox is conceived to be. We wanted Mox to become integral to people’s daily lives, so working with partners that had already achieved this, to create joint service offerings, was key to our value proposition.

Tell us more about your offerings. Who is your target customer base? What services does Mox Bank offer, or plan to?

Mox is simply a smarter, easier, delightful way to bank.

Everything we do is based on extensive research to identify what truly matters to you and to solve real pain points.

We will deliver a suite of retail financial services as well as lifestyle benefits all in one place, with the focus of providing financial well-being to our customers.

We are reaching out to the Generation Mox in Hong Kong. They’re a tribe of creative, curious and connected people, who want to do more, feel more, see more. They’re digitally savvy, regardless of age. They want to grow, individually, financially, as a community and a society.

For starters, we’re bringing to Hong Kong a whole new experience for savings and spending. We want to get customers to form good savings habits, and we will help them automate this. Customers can set up specific savings goals and be in a better position to track their progress, and focus on achieving them one by one. Savings Calculator and other tools help customers to automate saving habits.

Customers will earn daily interest.

Why launch an all-in-one numberless card?

When you open a new account with Mox, you’ll receive a virtual Mox card, with which you can actually start to conduct your banking immediately.

But there’ll be instances that you need a physical bank card, such as spending and ATM cash withdrawals. We partnered with Mastercard in coming up with our Mox

Mox Bank says its preliminary goal is on winning “heart share”, rather than market share.

Card, re-defining innovation, security and privacy. Our numberless bank card has no card numbers, expiry dates or card verification value (“CVV”). This helps reduce your risk of losing personal information, making it one less thing to worry about.

All card information can be securely accessed in the Mox app. And if you ever lose the card, simply and instantly freeze it in the app. Users can enjoy ATM services at over 2,000 Jetco ATMs in Hong Kong, and all ATMs globally that accept Mastercard cards.

If possible, can you share with us your future projects and plans you have in store in the coming year?

We will start by offering a unique experience in savings and spending, and over time will introduce other services as well.

We aim to introduce some market firsts to Hong Kong consumers. Together with Mastercard, Mox is the first bank in Asia to launch an all-in-one numberless bank card—a physical card for both spending and ATM cash withdrawals without any printed card numbers, expiry dates or card verification value (CVV). This helps reduce customers’ risk of losing personal information, making it one less thing to worry about. All card information can be securely accessed in the Mox app. And if our customers ever lose the card, simply and instantly freeze it in the app.

How has Mox Bank been received by the public so far?

In early May, we started to invite Hong Kong people to sign up on our website and get early access to our services. We would like to take this opportunity to thank the applicants for their tremendous support of Mox. This is very successful, as we have had a very large number of registrations. We look forward to creating Mox with them.

We are very happy with our progress so far, and we’re excited that the launch is gathering pace. We’re proud to say that the team has continued to build the bank, with a work-from-home model. I have to hand it to my team here. Their perseverance, passion and commitment to the cause. Despite being of different cultures, different experience sets, they hunkered down and didn’t let the pandemic affect target deadlines. By Frances Gagua

Mox Bank’s numberless card

HONG KONG BUSINESS | JANUARY - MARCH 2021

19

ANALYSIS: BUSINESS LEADERSHIP

Three out four CEOs say the pandemic has accelerated digital customer experiences

CEOs pivot towards longterm growth strategies The pandemic has shaken the confidence of CEOs, but KPMG’s global research shows they still have some optimism for the long-term impact on business.

A

s the COVID-19 pandemic continues to impact businesses around the world, companies have taken on a wide range of different strategies to shield themselves.

In particular, many organisations have repositioned their focus toward long-term growth, in the hope of riding out the storm and minimising their losses over the short and medium terms.

According to KPMG’s 2021 CEO Outlook, the pandemic has certainly shaken CEO confidence in global economic growth, with about 32% of the 1,300 business leaders from around the world saying they were ‘less confident’ about prospects for global growth over the coming three years.

Whilst CEOs are uncertain about how the economy will run, they are more optimistic of what the future holds for their companies. Around 67% of then told KPMG they were “more confident” on the growth prospects for their businesses, as they had “more control and levers of influence” in the fortunes of their companies.

20

HONG KONG BUSINESS | JANUARY - MARCH 2021

Global CEOs are more confident in their own companies growth prospects, compared with the global economy as a whole

Businesses deem digital growth as one of the most critical levers they can control, with the past year in particular highlighting the vital need for digital transformations.

75% of CEOs say the pandemic has accelerated the creation of a seamless digital customerexperience, with over one in five (22%) of those saying progress “had sharply accelerated”. As one respondent told KPMG’s researchers, “this has helped to put us years in advance of where we expected to be”.

One international media industry CEO explained that whilst digital

transformation was already central to his company’s growth strategy and operating model, shifts in customer attitudes and behaviours had accelerated that transformation.

“Any resistance in our clients’ mindsets to moving to the cloud or the next generation of digital solutions has largely, if not entirely, evaporated. I think we’ve seen three to four years of progress in just three to four months, in terms of acceptance of what the new world needs to look like,” he told KPMG. Meanwhile, as businesses focus on their survival, the report has noted that new challenges are also rising. In January, 2020, CEOs ranked talent risk as the 12th greatest risk to growth. However, this issue has skyrocketed to be the Number One threat for growth since the onset of the pandemic.

KPMG International global head of clients and markets Gary Reader stated that the report highlights how human and operational risks have been given greater priority by senior executives.

“CEOs recognise that losing key employees and attracting specialised talent can have a critical impact on future business performance,” he said in the report’s conclusion. “Many leadership teams are concerned about the mental and physical wellbeing of their staff , but also recognise that unless they manage this properly, growth will likely be (heavily) stunted.”

CEO confidence at different levels over the next three years

Source: KPMG CEO Outlook report

CORPORATE FEATURE

New venue for performance perfect events Empire Hotel Hong Kong gives a glimpse of the new Empire Grand Room.

Empire Hotel Wan Chai lobby

E

mpire Hotel Hong Kong in Wan Chai has unveiled a new look for its Empire Grand Room, an ideal venue for corporate meetings, trainings, trade and property exhibitions and seminars.

The venue has recently undergone a head-to-toe make-over including brand new carpeting, wall furnishings, and meeting furniture.

More importantly, the renovation is wellappointed with a state-of-the-art audiovisual system and hi-tech fixtures enabling the venue to step up to the next generation of clients’ needs, nature and versatility of their events and arrangements.

Bright and elegantly designed and furnished, the Empire Grand Room consists

Empire Room 2-cocktail

of three separate function rooms which can also be re-configured into one large function space totalling 2,100 sqft.

Natural daylight is allowed in all function spaces where attending guests won’t easily fall into Morpheus’ arms during any event.

Alternatively, blinds and lighting controls are within reach if you wish for a more subdued ambience.

The new state-of-the-art visual system offers the video wall display solutions equipped with 4K picture quality in Empire Room 1 (approx. 1,100 sq. ft.). Nine LCD panels with LED backlighting technology are tiled together to form a seamless 140” large screen of 4K UHD resolution. Images and presentations projected on the video

wall are impressive and visually-stimulating.

This LED edge lighting technology allows a more environmental and aesthetic impact.

Positing next to the video wall is a sleek lectern equipped with 4K touch-screen preview monitor and microphone. A 65’’ interactive 4K UHD LCD touchscreen panel with integrated annotation software is each available in Room 2 and Room 3.

All display solutions support ‘plug and play’ of presentations, high-resolution video and almost any other type of content stored on a USB device or internal memory. Display mirroring function is available across all function rooms for a larger audience in a simultaneous meeting.

Moreover, popular video conferencing is made easy with professional conference cameras and all relevant apps installed.

Showcasing your products, sharing and streaming your ideas across different times and spaces can never be made easier in Empire Grand Room. Transform your meetings and presentations into a vibrant, visually-stunning and seamless interactive experience. Standard meeting and rentalonly packages are available whilst special requests and budgets can also be custommade.

Call our sales hotline: +852 3692 2139 / 3692 2134 or email: meetings-wc@ empirehotel-hongkong.com for more details.

Empire Room 1-U-shape

HONG KONG BUSINESS | JANUARY - MARCH 2021

21

INTERVIEW

Hong Kong’s only homegrown virtual bank enjoys data-led kick-start WeLab Bank achieved a goal-breaking 10,000 customers just 10 days after its launch.

W

eLab Bank believes that it’s parent company’s seven-year head start in the online financial services space—and in leveraging data analytics—puts it at an advantage in meeting Hong Kong banking customers’ needs.

Just 10 days after it publicly launched in July, it has immediately amassed 10,000 customers. Two months later they already count 20,000 uses in their debit card.

Though impressive, the statistics came as no surprise to WeLab: they consider themselves masters at moving quickly and efficiently, according to Adrian Tse, Chief Executive of WeLab Bank.

More than that, they immediately respond to their customers’ needs.

“We conducted multiple user research studies long before we have launched,” Tse told Hong Kong Business in an exclusive interview. “For example, we came up with GoSave because users have expressed their difficulties from participating in the incumbents banks’ deposit offers. They are not able to withdraw their money before the maturity date, and if they choose to do so, they will be penalized for their actions.”

One of the two unique products that WeLab Bank introduced upon launch, GoSave is a time-deposit product that “harnesses the power of the community,” Tse said. “More people joining GoSave means a higher interest rate. We added the “minibus” element, which has personal connections with our users, to make the experience more memorable.”

What makes it better is that you can enter the GoSave service for as little as HK$10 (US$1.30). Customers can also pull out their money at any given period without any penalties whatsoever.

