HK 2022 IPO funds to reach $400b PwC

CONSUMERS BLAME BRANDS FOR SCAM MESSAGES: CALLSIGN

Asurvey by Callsign released 23 September 2021 reveals 45% of consumers say their trust in businesses such as banks, retailers, mobile network operators, and delivery companies has decreased due to the persistent scam of spoofing brand names. Around 42% of consumers from Hong Kong, India, Indonesia, the Philippines, and Singapore ask mobile network operators to do more to stop scammers using their platforms, and 33% ask the same of banks.

People claim to have received scams through email (67%), SMS (57%), phone (46%), messaging apps (33%), and social media (23%) in the last year. However, 37% of global consumers do not know where or who to report a scam message. Over half of consumers do not trust organisations to keep their data safe, with 43% of scam victims reacting with suspicion and wanting to know where fraudsters got their details.

Erosion of consumer trust

“Callsign’s data demonstrates that consumer trust in our digital world has vanished, and brands are blamed. Yet the sense is that little is done to purposely re-establish digital trust through complete and accurate digital identities,” says senior vice president Stuart Dobbie.

“The solution lies in re-thinking how we fight fraud and how we identify people online. Current approaches tackle both challenges by only identifying fraud,” states general manager Namrata Jolly. “The problem with this approach is that a fraudster using stolen credentials looks like a genuine user gaining access to accounts or executing transactions. If instead fraud strategies look to identify only genuine users, this automatically and simultaneously prevents fraud.”

Callsign’s technology involves the layering of behavioural biometrics over threat detection, device, and location data. Organisations eliminate one point of failure in the authentication process and achieve two-factor authentication with minimal friction.

FIRST HK 2022 IPO funds to reach $400b: PwC

Hong Kong’s bourse is agile and continues to evolve by embracing new models

Total initial public offering (IPO) funds to be raised in Hong Kong are expected to reach $350b to $400b in 2022 on the back of abundant funds and huge investment needs for corporate development, according to PwC.

PwC forecast 120 IPOs in 2022 will raise the $350b to $400b which could place Hong Kong “amongst the top 3 fundraising markets in the worldwide” in the year.

The cross-boundary Wealth Management Connect Scheme and other initiatives allow Hong Kong “to offer greater value and more business opportunities for enterprises and investors,” it said.

Benson Wong, PwC Hong Kong Entrepreneur Group Leader, said reforms in the listing regulation over the past decade diversified Hong Kong’s IPO market.

“Hong Kong’s bourse is agile and continues to evolve by embracing new models. It has joined other global bourses in allowing special purpose acquisition companies (SPACs) to raise funds through IPOs,” Wong said.

“We expected around 10 to 15 SPACs to list in Hong Kong last year, raising $20b to $30b. 2022 will be an important year for the Hong Kong IPO market. We are confident that it will regain its place as one of the top three fundraising hubs in 2022,” he added.

The New Economy and Chinese enterprises listed in the United States will be the main drivers of listing activity in 2022, PwC said.

Last year, total IPO funds raised reached $331.66b, a 17% decline from 2020 despite the high level of activity from New Economy listings and secondary listings by US-listed enterprises. US-listed Chinese enterprises that returned to Hong Kong for listing raised $100.3b, PwC said.

A total of 99 new IPOs were listed in 2021, 98 of which were listed on the Main Board. It noted that 54% were retail, consumer goods and services, and 19% were financial services.

Eddie Wong, PwC Hong Kong Capital Markets Services Partner, said that aside from pandemic, geopolitical and economic uncertainties, the IPO market of Hong Kong has also been affected by “scrutiny from China targeted on certain sectors.”

He also noted that Hong Kong ranks fourth globally in total funds raised amongst IPO markets.

“However, Hong Kong’s pipeline for IPOs remains strong. Greater investor demand and stricter regulatory requirements on climate change and sustainability will drive accelerated growth in listings for renewable energy, electric vehicles and other companies involved in sustainable innovation and ESG,” he said.

