MAY 2016
Slow Lifestyle Not Snubbed
CONTENT COVER
BEER
Slow Lifestyle Not Snubbed
Rising Craft Beers Turn Over a New Leaf in Beer Market
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GREATER CHINA Taiwan, Hong Kong Eye In-depth Travel to Beef Up Tourism 16 12
LOCAL
TECH
IPO
Alibaba’s SCMP: Free News for Bigger Ambition
Game Streaming Platforms Go Viral Despite Lagging Profit
Hong Kong Still Tops IPO Markets in First Quarter
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FOREWORD
Seemingly unbeknownst to all of us, The Young Financial Post has already been launched for more than a year and half. Once again, we thank for our readers and the efforts of advisors, reporters and editors. Summer came early to me when preparing this issue. All the hustle and bustle in the city has pressured us, especially in this hot weather. Slow lifestyle is the new black in Hong Kong, enabling you to loosen your stressed routine. Discover more about the slow living concept in businesses in the cover story. Chinese Billionaire Jack Ma’s flagship Alibaba has taken over local English media South China Morning Post. It marks the free online news era of the Post and Ma’s ambitious footprint. Craft beer breweries put the homegrown products on sale. They set to spice up monotonous market with new multi-tastes offerings.
“Cha-ching” - online games turn into cash for Tencent, which has been developing Game Video Streaming Platforms. The platforms welcome game casters to to reap views and money. During the recently-concluded Labor Day golden week, the tourist arrival number has improved from the grim beginning of the year. However, the local tourism industry has over relied on mainland visitors, similar to Taiwan. Experts put forward their suggestions that the two cities should hold more indepth travels to stay attractive. Come May, many corporates have concluded their quarterly results. Despite Hong Kong economy is believed to head south, local bourse has outperformed its New York peer to rank the first in terms of new listing handling.
Sector Representatives Kate Lin Watson Tan Art Director Kyle Tang Copy Editor Kyle Tang Photo Editor YY Yeung Public Relation Officers Hera Poon Joyce Zhou Advisors Jenny Lam Alison Leung Francis Moriarty Financial Editor Joshua So
Publisher Alice Lee
Editors Emilie Chan Vanessa Chan Adelaide Hui Bryan Kwok Ian Mak Samuel Lee David Liu Joanne Liu Gloria Song Ever Tang Vegas Tang Jessica Tian Iris Tong Alex Tsoi James Wang Laura Wong Emma Yang Malina Yao Reporters Wendy Cheung Doris Huang Suki Kwan Charlotte Lam Nancy Ping Suki Sin Irene Song Brian Sze Katie To Koey Yip James Xie Theresa Yan Jasmine Zhou Printer
Kate Lin Sector Representative
Department of Journalism School of Communication Hong Kong Baptist University
Website tyfp.journalism.hkbu.edu.hk
Email youngfinancialpost@gmail.com
COVER | TYFP
Slow Lifestyle Not Snubbed By Suki Kwan Edited by Kate Lin
PHOTO PROVIDED BY YÚ TEAHOUSE
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Fast has been the signature tempo of Hong Kongers. To not waste any precious moment to wait, locals are used to multitasking as to achieve what they think is efficient, resulting a scarcity in choices that enable a casual Sunday stroll or simply an afternoon swinging on hammock. Despite the quickened pace of life in the city, some entrepreneurs bring the idea of slow lifestyle and business together in hopes of leading a new trend as well as creating commercial opportunities.
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COVER | TYFP
Pause Rewind n Fastforward is among the stores that are branded with “slow”. The cafe, situated in the midst of hustle and bustle-Mong Kok, opens to everyone to indulge in upbeat music and comfy ambience without charging a penny. Unlike other cafes in the city, the founders of the Hut do not see it as a café only, but an open space for a rest. Special light meals are served, for instance green tea parfait, which cost from HK$50 to HK$100. Majority of income is derived from the sales of food and beverages. Another income source is from work- shops, such as resining flower and polishing classes, priced between $100 and $450 for one lesson, the co-founders Ms Polly Chan said. Art exhibitions are held occasion-
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ally since the founders are willing to share their place for free with local artists to lessen their burden of renting an art gallery somewhere else. One of the customers, Mr Steven Wong Chun-ming, said the place has impressed him with an unprecedented leisure moment, saying the café aims not only to profiteer. Another customer Ms Rainbow Law Sai-ting, who does school assignments in the café, feels the area a lot cozier than the other cafes due to the relaxing and slow ambience. It is not always easy to find a free shared space in Hong Kong. The founders aim to promote the concept of “pubic space for locals for free”.
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The cozy setting and ambience in Pause Rewind n Fastforward allows customers to enjoy a cup of flowering tea.
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SUKI KWAN
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COVER | TYFP
Ms Catherine Yung Tak-yu (pictured) wants to promote the art of tea in the city.
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PHOTOS PROVIDED BY YĂš TEAHOUSE
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As in the other coffee shops, customers are normally charged a minimum spending for a cup of drink or two, in exchange with limited time to chill out. “Mong Kok is the most ideal district for spreading our business concept due to its easy accessibility,” Ms Chan said. Pause Rewind n Fastforward is situated at the second floor of an old tenement in the district. Ms Chan foresees the
“Starting up this café, we are to change the traditional mindset of Hong Kong people that chilling in a café can never be free.” The co-founder of Pause Rewind n Fastforward, Ms Polly Chan
place will be affordable in the near term but she is worried that the ultimate goal cannot be achieved. As the slow lifestyle is yet to be popular so she hopes more free spaces can be introduced in the city. Secluded industrial area like Fo Tan is hiding slow lifestyle places and Yú teahouse (瑜茶舍) is among them. Ms Catherine Yung Tak-yu established a tea house with her family last year. The tea house is named “yu” meaning a calm mind. A sip of tea and live band performances conclude the activities of visitors. “There is shortage of education and channel for tea tasting and appreciation. Tea is also a form of art,” Ms Yung said.