Not only that, the bank is quick to embark on partnerships that meet their customers needs. Recently, they partnered with online food ordering service OpenRice upon noticing that 70% of the transactions in their debit card are online orders for food.

“This is exactly what makes us different from the others: that is, our ability to leverage technology. In all these, technology helps us collect the data and also allows us to build and promote other offerings to our customers,” said Tse. What was the idea behind the name “WeLab”? How does the name of your bank represent how you want to position yourself amongst customers and the industry?

Lab basically stands for “laboratory” where scientists conduct their experiments and projects. It represents 22

HONG KONG BUSINESS | JANUARY - MARCH 2021

WeLab Bank amassed 10,000 customers within 10 days of its public launch in July, 2020.

Adrian Tse, Chief Executive, WeLab Bank

our goal to do different “experiments” to help customers take control of their financial journey, so that they can have fun while growing their money. What we are doing is leveraging technology to redesign a solution that is suitable for the customers during their financial journey.

Whilst we started our journey in consumer lending in Hong Kong, and eventually expanded to China and Indonesia, our ambitions did not stop here. WeLab wants to open up additional channels to extend a broader range of financial services. When the Hong Kong Monetary Authority (HKMA), the regulator, decided to give out eight virtual bank licenses last year, we think this would be a good time to move into the banking territory because [what virtual banking represents] is exactly our objective when we leverage technology in our financial services: that is, to bring a very different banking experience to customers in Hong Kong. In the end we were fortunate to get one of the licenses, and we continue to bring joy to our customers through innovative products.

Can you tell us more about the founders of the bank?

What inspired them to launch WeLab? The founder is Mr. Simon Loong, who is also our Group CEO. He’s been in banking for over 15 years and is very experienced in the field. I worked with Simon back in

INTERVIEW Standard Chartered, where we got first-hand experience on how traditional banking is fulfilling people’s banking needs. We saw that the products that’s been offered by incumbents are unable to serve everyone’s needs, where it is our believe that everyone should have simple and equal access to credit.

Simon then started WeLab Group, where we leveraged big-data powered technology and our know-how in risk management to revolutionize lending: by delivering seamless, purely online lending experiences accessible 24/7 to underserved consumers.

What are your thoughts in being one of Hong Kong’s newest virtual-only banks?

The online business model is in our DNA. We are very well positioned to demonstrate a very different banking experience to Hong Kong customers and some of the specific characteristics that we have will allow us to deliver this experience.

As Hong Kong’s only homegrown virtual bank, we have a very deep understanding of what types of financial products Hong Kong customers need. We are wholly owned by the WeLab Group who has a seven years track record of delivering online financial services. As of today, we’ve hit 46 million individual customers.

As for how and why we grooved with 46 million customers: we have a startup mentality and we move very quickly. Launching WeLab Bank is an example. We got the license last April and then under just about 400 days, we have already launched the bank. The bank was launched in late July, and within 10 days we have already accumulated 10,000 customer applications, which is very exciting for us. That’s how quickly we move things.

How has WeLab Bank been received by its customers and the general public so far?

We launched in late July and in just less than two months, we have shown some good results. More than 60% of our customers have used two or more of our product or services. As of interview, we have over 10,000 of GoSave transactions and also over 20,000 transactions on our WeLab Debit Card, and they continue to grow on a daily basis. We were happy that our customers come back and use it repeatedly, showing strong interest to use our products. We hope to bring further innovation to the market in the coming years to come.

Tell us more about your other services.

We have another product, the WeLab Debit Card, which is a tap-and-go card that is the first numberless card publicly launched in the market. With the debit card, you will not overspend because you can only spend the balance that is in the account.

Also, when we did our survey and talked to customers, they told us that they want to make sure the card is secure and private.

The concept of a numberless card is that even if someone picked up the card or whilst the card is being given to someone in the restaurant to get the bill, nobody can get your personal details or card numbers.

WeLab Group was started with the view of leveraging big-data powered technology and its founders’ knowhow in risk management to revolutionise lending.

To complement the physical card, we have a virtual card in the app as well. When our customers download the app, when they’ve successfully open an account, they can go online and do their online shopping at any time that is convenient.

What is your outlook for Hong Kong’s growing number of virtual banks?

I think these are very exciting times. From a market perspective, Hong Kong’s banking sector is huge. It has an annual income of about US$51b and we think there is room for virtual banks to take a significant piece of the market share.

Customers have also shown their enthusiasm in trying out virtual banks, as seen in how we achieved 10,000 customers in less than 10 days.

What we also observed during the COVID-19 pandemic period is that people are willing to do things on the phone or online. In fact, they are trying to avoid going to branches or leaving their homes. This is how the pandemic has become an enabler or a catalyst for people to try and use virtual banking services. With even more innovation coming to the market, I think the outlook for virtual banks in Hong Kong will be incredibly exciting.

What’s next for WeLab Bank?

We have a strong product roadmap and will roll out features in the coming months. All of our features will be customer centric with the goal to help them manage, grow, and save their wealth.

Interestingly, when looking at our customer demographics after launch, we found out that 30% of our customers are aged 40 and above. This was a pleasant surprise since we thought the majority of our customers will be in the younger generation. This shows that age is not a limit for being tech savvy.

As we continue to build innovative products, we will continue to leverage big data analysis to better understand our customers, so that we can provide a tailor-made and diversified portfolio of products to better help them reach their goals. By Frances Gagua

WeLab Bank partnered with Mastercard to launch a numberless card last July.

(Source: WeLab)

HONG KONG BUSINESS | JANUARY - MARCH 2021

23

COVER STORY

Investors will face plenty of risk, but also opportunity, during the Year of the Ox in 2021

Where to invest your money in 2021 2020 was a year of disruption for many investors but there is light at the end of the tunnel. Here are eight diverse investment ideas to consider for 2021

P

olitical upheaval, social unrest, and continuing trade wars marked a tumultuous year for business and investors alike in 2020. And that’s even before the global impact of the COVID-19 pandemic – and the ongoing lockdowns and business restrictions – were factored in.

But while what goes down doesn’t necessarily have to come back up, the overwhelming view of economists and investment managers is that recovery is on the cards in 2021. Fast work on several COVID-19 vaccine options, coupled with a greater understanding of spread minimization techniques among policymakers, has meant many have rung in the New Year with a renewed sense of confidence.

Andrew Tilton, Chief Asia Pacific Economist with Goldman Sachs Research, has told the firm’s Exchanges podcast that he is also optimistic about growth in the Asia Pacific region in particular.

“China – the biggest economy in the region – has already recovered quite a lot, and is now showing growth on a year-by-year basis,” he said, adding that effective vaccination programmes will be provide another kick-start to local markets. “It’s really widespread vaccination that will allow those remaining restrictions to be lifted and have another reacceleration of growth to get back to more or less normal.”

Nigel Green, CEO and founder of independent fintech advisory deVere Group, says 2021 is set to be a year of major investment risks – but also massive opportunity.

“2020 was a year for which nobody had planned,” he said.

24

HONG KONG BUSINESS | JANUARY - MARCH 2021

Andrew Tilton

Ronald Chan

“This included investors, many of whom were caught spectacularly off-guard by not having properly diversified portfolios, he added.

“Looking ahead to 2021, it is likely that investment headwinds will still exceed the tailwinds – but, I believe, that there are also more major investment opportunities to be had in the next year than perhaps in the last decade.”

Whilst we here at Hong Kong Business have no crystal ball, and can’t predict the future, we have talked to some of the leading analysts and institutions from across Asia and around the world. What follows are eight of the most interesting examples from their advice to clients for the year ahead.

Whichever way your investment portfolio heads in 2021, and the Year of the Ox, we wish you all the best of luck and prosperity. Stay well, and invest with care.

Idea 1: Asian equities When it comes to regional views of the stock markets, Asia is seen as a likely strong rebounder in 2021, according to a wide range of analysts and guidance.

Ronald Chan, Chief Investment Officer (Equities, Asia ex-Japan) for Manulife, describes the investment outlook for the Asia region as “greater than the sum of its parts”. He says robust fiscal and monetary stimulus globally and in Asia allowed equities to recover the worst of the pandemicinduced downturn, with regional equity indices ending the year with a nearly 19% return in 2020 (albeit with significant

COVER STORY volatility across different markets and industries).

He is expecting growth of roughly 5.5% overall during what will still be a period of gradual and uneven recovery.

BlackRock, meanwhile, says the region is well placed to take advantage of the global recovery. “Many Asian countries have been more effective at containing the virus – and are further ahead in the economic restart,” it has advised clients.

“We see the region’s tech orientation allowing it to benefit from structural growth trends.”

Schroders is also bullish on Asia, but has a particularly confident outlook for Chinese equities. These have already rebounded faster and stronger than other markets, in line with the “first-in, first out” story of the Chinese economy’s pandemic. “We believe sectors providing exposure to long-term growth themes in the country will continue to outperform. In particular, we like areas including industrial automation, electric vehicles and components, and supply chain localisation,” said Louise Lo, Head of Greater China Equities for the global fund manager, based in Hong Kong.

Idea 2: Asia-Pacific REITs Many real estate investment trusts (REITs) took a significant hit from the lockdowns of 2020, but several analysts say that gives them strong room for renewal and growth in 2021.

Hui Min Ng, Portfolio Manager within Manulife Investment Management, says this is particularly true where “lower for longer” global interest rates are now providing a generous tailwind for property development.

“Moving into 2021, we envisage the macroeconomic backdrop should gradually improve across the region, with significant dispersion in economic growth across the region,” she says. That should create a recovery in cashflows for retail landlords (given the low base of 2020), while industrial REITs are likely to remain stable throughout 2021 “with growth boosted from accretive acquisitions”.