PwC forecast 120 IPOs in 2022 will reach $400b, which could place Hong Kong in the top 3 fundraising markets worldwide

CASE STUDY: RENEWABLE ENERGY PROJECTS

Citi and CLP senior executives in front of solar panel installation

Citi Hong Kong installs 360 solar panels at Kowloon office

The project is part of a hybrid electrical and thermal energy system and is expected to produce 85,337 kilowatt-hours of renewable energy per year.

Banks around the globe have become creative in making their own operations more includes a wind turbine, which generates electricity on-site for local use. Even water heating is covered energy effi cient and renewable. Th e Netherland’s ING Bank’s new headquarters Cedar, for example, used concrete and rubble from its old building as well as banned the use of single-use plastics in its restaurants and coff ee shops, amongst other sustainability-related changes. But ING has the advantage of space: what about fi nancial institutions whose base of operations are located in jampacked industrial centers with limited land areas, such as Singapore and Hong Kong?

Citi Hong Kong’s solution is to build its new renewable energy source at its roof. In March 2021, the bank unveiled its new hybrid electrical and thermal renewable energy system, built on the rooft op of Citi Tower at Kowloon East.

Th e new system’s focal point is its 360 solar panels, which Citi said is able to produce 85,337 kilowatthours of renewable electricity. Th is is reportedly equivalent to the annual energy consumption of 20 households, according to the bank.

Th is rooft op installation also by the energy produced by this new installation, with the hybrid system making use of the sun’s energy to heat up water for use in the tower. Citi Hong Kong expects that the hybrid system will overall contribute to a cost saving of approximately 4% of the building’s annual power consumption. Th rough this installation, the bank was also eligible to take part in the Renewable Energy Feed-in Tariff FiT) scheme introduced by local electricity provider CLP. Under this, the bank will receive FiT payments for connecting the system to CLP’s electricity grid. Th e Feed-in Tariff Scheme is an

important initiative to promote wider use of renewable energy in Hong Kong, Angel Ng, CEO for Citi Hong Kong and Macau, said during the unveiling of the bank’s tailored hybrid energy system. “We are proud to be contributing to this eff ort, which is in line with our group-wide strategy to reduce the environmental footprint of our facilities around the world,” Ng added. Even before the hybrid system was fully installed and revealed to the public, Citi said that it’s Hong Kong operations had already reached its goal to source 100% renewable electricity to power its operations in 2020.

Net zero by 2050

Th e hybrid energy system is a step forward in Citigroup’s commitment to achieve net zero greenhouse gas emissions by 2050, as announced by Citi CEO Jane Fraser in March. Th e commitment counts emissions that Citi directly produces and those contributed by the bank’s specifi c fi nancing activities. Net zero means “Net zero means rethinking our rethinking our business and helping our clients business and rethink theirs,” Ng said. “We believe helping our that global fi nancial institutions like clients rethink Citi have the opportunity—and theirs responsibility—to play a leading role in accelerating the transition to a net zero economy and deliver on the promise of the Paris Agreement.” Ng added that the bank’s track record in sustainable fi nance places it in a good position to support clients with new ways of creating fi nancial value that have environmental and also social benefi ts. From 2014 to 2019, Citigroup fi nanced and facilitated US$164b in low-carbon solutions and in 2020 pledged an additional US$250b in environmental transactions by 2025. Solar panel installation at Citi Tower in Kowloon East

VOX POP

How do China’s plans to stop building coal power abroad affect coal-reliant countries?

CHINA

Fabian Ronningen Analyst, Rystad Energy:

China has been one of the biggest funders of coal in Asia, together with ADB and development banks in Korea and Japan. We have seen already that several of the large fi nanciers are pivoting their investments away from fossil generation, predominantly coal, to more green investments in Asia in the last few years. Now that China also has made it clear they will not fi nance any new coal power plants or coal mines, that could make it harder for several Asian countries. Countries that could be aff ected by this are especially Vietnam, Indonesia, Pakistan, the Philippines, and Bangladesh, which all have rapidly growing power demand and still plan to add more coal power to a larger or smaller extent. How dependent they are on Chinese fi nancing depends on the country, but it is clear that all of them will feel it in some way.