“The main attraction of Asia Pacific REITs as an asset class is the stable, sustainable payout of dividends to investors. While this assumption was challenged in early 2020, the response by governments and central banks helped to stabilise the real estate sector (and) moving into 2021, we believe an improving economic outlook and continued low interest rates should be beneficial for the asset class,” Ng said.

In Singapore, DBS Bank is also confident of the local REIT market, but says mid-cap trusts are offering particularly good value to investors at this time.

Top 10 Asia Pacific REITS

Source: The MSCI AC Asia Pacific REITs Index, December 2020

Louisa Lo

Mary Jane McQuillen

“In general, mid-cap REITs are usually able to produce better returns because of their ability to act quicker than large-cap REITs, while also being more financially stable than their small-cap counterparts,” the bank has advised.

“And now, mid-cap industrial S-REITs have ample valuation buffers, while some have also gradually increased their overseas portfolio over the years, making them more diversified.”

Idea 3: Technology Technology assets, particularly those with exposure to cloud computing and the work-from-home revolution that was a hallmark of 2020, enjoyed a surge in valuations over the past 12 months. While many have predicted that rate of growth to slow down in 2021, some analysts are predicting an unprecedented rally well into the New Year.

Scott Glasser, Co-Chief Information Officer and Portfolio Manager with ClearBridge Investments is one such investor still bullish on big tech. “Simply looking at valuations would suggest technology stocks are overbought and most at risk of disappointing investors in 2021,” he says. “Yet much of market forecasting is based on past analogs and we would argue that given the unique nature of the COVID-19 pandemic, which caused voluntary shutdowns of broad swaths of the economy, such analogs are not as applicable today.”

Research from State Street in Asia Pacific goes some way to backing this theory up. Its survey of institutional investors in the region found a majority (64% in Asia Pacific, and 68% globally) expected continued and improved investment in new technology in 2021. Those moves to replace legacy IT systems with new tech and services are likely to maintain demand and revenues across the global tech market.

Idea 4: ESG Investing Successfully managing environmental, social, and governance issues has become so vital for organisations throughout the developed world, that it even has its own investment trend that has gained plenty of interest – and funds – from the finance community. UBS’ Chief Investment Office says sustainable, or “Impact Investing” is also seeing some strong relative returns for its dedicated funds, portfolios, and indicies.

“So far, during the global coronavirus outbreak, MSCI Asia ex-Japan ESG Leaders have outperformed the regional benchmark by over 200 basis points,” it advised clients in 2020. “While past performance is no guarantee of future performance, we expect ESG considerations to continue to influence corporate and investor actions in Asia in the future.”

Mary Jane McQuillen, Head of ESG Investment at ClearBridge is similarly upbeat about the sector’s growth prospects in 2021.

‘We expect many of the drivers of strong returns for stocks with strong sustainability characteristics to continue in 2021,” she says. “We believe renewable energy will enjoy long-term secular growth as the world transitions to a less carbon-intensive economy and as solar and wind power has become more cost-competitive with fossil fuels. The HONG KONG BUSINESS | JANUARY - MARCH 2021

25

COVER STORY push to lower emissions and increased energy efficiency will (also) continue to support the growth of electric vehicles (EVs) and their evolving supply chains.”

Idea 5: Gold While the world is looking forward to a year of recovery and growth in 2021, the previous year has taught us that uncertainty will likely persist for many years to come. That has brought some of the tried and tested safe haven investments back into focus, and the most trusted of these continues to be gold.

HSBC is describing gold as an important “portfolio diversifier” in 2021, particularly with ultra-low yields on highquality bonds expected to persist. “(Gold’s) strong relationship to real interest rates should offer protection against positive inflation surprises,”it added. “There remains an abundance of uncertainty, with the imminent risks of Brexit, continued geopolitical uncertainty, and the as-yet uncertain success of a coronavirus vaccine.”

Goldman Sachs is also preparing for a continued rally of gold prices and associated assets. It holds a US$2,300 per ounce target for 2021, which would represent a 22% rally from current levels. In a recent investors’ note, Goldman analysts Mikhail Sprogis and Jeffrey Currie said this prediction was based on expectations for renewed concerns over inflation globally.

But not everyone is convinced. Some analysts suggest gold’s safe haven status has come under pressure during the current crisis, leading to greater than expected volatility last year. There is also growing demand pressure from a very different asset that many are claiming has alternative safe haven properties. That forms the basis of our next investment idea.

Idea 6: Bitcoin It’s been a tumultuous ride for the world’s best-known cryptocurrency over the last few years, but 2020 saw it catch the eye of a serious level of institutional investment. Bitcoin’s price grew over 300% last year, boosted in part from its acceptance by mainstream companies such as Paypal. Many now see it as an alternative safe-haven for gold over the long term (the term “digital gold” is now being used to describe bitcoin), although with significantly greater price volatility in the short term.

Nikolaos Panigirtzoglou, Senior Global Markets Strategist with JP Morgan, believes that the adoption of Bitcoin by institutional investors has only just begun compared to holdings of gold. He sees Bitcoin’s intrinsic value rising significantly over the coming years as mining activity improves, although nearterm risks are clearly skewed to the downside.

“The sponsorship we have seen for bitcoin through corporates and respectable asset managers is changing the views of many baby boomers (who have long-held a preference for gold as their investment safe haven of choice)”.

Idea 7: Green hydrogen It’s the first, lightest and most abundant element in the universe, and it could provide a low-impact solution to the world’s energy needs. While currently, 99% of hydrogen is captured using fossil fuels, climate scientists say the technology to “greenify” these carbon-heavy processes is now within sight.

Bank of America Global Research says the stars are about to align for a potential $11 trillion market, with 26

HONG KONG BUSINESS | JANUARY - MARCH 2021

Gold price rises during volatile 2020

Source: www.gold.org/goldhub

Nikolaos Panigirtzoglou

Nicholas Hardingham

green hydrogen supplying up to 24% of energy needs by 2050. It says the falling cost of electrolysers (down 50% in the past five years, and estimated to fall 60% - 90% further before the end of the decade) used to produce green hydrogen, technology improvements, and the global focus on sustainability all highlighting the potential of green hydrogen as a revolutionary fuel source.

“Scaling up any new technology entails challenges, but we think now is the time to look at it, before it goes mainstream,” the Bank advised in a Hydrogen Primer report from September last year.

Beneficiaries of an effective green hydrogen solution will include the renewable energy sector, utilities, industrials, and chemicals. The oil and gas industry and coal sectors, meanwhile, can expect significant loss of global demand, Bank of America Global Research says.

Idea 8: Emerging market bonds Both corporate and government-based bonds offer a stable investment choice in 2021, but analysts have an overwhelming preference for emerging market bases for these assets.

Nicholas Hardingham, a Senior Vice President with Franklin Templeton Fixed Income, says the growth gap between advanced economies and the emerging markets is set to widen further this year, with China in particular heading for an 8.2% expansion of GDP. “This is important because China is a growth engine to which many other emerging markets sell their commodities,” he said.

Emerging market government bonds are currently yielding around 4% more than their counterparts in advanced economies, and Hardingham sees that trend likely to continue into the year ahead. “As 2021 starts, government debt is expected to rise to 125% of GDP in advanced economies, compared with 62% in emerging markets.”

Standard Chartered’s Wealth Management Advisory is also positive on emerging markets, particularly Asia. “We prefer Asian USD bonds and Emerging Markets bonds as they should benefit from the weaker USD, stronger inflows, reduced geopolitical risks given the US election results, and potential for capital appreciation given cheap valuations,” it advises in its Market Outlook 2021 report.

HONG KONG BUSINESS | JANUARY - MARCH 2021

27

ANALYSIS: ECONOMY

HK economy set to remain under siege from virus; closed borders DBS Bank has delivered its economic outlook for the Special Administrative Region, which it says will all ride on its continuing response to the pandemic.

T

he Hong Kong economy has entered 2021 in a challenging position, according to this report from Samuel Tse of DBS Bank Group Research. He says the much-needed rebound of asset prices and the broader economy will hinge crucially on the development of the Covid-19 pandemic and the eventual relaxation of immigration policies.

Looking specifically at the expectations for unemployment, the retail and tourism sector, and Hong Kong real estate markets, Tse says a further round of timely economic stimulus may be needed to avoid yet another wave of business closures across the Special Administrative Region.

Still, there are some positives to report. Tse says that with the Covid-19 now largely stabilised

in China, DBS does expect that border to reopen at some stage early in the new year. This would create a “powerful pull factor” for the Hong Kong economy, he says.

The Singapore bank has revised its prediction for total GDP growth in 2021 up to 4.0%, from 0.5% previously.

Other conclusions drawn by the bank when it comes to Hong Kong immediate economic outlook include: • Domestic demand remains weak; and tourism is moribund. That has pushed the jobless rate across the SAR to higher levels • Another round of economic stimulus is urgently needed.

This will help the Hong Kong economy to avoid yet another next wave of business closures

Rebound of the economy will hinge crucially on the COVID-19 pandemic

28

HONG KONG BUSINESS | JANUARY - MARCH 2021

Unemployment is now at its highest levels since the SARS epidemic of 2003.

•

•

There are some positive signs however, with the potential for the border with China to reopen during the first quarter of 2021. This would be a powerful pull factor for the economy The implication to DBS’ forecast, is that 2021 GDP growth has been revised up to 4.0%, from 0.5% earlier during the pandemic.

Soaring unemployment The unemployment rate rose to 6.4%, in 3Q from June – August, with the number of unemployed persons rising by 11,500. The underemployment rate stayed consistent at 3.8%, the highest level it has been seen at since during the SARS epidemic in 2003 (4.3%).

This was due to the stringent

ANALYSIS: ECONOMY social distancing rules amid the resurgence of new COVID cases in the quarter, which accounted for over 75% of the total cases in Hong Kong. Economic activities were partly halted, including in-restaurant dining, which was forbidden for most of that time.

The worsening employment situation was also partially attributed to the increasing number of first-time unemployed job seekers – students recently graduated from university.

Against this backdrop, more noticeable increases were seen in the consumption and tourismrelated sectors. Hong Kong’s jobless rate rose further to 11.7%, from 10.8%. The unemployment rate could rise again if the border remains closed. Jobless rates of other sectors had already jumped between November 2019 and January 2020. These include the transportation sector, where unemployment rose to 5.9% from 2.2%.

Cathay Pacific announced plans to axe its subsidiary Cathay Dragon, and will implement a large scale lay-off plan, adding to that pain. A total of 5,300 local staff, spanning from cadet pilots to cabin crew, will be impacted. Its number of passengers dropped by 98.1% YoY in 2020, largely comparable to the 99% drop in total Hong Kong visitor arrivals.

As such, the number of unemployed persons will be expected to rise by 1.9%, and translate into another 0.1 percentage point increase in the

Domestic demand for “staycations” helped push hotel occupancy rates back toward 50%

Hong Kong’s changing unemployment rate

Source: DBS Bank Group Research

Retail sales by category

Source: DBS Bank Group Research

headline unemployment rate.

For now, Hong Kong has plans to open the border gradually with Singapore under the “Travel Bubble” agreement, that has been delayed since November. Yet, visitors from the Lion City only account for 0.8% of total visitor arrivals, or 1.5% of total tourist spending. Should the situation turn south again, the jobless rate will soar in the months ahead. In fact, tourist spending accounts for around 30% of Hong Kong’s total retail sales value. That said, the consumption sector could at most achieve 70% of their revenue with local spending.

Not too over-optimistic on relief in retail sales The relative improvement in retail sales, which narrowed from -44.0% YoY in February to -13.1% in August, was largely a result of the low-base comparisons. The retail sales value has recorded negative growth since February, 2019, due to the economic slowdown in China, and the RMB depreciation amid the China-US trade war.

The contraction has further widened since June 2019, when Hong Kong experienced an unprecedented 6-month period of social unrest. Retail sales dropped by 30% YoY in the second half of 2019.

The performance of tourist hot-picks such as jewellery and clothing remained subdued. The hotel occupancy rate rebounded from 29% in February to 50% in

August, due to unusual demand from ‘staycations’ – domestic holidaymakers enjoying local stays. Yet, the overall room rate after discounted by CPI dropped to HK$632 per night, even lower than the HK$660 rate during SARS in 2003.

Fiscal constraints kicked-in Against this backdrop, another round of timely stimulus package is needed to avoid the next wave of business closures.

The budget deficit as a percentage of GDP is expected to reach 11.1% in the 2020-21 financial year, up from 0.4% previously. This was the strongest fiscal stimulus ever. However, another round of rescue packages was restrained by the fiscal reserve, which could maintain government expenditure for another 12 months.

Further stimulus will require the government to issue new bonds. The structural decline of the labour force, resulting from the ageing population, will also increase the need to issue sovereign bonds over the longer term. The Hong Kong Government forecast that the workforce would continue to shrink after the economy recovers from the Covid-19 pandemic in its latest Labour Force Projection (issued in September). These will challenge the mandate of “keeping the expenditure within the limits of revenues in drawing up its budget” stated in the Basic Law HONG KONG BUSINESS | JANUARY - MARCH 2021

29

ANALYSIS: ECONOMY – the mini-constitution of Hong Kong.

Setting political obstacles aside, enlarging the scale of debt issuance will likely fuel nominal interest rates.

Coupled with the deteriorating credit rating of the city, we may see some upward pressure on government bond yields. This was reflected by the hike in the iBond guaranteed yield. This is the first time HKMA guaranteed a yield higher than the concurrent inflation rate. Fortunately, the burden of debt servicing remains manageable as government debt and debt guaranteed by the government has stayed low, and was at 2.4% in August.

The deflation risks will, in turn, increase real interest rates as well, which reached the post-Global Financial crisis high of 3.2% in August. CPI fell by 2.3% YoY and 0.4% in July and August respectively, the first deflation recorded in three years. Hong Kong’s last persistent deflation spanned 68 months over 1998-2004, when it endured four major economic shocks.

Hopefully, the deflation could ease on the back of an ultra-low interest rate environment. Otherwise, a persistently high real borrowing cost will damage the recovering economy.

Diverging property price movements Residential property prices on the secondary market have fallen 7.7% from their peak before the social movement in June 2019, or 1.3% YTD. The third wave of outbreak has weighed on both Hotel occupancy and room rates

Source: DBS Bank Group Research

30

HONG KONG BUSINESS | JANUARY - MARCH 2021

Joblessness in the construction could cause delays of some ongoing projects in the months ahead

Hong Kong GDP projected to rebound by 4% this 2021

transactions and prices. Prices set by developers in the primary market have been less aggressive lately. For instance, the initial average selling price (ASP) of The Pavilia Farm, the latest development co-constructed by New World Development and MTR, was at HK$18,921 per square foot.

This is largely comparable to those on secondary market in the same district.

In the rental market, the rising unemployment rate, especially in the low-paying sectors, has already translated into downward pressure on residential rental fees (-7.8% YoY).

Likewise, retail shop rents also fell substantially due to weak retail sales performance.

Looking ahead, home prices are expected to show divergent movements. The mass market should stay largely resilient due to the longterm demand-supply imbalance.

Short-term supply will remain tight due to the pandemic. The jobless rate of the construction sector, stayed at 10.9% for much of 2020, the highest level last seen during the Global Financial Crisis. This points to the possible delay of construction works in the months ahead. Over the medium-long term, Hong Kong will need extra 9,080 hectares of land due to the increasing ageing population, ageing residential property, as well as increasing demand for larger living spaces.

However, the current land reserve is only 5,000 hectares, including the yet-to-be-approved reclamation project Lantau Tomorrow. Property

market indicators such as negative equity (0.1% of total outstanding mortgages), loan-to-value ratio (56.7 in March, 2020 compared to 68.9 in September, 2002), and affordability ratio (41.1 in June, 2020 against 64.4 in June, 1997) point to a relatively low default risk.

The long-term demand-supply imbalance, as well as the ultra-low interest rate environment, should continue to serve as a buffer for this asset class.

Yet, we should see more downside risks for the luxury real estate market in the months ahead. The cloudy economic environment may lead business owners to liquidate their assets. Should the border remain closed amid the unstable Covid-19 situation, investment demand from Mainland investors for large units will remain subdued.

We expect the overall residential prices to stay flat with some fluctuation in 2021.

To conclude, the rebound of asset prices and economy will hinge crucially on the development of COVID and the relaxation of immigration policies. Economic growth is projected to remain negative due to the third wave of COVID outbreak but narrow to -5.6% YoY in 3Q and -4.1% in 4Q to conclude the year at -7.0%.

With the largely stabilized COVID outbreak in China, we expect the border will re-open in the first quarter of 2021. GDP could thereby rebound by 4.0% next year.

HONG KONG BUSINESS | JANUARY - MARCH 2021

31

TRADE PLATFORMS

hktdc.com’s new sourcing platform

New sourcing platform connects SMEs to int’l buyers

Safety measures to curb COVID-19 have hampered brick-and-mortar retail businesses in Hong Kong.

S

ocial distancing and movement restrictions that governments all over the world have implemented amidst the COVID-19 pandemic led to the cancellation of many physical activities inducing exhibitions and business events.

COVID-19 control measures have hampered brick-and-mortar retail businesses whilst online shopping grew significantly worldwide in the first half of 2020, said the HKTDC. Nearly 4,000 physical exhibitions all over the world have been either postponed or cancelled, according to the HKTDC, affecting deals worth about $2.29t (US$296b).

Work stoppages and transport disruptions that were brought upon by the pandemic have disrupted global supply chains, according to the Hong Kong Trade Development Council (HKTDC).

“As such, [small and mediumsized] enterprises have shifted focus from speediness to trustworthiness when selecting working partners; the outbreak has accelerated the development of regional supply chains, whilst localised manufacturing will become more popular,” the council added.

Without physical international

32

HONG KONG BUSINESS | JANUARY - MARCH 2021

Work stoppages and transport disruptions that were brought upon by the pandemic have disrupted global supply chains

exhibitions, local SMEs and other traditional businesses have turned to online exhibitions and digital sourcing platforms to reach both existing and potential customers, instead of wholly relying on the usual sales and distribution channels such as wholesale and retail. The ongoing pandemic has changed the sourcing pattern for many companies and accelerated the transformation of the global supply chain, added the HKTDC. The council’s survey showed that a significant number of SMEs are already adjusting their business strategies as store operations cope with the new normal.

The survey showed 69% increasingly makes the shift to digital to expand online distribution channels, whilst 56% utilises online marketing to develop new business markets, and 47% accelerates technology application in their business.

With this, the HKTDC has revealed its enhanced digital sourcing platform, hktdc.com Sourcing, to better connect local small and medium-sized enterprises (SMEs) with prospective buyers from all over the world.

The upgraded platform hktdc.com Sourcing is an agile, scalable, extendable, and secure platform supported by AWS cloud technology that is ready to be enhanced and expanded quickly anytime. It was first launched in 2000, helping local SMEs establish business connections with prospective buyers from around the world, with HKTDC’s 50 years of experience in the promotion of foreign trade, and an extensive business network with a total of 50 offices in major commercial cities around the world.