Cutting abroad fi nancing will maybe not impact Chinese emissions and emissions targets directly, but it sends a clear message that future coal power will be diffi cult to fi nance. As for the domestic emissions in China, we have also seen several signs that China is increasing its pace of renewable investments and development, to directly displace coal in the generation mix. If we only consider power sector emissions, the target of reaching peak emissions before 2030 is defi nitely feasible with the current pipeline and projections we expect for China. Whether or not China will reach carbon neutrality by 2060 is an open question. Focusing on reducing the dependence on coal is defi nitely a step in the right direction, but how fast emissions can drop aft er the peak depends on how eff ective China is in cutting coal out of its power generation mix.

It is unclear from the current statement how the fi nancing ban will affect projects already under construction or the planning phase. Probably most of these projects will be completed, due to contractual obligations, but projects in the early planning phase have the risk of being cancelled or fi nding other fi nanciers, which may be diffi cult.

China’s coal plant investments

Using data from the Global Coal Public Financing Tracking website, it is stated that China fi nanced a total of 53.1 gigawatts (GW) of foreign coal plants in the period 2013 to 2020 for a total fi nancing cost of 50.1 BUSD. Th e data also shows that China represented 56% of foreign investments in coal plants in the period, so removing this fi nancing source will create a “fi nancing gap” for some of the countries we mentioned earlier.

Let’s assume similar Investments pr MW of coal capacity, we see that the cost is roughly 945 MUSD/GW in investment for a new coal plant (CAPEX). Let’s also assume that China would have continued to fi nance 56% of foreign investments in new coal power in Asia. Rystad Energy expects roughly 70GW of newbuilds in Asia the next decade (excluding

Narsingh Chaudhary, Black &Veatch’s Executive Vice President & Managing Director, Asia Power Business. Harry Harji, Associate Vice President for Black & Veatch management consulting business in Asia:

Decarbonisation commitments, such as China’s pledge to stop building new coal-fi red power projects overseas, present an opportunity to increase support for countries developing green and low carbon energy and accelerate Asia’s energy transition.

With fewer fi nancing options available for coal developments, we anticipate more proposed coal plants will be cancelled. Consequently, countries reliant on China for coal fi nancing will need to review their energy plans to scale up alternative power solutions including renewables.

To accommodate more renewable energy generation, the region will need more integrated solutions across generation, transmission, and distribution; as well as the expansion of gas-fi red generation and energy storage, to improve grid effi ciencies and stability. In the longer term, integrating hydrogen to support baseload generation could be another approach to decarbonise the electric sector.

Th e China Electricity Council has reported that the electricity consumption of the country reached 6,165.1 terawatt-hours from January to September last year, a year-on-year increase of 12.9%. Countries with high demand growth rates such as China will need to balance economic developments and carbon neutral commitments.

China’s renewable energy portfolio

Whilst China is still dependent on coal generation, it has also expanded its renewable energy portfolio. According to the International Renewable Energy Agency, China is the global leader in terms of wind energy deployments, installing 72GW of new capacity in 2020 alone rivalling the second largest country, the United States, which has a total capacity of about 95GW. Furthermore, with 253GW of installed solar power capacity as at end of 2020, China also has the world’s most capacity and this compares with about 151GW of solar power capacity across the European Union, according to International Energy Agency data.

However, too much intermittent renewable energy by itself can threaten reliable grid operations and performance. Given China’s continued growth in electricity needs, coal appears to remain a near-term option domestically to balance the grid; lessons from the recent grid challenges across China bear this out. Long-term, however, to meet its 2060 goals and address renewable energy variability, China will benefi t from more integrated solutions across generation, transmission and distribution, like the rest of Asia, to eff ectively manage the energy transition and provide stable and reliable power. Gas-fi red generation, energy storage and in time hydrogen and potentially nuclear are likely to see an increasing share of deployment.