Now, by incorporating the latest AI technologies and design, it is said to provide a better and more personalised experience for buyers on their sourcing journey through its simple and clean user experience (UX) design, said the HKTDC. At the operational level, SMEs can create and develop their own personalised shop pages as well as easily upload pictures and information about products to these, said HKTDC, noting that the platform utilises image recognition technology that can suggest keywords of relevant products, so the SMEs’ offerings can be more effectively located by target buyers.

“SMEs can also update their page content anytime and anywhere, whilst gaining a better understanding of buyer behaviour based on data analytics provided by the platform which can help them improve supply chain management and analyse their marketing effectiveness,” added HKTDC. A new Online Purchase feature just went live on the platform last 5 December 2020, which allows flexible pricing and minimum quantity order setting, making it possible for small-quantity or sample purchases, solving buyers’ urgent sourcing or sampling needs.

Order payments can be made easily and securely via PayPal, and cost-effective shipping comparisons and settings are facilitated by the feature’s integration with cloud shipping software Easyship.

“When it comes to product listing management, it is just as convenient for SMEs who can manage all

TRADE PLATFORMS product information via easy-to-use backend operations,” commented the HKTDC. Meanwhile, in terms of business promotions, SMEs can now flexibly purchase promotion combinations according to their business needs and promotion strategies, increasing exposure on the hktdc. com Sourcing platform and hence increasing opportunities of being seen by prospective buyers and getting business enquiries.

To provide more promotional support to SMEs, the HKTDC has also launched the Newsbites website to share latest buying trends and popular new products regularly with prospective buyers from around the world through popular social media channels.

The platform also allows SMEs to gain intelligence information about the latest purchasing records of buyers worldwide.

“The upgraded hktdc.com Sourcing platform deploys a variety of new technologies and AI is one of them. Powered by the cloud computing infrastructure of Google and Amazon Web Services (AWS), the platform offers new functions, enabled by technologies such as AI and machine learning, that make the matching process as efficient as possible,” added the HKTDC. The use of AI and machine learning primarily aims to enhance the platform’s matching efficiency between SMEs and their prospective buyers, delivering a better, 24/7 intelligent sourcing experience to users.

“Supported by the big data generated on the platform, our AI technologies enable the platform to provide product and business matching suggestions for SMEs and prospective buyers alike; the AI-assisted smart sourcing can also screen out false queries and recommend more desirable products to buyers and find more suitable buyers for the SMEs,” added the HKTDC. AI’s role as businesses go digital According to a study conducted

by KPMG and InvestHK exploring Hong Kong’s vital role in the global

HKTDC will continue to organise online sourcing events to cater to the different sourcing cycles of various sectors

Lorem ipsum Benjamin Chau, dolor Deputy sit amet Executive consectetur Director adipiscing of HKTDC

supply chain in 2021 and beyond, the significant economic impact of COVID-19 has impacted the entire supply chain and this will last for some time to come.

Companies have suddenly realised that there is a need to digitise across multiple supply chains, and Hong Kong does need to prepare itself for this new digital era wherein businesses will operate across a seamless global marketplace.

“We must be more agile as we serve those future digital supply chains with next generation data analytics, AI, and automation,” added the HKTDC. The council also noted that the city is taking the next steps as a global digital supply chain services hub and has embarked on major roles in every link of the manufacturing chain, from product design and development to the delivery of goods to consumers.

“Currently, AI is the primary driving technology of automation in the supply-chain industry; at our upgraded sourcing platform, we deploy AI to identify patterns in data and bring useful insights and hence enable effective business matching between SMEs and prospective buyers from around the world,” said the HKTDC. Moving forward, the council expects the industry to utilise AI in forecasting demand and providing more personalised services to their customers in the future, hence enabling companies to better manage their supply chain operations and become more

efficient and accurate.

“To ensure an effective use of AI technologies, we need a robust database that provides clean and valid data which would allow the generation of meaningful data analytics,” commented the council.

“Hence, maintaining valid data and eliminating data silos in the supply chain would be essential to create actionable data for AI technologies to effectively work on.”

The digital sourcing platform in a post-COVID world Even when physical exhibitions resume, the HKTDC aims to continue to organise regular thematic online sourcing events to cater to the different sourcing cycles of various sectors, providing exhibitors with additional opportunities to connect with global buyers.

“Fully utilising the advantages of online-to-offline promotion, we will carry out digital promotions and business-matching activities before and after the trade fairs, allowing exhibitors to reach out to overseas buyers who are not able to come to Hong Kong and helping to create an extended exhibition experience,” the council elaborated.

The HKTDC also plans to continue enhancing its online services to create more business opportunities for global buyers and suppliers, it concluded.

In the future, physical trade fairs and online platforms will need to integrate and complement each other, the council concluded.

HONG KONG BUSINESS | JANUARY - MARCH 2021

33

Display to 31 January 2019 HK$40

Issue No. 51 Hong Kong’s Best Selling Business Magazine

T INVESTMEN IDEAS for

10

It was a terrible year for equities, but experts are not completely writing them off in 2019.

2019

SALARY HIKE AWAITS TECH WORKERS THE HAMMER FALLS ON HONG KONG’S AUCTION HOUSES LENDERS UNDER THREAT MEET MERCEDES-BENZ HONG KONG’S NEW CEO

EY RV TLAW SUARGESS& T

L M ES S 25 FIRLARGE FIRM 50 ANC

51

UR INS

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

Issue No. 85

Display to 31 December 2018 s$5.90

Daily news at www.sbr.com.sg

THE PROPERTY ISSUE Singapore’s Best Selling Business Magazine

sKY HIGH RENTALs PUsH F&bs TO CO-sHARE sPACEs WILL YOU LET bOTs MANAGE YOUR MONEY? THE DEATH OF AN ACCELERATOR FACTORIEs GET A FACELIFT

EY S RV SU ARGESRTAMME

L OG R T AP ES RS MB RG IDE LA ROV AP MB

85 73

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

ASIA’S LEADING

Issue No. 88

BUSINESS TO BUSINESS ISSUE 88 | DISPLAY TO 31 AUGUST 2018 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

SEmbCORP’S INtEGRAtED ENERGy StRAtEGy Asian Power

GROUP PREsIDENT & CEO NEIL MCGREGOR TAPs INTO GAs, RENEWAbLEs, & RETAIL.

mAlAySIA’S mASSIVE bIOmASS POtENtIAl INVEStORS’ INSAtIAblE CRAVING FOR RENEwAblES CHINA DROPS A bOmbSHEll: A SHIFt IN SOlAR POlICy wHy INDONESIA’S ENERGy RulES ARE StuCK IN tHE DOlDRumS

MEDIA

PUBLISHER

ISSUE NO. 13

The magazine for healthcare administrators and policy makers

|

www.healthcareasiamagazine.com

Display to 28 February 2019

HOSPITALS UNDER ATTACK SINGAPORE’S MASSIVE DATA BREACH SHOWS THAT HOSPITALS NEED TO STEP UP THEIR GAME IN ORDER TO WARD OFF POTENTIAL ATTACKERS AZHAR HARUN CEO, UMSCp14

Healthcare Asia

CHINA’S INtERNEt HOSPItAl bOOm OVERCROwDING IN SINGAPORE’S PublIC HOSPItAlS wIll RISING COSt StuNt tHAILAND’S UHC GOALS? INDIA’S AmbItIOuS mODICARE PROGRAmmE

34

HONG KONG BUSINESS | JANUARY - MARCH 2021

In Print, Online, Mobile, Events, Awards, and Research

ANALYSIS: RESIDENTIAL PROPERTY

Hong Kong residential property prices to fall by 5% in 2021

Tight property supply proves an advantage Despite large reported rent reductions in 2020, the city’s property developers have reason to be optimistic in 2021 argues S&P ratings analyst Edward Chan.

H

ong Kong’s limited housing supply has long been a burden for home affordability. Now it’s helping to save the city’s residential market from a sharp correction amid COVID-19 fallout however S&P Global Ratings believes retail and commercial properties could have a harder time recovering from prolonged economic stress throughout the Special Administrative Region.

Even without lockdowns

and curfews as elsewhere, comprehensive pandemic measures in Hong Kong have exacerbated pre-existing economic problems.

The special administrative region’s GDP has shrunk for a fifth straight quarter, on year-on-year comparisons as of Sept. 30, 2020, and unemployment stands at a 16year high of 6.4%.

We anticipate Hong Kong residential property prices will fall a further 5% in 2021 after sliding

Standard & Poor’s expects residential property prices will fall a further 5% this year

Source: Centaline

200

9

180

8

160

7

140 120 100

80 60

6 5 4 3

40

2

20

1

0

0

Source: Centaline, Census and Statistics Department of Hong Kong Copyright © 2020 by Standard & Poor's Financial Services LLC. All rights reserved.

Centa-City Leading Index (monthly average) (left scale)

%

Hong Kong Property prices to Bottom when Unemployment peaks

July 1997=100

Hong Kong Property Prices To Bottom When Unemployment Peaks

Unemployment rate (seasonally adjusted) (right scale)

by about 7% as at end-October from their peak in June 2019. The key indicator of more weakness ahead is jobs. The unemployment rate is potentially still rising.

During the past two decades, Hong Kong property prices tended to bottom only when the jobless rate had peaked or was about to peak.

A shortage of housing remains a safeguard against larger price plunges, in our view. During 2010-2019, private housing completions averaged 13,500 units a year, down about 30% from the previous decade; meanwhile the population has been rising. Falling vacancy rates demonstrate the supply tightness. Private housing vacancies steadily dropped to 3.7% last year from 6.8% in 2002. In the absence of a major population net outflow, housing supply will likely remain tight over the next three to five years. Furthermore, another pillar, low interest rates, will

HONG KONG BUSINESS | JANUARY - MARCH 2021

35

ANALYSIS: RESIDENTIAL PROPERTY Most landlords are likely to provide special rental concessions to their retail tenants in 2021

16

14 12

%

10 8 6 4 2 0

Source: Colliers International Source: Colliers International.

36

HONG KONG BUSINESS | JANUARY - MARCH 2021

7.5

30,000

Units

7.0

20,000

6.5

10,000

10-year avg. private housing completions (left scale) Mid-year population (right scale)

6.0

5,000

5.5

0

Source: Rating and Valuation Department of Hong Kong, Census and Statistics Department of Hong Kong.

Source: Rating and Valuation Dept. of Hong Kong Copyright © 2020 by Standard & Poor's Financial Services LLC. All rights reserved.

Vacancy rates rise amid uncertain economic outlook Hong Kong Island East

Annual private housing completions (left scale)

35,000

15,000

Vacancy Rates Rise Amid Uncertain Economic Outlook Central

8.0

40,000

25,000

Rated landlords with high exposure to high-end shopping are more exposed, in our view, than peers focused on the mass market.

Luxury retail sales have suffered nearly their biggest declines on record This could result in steeper negative rental reversions and

Overall vacancy rate

Private housing completions asRises population rises Private Housing Completions Decline Asdecline Population In Hong Kong

Millions

continue to underpin demand.

We believe transaction volumes in the primary residential market will rebound in 2021 as social distancing measures gradually ease. From January to September 2020, total transactions by volume dropped only moderately, by 9%.

Secondary market transactions jumped 10% over the period, while primary transactions plunged by 41%. We believe this drop was mainly due to developers holding back project launches amid the pandemic. On the other hand, the resilient performance of the secondary market highlights solid pent-up demand.

We believe landlords will continue renewing most of their retail leases at lower rates in 2021.

Most landlords will also likely provide special rental concessions to their retail tenants next year, albeit probably less than in 2020.

Footfall in retail malls has partially recovered since August as the pandemic and restrictions eased in Hong Kong. However, we don’t expect a meaningful yearon-year growth in 2021, given tourism remains sluggish and unemployment high. That said, further downside from the low base in 2020 is limited.

Kowloon East

luxury retail sales will not recover to pre-COVID levels this year.

Nondiscretionary retail, such as supermarkets, has been resilient. As such, we anticipate less rental pressure for Link Real Estate Investment Trust, given supermarket and foodstuffs account for more than 20% of its trade mix.

From April to September 2020, tenant sales from this segment rose about 14% year on year. This partially offset weakness in Link REIT’s other segments, including a 20%-25% tenant sales drop in food & beverage and general retail.

Rising office vacancies point to negative rental reversions in 2021.

In particular, spot office rents in traditional prime business districts, such as Central, have dropped by more than 20% from a peak in early 2019 to a level now similar to the fourth quarter of 2015. In our view, spot prices in prime locations have further to fall, in part due to a continuation in decentralization.

Economic uncertainty could also limit the pool of prospective tenants, including those from mainland China, which have supported the remarkable rental growth in recent years. This will exert negative rental reversion pressure on office properties owned by rated landlords and developers such as IFC, Hongkong Land, CK Asset, and Swire Pacific. That said, rental reversions only affect the portion of leases coming to expiry. We estimate lease expiries in 2021 varies at 12%-25% of these companies’ Hong Kong office

portfolios.

We expect decentralization to continue, as companies reap the benefits of lower rents. Spot rents in less prime districts have been more stable than in prime districts, dropping by 12% in East Kowloon since early 2019 and 7% in Island East. Office properties owned by Swire Pacific and Link REIT in those areas could be more resilient during the downturn. For example, Swire Pacific’s office buildings, One Island East in Quarry Bay and Three Pacific Place in Wan Chai, have benefited from the relocation of the Securities and Futures Commission and an investment firm, PAG, from Central.

Although IFC has a thinner rating buffer than peers, its Hong Kong retail and office rental income grew robustly by about 18% from fiscal 2015 to fiscal 2019. Even if rents continue to hover around the current low levels, we believe it will take at least three to four years before such rental growth will be fully eliminated. That’s because rental reversions only affect a portion of the rental portfolio. During the past down cycle, it took three years for Swire Pacific’s Hong Kong retail and office rental income to drop by about 15%-20% from its peak in 2001 to trough in 2004.

For Hong Kong developers, the expected rebound in home sales volume should shield them from weaknesses in their rental portfolios.

C

M

Y

CM

MY

CY

CMY

K

HONG KONG BUSINESS | JANUARY - MARCH 2021

37

38

HONG KONG BUSINESS | JANUARY - MARCH 2021

ANALYSIS: DATA CENTRES

Data centres play a critical role in buttressing the financial services, insurance, trading and logistics sectors

Hong Kong faces new data centre dearth Expect more data centre developments, as companies either build from scratch or increasingly convert existing buildings, real estate consultancy Savills argues.

C

urrently there are about 58 colocation data centers in Hong Kong. The majority of data centres are located in Tseung Kwan O, followed by Kwai Chung, Tsuen Wan, Tsing Yi, and Shatin. Most new data cente supply is located in Tseung Kwan O, partly due to the relatively high availability of land in the area.

Tseung Kwan O also happens to be the location of three of Hong Kong’s eight submarine cable landing stations (there are two in Tong Fuk and one each in Deepwater Bay, Chung Hom Kok and Cape D’Aguilar).

The Tseung Kwan O Industrial Estate (TKO IE) now accommodates the largest data centre cluster in Hong Kong with 11 high-tier data centres established by a number of multinational and local enterprises.

Together with the data centre in Tai Po Industrial Estate, these 12 data centres occupy a total floor area of about 3.8 million sq ft, about half of all data centre floor space in Hong Kong. HKSTP is also developing a

Data Technology Hub with a total GFA of over 290,000 sq ft in TKO IE to provide a purpose designed infrastructure for the data technology and telecommunications services industry.

There are three major players driving demand for data centres.

First, cloud service providers such as Alibaba, Amazon and Microsoft are expanding as most enterprise users have started adopting cloud solutions in response to the COVID-19 pandemic if they weren’t before.

Secondly, internet companies and application developers such as multimedia content providers or e-commerce players demand ample data storage capacity and plenty of data processing power given the growing importance of Big Data, industry 4.0, the Internet of Things and 5G. These all create substantial demand for data centre facilities which are highly secure and easily serviced.

Lastly, data centres play a critical role

The data centre market is expected to increase substantially from US$883 million in 2018 to US$1.7 billion in 2023

in buttressing the financial services, insurance, trading and logistics sectors which together account for about half of total data centre capacity in the city of Hong Kong.

As of March 2020 , there were a total of 40 applications to convert parts of existing industrial buildings for data centre use, and six applications for lease modification for the redevelopment of industrial

En-bloc Supply Of Data Centres By Developer/Operator, 2020 to 2023 after

Source: Buildings Department, Savills Research and Consultancy HONG KONG BUSINESS | JANUARY - MARCH 2021

39

ANALYSIS: DATA CENTRES lots. Through land sales, China Mobile acquired an industrial government site in Fo Tan for data centre development for HK$5.6 billion in July 2020, paying a record high A.V. of HK$5,967 per sq ft for an industrial site. There have been no additional land sites released by the government after China Mobile’s Fo Tan site and only the conversion of industrial buildings is therefore capable of meeting demand in the short term.

There are four data centre classifications with diff erent requirements, with Tier IV the highest classification. Data centres are operated as either colocation, managed hosting or hybrid facilities.

Colocation provides space rental services for tenants who purchase their own servers, while managed hosting provides servers for rent and provides 24-hour system support. Typically, retail operators (JUMBOiAdvantage by SUNeVision in Tsuen Wan, Wharf T&T in Tsuen Wan) provide managed hosting services, while wholesale operators (Global Switch in Tseung Kwan O Industrial Estate) provide a range of colocation services.

Mismatch of demand and supply In Asia Pacific, data centres saw strong demand with total investment volume over the year to November 2020 reaching US$3.3 billion, about 471% of the 2019 level. In Hong Kong, the data centre market is expected to increase substantially from US$883 million in 2018 to US$1.7 billion in 2023 . Rapidly growing demand and limited

Building Requirements For Data Centres

Source: : Savills Research & Consultancy

40

HONG KONG BUSINESS | JANUARY - MARCH 2021

Most new data centre supply is located in Tseung Kwan O, partly due to the relatively high availability of land Change chart headline to: En-bloc supply of data centres by developer/ operator, 2020 to 2023

Data centre distribution and cable landing stations in Hong Kong Data centre distribution and cable landing stations in Hong Kong

Source: Office of the Government Chief Information Officer, HKSAR

supply is expected to result in a shortage of data centres. According to DBS, future data centre demand is expected to grow at a 15% CAGR from 6.0 million sq ft in 2018 to 10.0 million sq ft in 2021, while stock is expected to grow at a 7% CAGR from 7.3 million sq ft in 2018 to 9.3 million in 2021. This will result in a 0.7 million sq ft shortfall by 2021. Our forecast for en-bloc data centre supply shows that supply in 2020 and 2021 will total 573,054 sq ft and 624,294 sq ft (in terms of GFA) respectively.

In 2022, that number will double to 1.44 million sq ft, because of the large supply from Sites 2 and 3 on Wan Po Road by SUNeVision which will provide 1.21 million sq ft. A further 1.49 million sq ft will be released in 2023 and after, including 940,000 sq ft in Fotan provided by China Mobile.

Convert or build Building owners of an industrial building, located in “Industrial”, “Commercial” or “Other Specified

Uses (Business)” zones, may apply for a special waiver to change parts of eligible industrial buildings into data centre use at nil waiver fee. The proposed data centre use must be in part of industrial buildings aged 15 years or more. Another cost is the high CAPEX and the considerable time it takes to reinstate floors if investors intend to lease space to tenants other than data centre users after lease expiry. A major hurdle is finding an appropriate partner with the technical know-how willing to make a long term commitment.

One feature of data centre investment is that it provides a stable and predictable rental income stream not least because lease-terms are usually long (8-10 years). For example, Equinix signed a 12year lease with Kerry Warehouse Kwai Chung, with staged rental increases every 12 months and three consecutive options to renew for a further term of three years.

Also, tenants tend to be sticky as relocation incurs high switching costs and risks service disruption.

This allows operators to maintain a high occupancy rate. In addition, this asset class provides valueadded opportunities for yieldhunting investors to redevelop or convert aging industrial buildings.

Nonetheless, investors need to take into account that there will be high investment costs involved in meeting the building requirements and selecting suitable areas which are away from petrol stations and oil depots among other onerous requirements.

HONG KONG BUSINESS | JANUARY - MARCH 2021

41

OPINION

CHESTER LEUNG

True interpretation of Hong Kong residential market under COVID-19

T

he pandemic has affected all sectors of the economy with some sectors having a harder time than others. Although rents in the Hong Kong residential market started to slide in the middle of last year, prices are still at a high level. If we go back to the early stages of the pandemic, everybody was holding a waitand-see attitude on the property price movement with some even hoping that prices would plummet as much as what we saw during SARS in 2003. However, things didn’t pan out as expected with rents falling but not prices meaning that the rate of return is going to drop further. However, if we look at it from a macroeconomic view or from the micro view of rate of return, why do Hong Kong property prices have this kind of performance? With the strange situation of the property market as it is now, how do we examine it in order to really understand it?

Game players in the residential market Property prices are determined by transactions between buyers and sellers. However, we cannot just focus on property indices. If we do not take note of trends and changes in the transaction volume of the property market, we will not be able to learn of the true situation.

The property price reflects the buying power of the buyer and holding power of the seller. If the epidemic impacts the income of a majority of people in the market, this would have been very rare historically. However from another perspective, it can be so said, that for a small group of people, wealth and income have not been affected too much by the epidemic. We can say that if only it was just this small group of people that played this property game, property prices would not necessarily be affected to the same extent and drop sharply.

For any commodity, the buyer will strive for the lowest price while the seller will strive for the highest price in the transaction. Therefore, we have to start off with the situation of owners and buyers from a social perspective, and analyse the situation of the owner and buyer, before we can understand the true meaning behind each transaction.

Owners entering retirement stage In the Hong Kong residential market, the majority of the owners are “baby boomers”, who were born after the war. On entering the latter part of their lives, they will not be investing in their careers in the same way as they did when they were young, nor will they easily make high-risk investment decisions. On the contrary, they are paying more attention to health, with less outgoings on clothing, eating out, living accommodation and travel.

Strong holding power of owners The pandemic has been a huge blow to many employees and employers, but it has had only a limited effect on those who have retired. Since their investment portfolios are generally prudent in nature, the volatility in the stock market has not shaken their assets.

What’s more, according to statistics, about 65% of the real estate units 42

HONG KONG BUSINESS | JANUARY - MARCH 2021

CHESTER LEUNG Director at CHFT Advisory and Appraisal Limited

in Hong Kong have no mortgage repayment obligations. Therefore, the current pandemic has only a very limited economic impact on these retired owners who do not have loan payment pressure, liquidity needs and reasons for forced sale.

Whether property prices will plummet depends on the holding ability of owners. If they have an urgent liquid capital need, only then will they slash prices aggressively to sell the asset as soon as possible.

Only when these kinds of owners dominate the market will property prices be reduced drastically.

Therefore, with owners having no urgent need to sell their flats, and coupled with government’s anti-speculation measures to keep a lid on the property market, this has caused families who need to move to bigger flats to delay their decision to sell and buy and thus this has led to a supply shortage in the secondary market. Only when they just suddenly realise that it was a seller’s market when they put their flats on the market, would each seller be thinking the same thing, that is sell only when the price is right.

Marriage compound divorce adds fuels to demand With every case of marriage, the housing needs for two families then becomes housing needs for three families. Increasing marriage cases boosts demand for housing. However, the majority of commentary on housing neglects to mention divorce statistics. In fact, with every case of divorce the housing needs of one family now becomes the housing needs of two families. The demand for small and medium-sized units will increase no matter whether the demand was triggered by marriage or divorce.

Conclusion The housing market under the pandemic has experienced the strange phenomenon of falling rents but prices staying high. This is because owners have no financial pressure, and with extremely low interest rates, the fall in rents has not affected the repayment burden of people with mortgages. The only people playing the “property market game” are a group of high-income earners. Under the pandemic, their incomes have not been as adversely affected as other people’s incomes. In addition, with the property market mercilessly distorted by government policies, this has only made people postpone the decision to buy over a long period. All along, the market has been merely catching up with pent-up demand. Therefore, the chances of property prices falling sharply like in 2003 are extremely slim. Moreover, if the economy recovers, high-income earners will respond relatively faster, and there will be plenty of opportunities for the property market to cease falling and head up again.

The property price is the result of a transaction. To only look at the property price index, to not look at the changes in the transaction figures, and to not further analyse the needs and circumstances of life from a social perspective, is to easily misinterpret the actual situation of the property market, and thus misses the true conclusion by a considerable margin.

W E DRIVE FASHION F ORWA RD – F OR GOOD.

PVH.com

OPINION

ADRIAN STONES

Why Hong Kong needs a corporate wellness paradigm shift now

T

hree reasons why Hong Kong needs a corporate wellness paradigm shift now and five ways to make it happen in your company Hong Kong scores the lowest out of eight global markets when it comes to well-being.

Cigna Hong Kong conducts an annual 360° Well-being Survey, tracking the perceptions of health and well-being of individuals by looking at five key areas: physical, family, social, financial and work health. This survey covers eight markets, including Mainland China, Hong Kong, Singapore, Spain, Thailand, United Arab Emirates, United Kingdom, and United States. But, if you look back on the past few years that this survey has been conducted, Hong Kong has consistently placed near the bottom of the list.

We have a long-term wellness crisis now at tipping point in Hong Kong and increasing expectations that companies do something about it. But what can corporations in Hong Kong do to effectively address this crisis? Put a different way, what can companies do that is not ‘wellness-washing”, or the wellbeing equivalent of “greenwashing” in the environmental movement?

Sustainability is increasingly finding its way into boardrooms and executive teams in Hong Kong. Leaders must become more adept at managing these seemingly opposing forces. Corporate wellness is an example of this type of paradox. Seen through a more traditional lens, it can be viewed as a cost to the business.

Seen through the increasingly accepted lens of “sustainability”, it is more accurately viewed as a cost that is not only the ethically correct choice, but it also has measurable, tangible benefits for employees. Those happier employees will experience higher engagement and work quality, which result in increased innovation and happier customers. Happier employees also reduce the number of HR- and compliance-related incidences— and their associated costs.

Everyone is experiencing COVID-19 in their own, unique way. There are some common themes though—resilience, burnout, mental health, and vulnerability. These are all extremely useful focal areas whilst we are passing through a crisis. However, the day will soon come when vaccines are widely distributed and therapeutics improve to the point where COVID -19 becomes more similar to the annual influenza season in terms of its societal impact. And then, focal areas will shift again to helping people emerge from this pandemic.

Rather than reacting to the crisis in front of us now, we should take a step back and think holistically about what really makes up “wellness”. The term “wellness” has been misappropriated by certain industries and that has clouded its true meaning.

Wellness in its truest sense is defined as “a delicate balancing act between an individual’s social, emotional, psychological and physical assets (resources) and the particular social, emotional, psychological and physical liabilities (challenges) they are facing in life and work at any one time”.

44

HONG KONG BUSINESS | JANUARY - MARCH 2021

ADRIAN STONES Founder & Managing Director at Zenshin

Wellness is not just whether or not someone is sleeping or eating properly. Just because you offer a dental plan to your employees does not mean you have a corporate wellness program.

It covers a wide range of components—authentic relationships, meaning and purpose, intellectual engagement, resilience, balance and boundaries, and energy and vitality. Most corporate wellness programs focus on the last three components—but that means that companies are leaving the strongest drivers of wellbeing unaddressed within the context of wellness. With “wellnesswashing” on the rise, it is critical that companies start with the kind of holistic definition I mention above.

Once you do that, it should become apparent that there is a lot of science behind “wellness”. The science, while relatively new, is still solid and points to tangible benefits to those who follow it.

However, given the complexity associated with defining, measuring and then positively impacting wellness, most corporations find that they just don’t have that kind of skill set internally. HR will be tasked with “making it happen”, but this is new for them, too.

There is nothing wrong with admitting that this is a new field.

Find experts you can trust to bring you the science, not the hype.

Bring in those experts to help you quickly ramp up. Learn all you can and make that knowledge part of your corporate playbook.

Turning to a different report also released by Cigna called “Health And Wellness In Workplaces: What Works?”, they found that “programs delivered at an individual level are most successful when they aim to reduce specific health risks, while programs delivered to the entire workforce are most successful when they promote healthy behaviors in general and develop a culture of wellness in the organization.”

One-off workshops help build awareness and invariably generate high levels of participation—workers in Hong Kong are clamouring for better wellness programs at work—but then engagement can drop off if the program hasn’t been designed to maintain momentum.

Changing long-held personal habits is not easy. Doing that in an environment that doesn’t support staff? Impossible.

The best way to support staff to make these difficult changes is to design and implement company-wide programs that create a culture of wellness and are led out-front by the company’s leaders, while hyper-personalizing wellness coaching and support for employees. Two tiers, in parallel, interacting and working together. Turning back to the paradox of ““purposeful profiteer””, companies still find it challenging to quantify the ROI of their corporate wellness programs.

To overcome this challenge, companies need to define parameters for success up-front. Create feedback loops in an agile manner that allow you to dial up or dial down certain programs and interventions, depending on how they are being received and the kind of measurable ROI they are generating.

HONG KONG BUSINESS | JANUARY - MARCH 2021

45

OPINION

CHERRY FUNG

Act now to prevent data breaches

I

CHERRY FUNG Fortinet’s Regional Director for Hong Kong, Macau and Mongolia

n Hong Kong and around the world, data breaches are in the news with alarming regularity.

According to Hong Kong’s Privacy Commissioner for Personal Data, 139 data breach incidents were reported in the city in 2019, representing an increase of 8% as compared to 2018. The data breaches involved hacking, system misconfiguration, employees contravening rules, loss of documents or portable devices and inadvertent disclosure of personal data by email or post.

Many data breaches could be prevented, as Microsoft engineers reminded people earlier this year, making headlines when it revealed that “99.9% of the compromised accounts they track” do not use multifactor authentication.

Whilst organisations and individuals wrestle with the challenges of protecting personal and financial information, criminals are taking advantage of the trust that is placed in organisations and their choice of data repositories.

Fortinet Chief Information Security Officer Phil Quade describes data breaches as “confidence vampires” that feed on this misplaced trust. He warns that core assets must be defined and protected by understanding the scope of potential compromise in order to constrain risk. Digital innovation and an increase in endpoint and IoT devices across networks also means new potential “security gaps”. To prevent data breaches it is essential for organisations to establish a security baseline and adopt strategies and solutions for proactive security

Use Signature-based Detection Tools As the majority of network vulnerabilities that get targeted are not new, security systems can detect attacks by looking for “signatures”, the patterns used in other cyberattacks. Signature-based detection tools enable security teams to scan networks and identify data breach attempts that are targeting known vulnerabilities. These tools are especially useful in complex environments that include devices that cannot be updated.

Make Multi-factor Authentication Mandatory Multi-factor authentication technology is widely available, but organisations need to enable it and make it mandatory for their employees. And as with the recommendations for email and SaaS applications, MFA provides a key complementary technology that can significantly bolster security with minimal investment.

Replace Traditional Security Technologies Traditional security solutions operate in isolation, which means they are only able to respond to threats detected in front of them and do not have the full picture of the network. Cyber criminals employ a multi-vector approach that use multiple vulnerabilities and more than one method to breach a network. By adopting a fabric-based approach organisations can protect evolving networks against data breaches.

Establish Security Hygiene Practices Many cyberattacks have been in existence for weeks, months and sometimes years and simply carry on targeting proven vulnerabilities in systems.

The continued prevalence of known methods of attack demonstrates the importance of having a formal protocol for security patches and system upgrades.

Consider replacing all devices that cannot be patched or updated, or ensure devices are “quarantined” with proximity controls such as IPS systems and zero-trust network access. Security teams must ensure the network is capable of automatically detecting and quarantining compromised devices.

Leverage Threat Intelligence Never underestimate the importance of advanced threat intelligence.

Security teams should leverage both local intelligence and follow global threat feeds to keep up to date on the latest cyberattack activity, then distribute this knowledge across the security framework.

46

HONG KONG BUSINESS | JANUARY - MARCH 2021

Use Behavioral-based Analytics and Data Sanitisation Some threats do not have a recognisable signature, so advanced threat protection solutions such as sandboxes and User Entity Behavior Analytics (UEBA) tools are required. Cyber attackers learn and mimic legitimate traffic patterns so security tools need to conduct an in-depth inspection and analysis that focuses on patterns that can then be used to detect and diagnose malicious intent. Ideally, security tools need to be able to intervene automatically before an attack takes place. Data sanitisation strategies such as Content Disarm and Reconstruction (CDR) tools can identify potential threats and stop attacks cold.

Employ Web Application Firewalls Despite the risk of cyberattacks, many organisations do not adequately test and strengthen their web applications before they are deployed. By employing a web application firewall (WAF) organisations can monitor web application traffic more closely than next-gen firewall technology.

Segment Networks The frequency of data and applications flow in digital environments means networks should be segmented to prevent the spread of cyber threats. Organisations can achieve this by deploying internal network segmentation firewalls and establishing macro- and micro-segmentation strategies. Segmentation is especially critical when collecting and correlating large amounts of data in single and multiple network environments. Consistent policies across the network more effectively manage and secure the movement of data and applications.

Stay Alert, Stay Proactive The frequency of data breaches and increasing sophistication of cyber criminals means security should remain a central priority. Defending against these threats requires strategies that rely on security solutions and awareness of risk. By creating a security baseline and embracing a range of strategies that can be deployed broadly , organisations can protect themselves and their customers from data breaches.

Standards don’t bother me, all I want is your data!

AD: VASTCOM

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

Discover

Monitor

For a free risk assessment, visit groundlabs.com

Remediate

HONG KONG BUSINESS | JANUARY - MARCH 2021

47

OPINION

ARON FROST

Building an E-commerce store with multiple user languages

S

etting up an ecommerce store is no easy feat. Not a lot of people realise the amount of time and effort that goes into building an aesthetically pleasing, functional, and easy-to-use website. It involves a great deal of work.

According to Statista, the revenue earned in Hong Kong through eCommerce has grown by 23.3% year on year. The most profitable market segments being fashion, electronics & media, hobbies & toys, and appliances. But what if you are also trying to tap into a new market?

A new market that has great potential but poses one big roadblock: language.

What do you do now?

As with everything else, you adapt. Growing your revenue streams means expanding into new markets. Often, your website or your online store would be the first thing that your new market sees. Online transactions in Hong Kong are growing. Back in 2013, 66.4% of Hong Kong residents shopped online, up from 57.9% in 2011. These figures have climbed in recent years, as more brands launch apps and make their products available on online platforms.

So, the question now is whether your website can service an entirely new culture and language. To ensure that you make a great first impression, consider building a multilingual e-commerce store.

Why is having a multilingual e-commerce store important?

A multilingual e-commerce store should be able to do two main things: translate your website accurately based on the language of your new market; and provide visitors with a coherent user experience. Keep in mind, however, that your new market might not respond well to your current marketing strategy. Apart from language, you would also have to consider context, culture, and values as potential challenges you would have to address to avoid getting lost in translation.

Remember, these website visitors are potential leads that could turn into paying customers. And, if pleased with your product and service, these paying customers could turn into repeat business.

Win-win. But how do you create a multilingual e-commerce store?

Where do you even start?

Pick your platform wisely When building an e-commerce store, the first thing you must do is choose an e-commerce platform that best suits your business. It really all boils down to what you, as a business, need. One thing we would like to emphasise is the importance of integrations.

Your e-commerce store should allow integrations that help with managing your content, handling your SEO, and optimising your online store for various platforms such as desktops, tablets, and phones.

Even your website’s multilingual capabilities depend on integrations.

Additionally, your e-commerce platforms should also allow you to seamlessly integrate your website with all your other marketing efforts.

Will your e-commerce platform integrate with your socials? How about your email marketing campaigns? Is your e-commerce platform capable of integrating multilingual options?

48

HONG KONG BUSINESS | JANUARY - MARCH 2021

ARON FROST SEO team lead First Page Limited

Always start with the data If you’re unsure which languages to add to your website, well, look at the data. In today’s world, data dictates everything. If your company is based in Hong Kong and you are planning to expand, it only makes sense to look to the broader Asia Pacific as new markets. Do you get website hits from Taiwan? Are these website hits coming from both the Englishspeaking and Chinese-speaking residents of Taiwan? If you are planning to expand to Malaysia or Philippines, are you getting enough website hits from Malay or Tagalog-speaking visitors to justify the integration of another language in your website? Once you have collected solid data about the market you are trying to tap into, you are ready to proceed with the next step.

Don’t forget the human touch Some websites rely on automatic translations services. Whilst this may be an easy and cost-effective method to translate your website to another language, it also poses some risks. Context is important no matter what language is involved. Some marketing strategies that European or American brands use might not sit well with an Asian audience and vice versa. At the very least, have someone proofread your website to ensure that your translations are accurate and culturally appropriate. Pay attention to the quality of your translation above all else.

Optimise user experience Having a multilingual e-commerce store doesn’t just involve translating one language to another. You have to take into account the user experience you are giving your customers. User experience is important for your conversion rates.

Check your SEO and localise your efforts Translating your website’s language is different from translating your SEO efforts. You also must consider SEO best practices of another language when providing multilingual options. Are you targeting the right native keywords? Are your SEO efforts localised? Do you have accurate currency conversions? When translated, are your page titles and meta descriptions still within the character limit? The list goes on.

It may not be the cheapest option but hiring a native speaker and ecommerce SEO expert should help you with your localised efforts. You know what they say: you must spend money to make money.

Key takeaways As the business landscape continues to evolve, the potential for increased profits evolves with it. Building a multilingual e-commerce store is not easy, but it should not hinder you from expanding your market reach.

Whether you are a bakery or an insurance company, you can adapt your business model to sell egg tarts online or digital insurance. So do your research on the plethora of tools available out there or invest in a local agency to ensure that you are providing accurate translations on your website. In doing so, not only are you ensuring a seamless user experience, but you are also overcoming potential cultural barriers.