“Renting street-level outlets fetch three or four times more, compared with renting an industrial unit in Fo Tan,” she said. Although the tea house is able to earn from café business and tea wholesaling, moving to a street-level shop looks impossible so far.
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LOCAL | TYFP
Alibaba’s SCMP: Free News for Bigger Ambition? By Charlotte Lam Edited by James Wang
The South China Morning Post has removed the paywall of its online news content a few months after China’s e-commerce giant Alibaba Group acquired the city’s only paid English daily from the SCMP Group (0583) at the end of 2015.
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Mr Lam Ka Kei, the head of research department of Pico Zeman Securities (HK) Limited, said Alibaba Group acquired an advanced mobile terminal and huge data base, which can help improve the popularity of the publication. “When the news are released from mobile terminal, it can be sent to different platforms. Since the Alibaba Group owns an array of media, it is able to increase linkage between them, and reach more readers,” Mr Lam said. In the digital world, netizens’ reading habits are changed from print media to online forms such as Facebook and other applications. The readership of the SCMP printed version fell 16 to 18 per cent in 2013 and 2014, according to Nielsen Media Index, while the online readers of SCMP jumped 54 per cent, the annual report of SCMP said. In the “Letter to Readers” of the South China Morning Post, Alibaba’s executive vice chairman, Mr Joseph Tsai said Alibaba would like to combine Alibaba’s digital strength with SCMP’s editorial excellence.
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To better suit the online news trend, Alibaba tumbled down the paywall on SCMP.com in April and expanded distributions without borders. “It is not feasible that media provides online news with charges,” said Ms Sham Yee Lan, chairperson of the Hong Kong Journalists Authority. “Despite the costs of production, such as hiring professional journalists, readers can enjoy latest news freely,” said
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Ms Sham. She also mentioned that breaking paywall can attract more readers, especially international media, leading to increased advertising income. The SCMP group’s net assets worth HK$613 million, 30 per cent of the selling price HK$2.06 billion, according to the transaction disclosure file. In comparison, Financial Times was sold to Japan’s Nikkei earlier last year for US$1.3 billion
(HK$10.1 billion). “Newspapers is a sunset industry, and investment value of media is actually low,” said Mr Lam. “This acquisition has revalued the market value of Hong Kong media groups. However, the diverse business of Alibaba is different from other Chinese Internet companies, it is rare to see such investments happening again in the near term,” said Mr Lam.
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BEER | TYFP
Rising Craft Beers Turn Over a New Leaf in Beer Market By YY Yeung Edited by Mira Ding
After dominated by mass-production beer brands for years, Hong Kong beer market finally sees a revolution in craft beers. Never before have there been so many unique beers in the city: unfamiliar flavors, creative designs, and organic-brewed. In the United States, craft beers had already increased their shares in beer market to 11 per cent in 2014, from 5 per cent in 2010. While the market is emerging, some Americans are bringing the influence to Hong Kong. According to Craft Beer Association of Hong Kong, craft beer market has been booming for two to three years, and at least 11 craft breweries were set up locally. The chairman, Mr Thomas Lau, regarded by many as the pioneer of craft beer business in the city, stated that the number of craft beer bars surged from 20 to 200 in the past two years.
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Comparing with popular brands such as Stella and Heineken, craft beers are much more costly. Lau said the former’s production cost was around HK$6 or below per bottle, due to the simple production process and economies of scale, while the latter was at an average of HK$20 each. However, the selling price of common beer and craft beer might be priced at a similar level, which is around HK$60 to HK$80 per bottle in bars. Usually craft beer is priced a bit higher, but with a much lower profit margin comparing with common beer.
“… common beer is having the same fate as instant coffee. Once people try craft beer, they can never go back, just like people now only go for brewed coffee rather than the instant one, because it is a human nature to pursue quality and freshness” The owner of The Globe, Mr Toby Cooper
Mr Toby Cooper, the owner of The Globe, which is a bar selling both common beers and craft beers, held a considerable confidence on craft beer’s prospect in Hong Kong. He compared beer to coffee;
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Mr Cooper believed the local breweries are getting experienced, and are able to replace the common beers, and even the imported craft beer. Nevertheless, Mr Lau disagreed, due to the limitations in Hong Kong. He pointed out that the rent in the city is too high for those who want to open breweries that require huge volume for machineries. Also, the quality of drinking water here is not favorable towards production of perfect beer. Mr Lau worried that the craft beer business is stepping into regurgitation soon after the recent growths. However, he still believed that it is a stage when “boys become men” – “those well-managed and of good quality stay, and it certainly benefits the industry”, he said. More than often, craft beers
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are welcomed by the highend restaurants. Mrs Michele Raphael, who owns a 700-square-feet craft beer micro-factory Moonzen Brewery - in Kwun Tong with her husband, admitted that they are targeting the upper and middle classes. Their products are not hard to be found in pricey restaurants and hotels, such as Mandarin Oriental Hotel and The Pawn in Wan Chai. Mrs Raphael reckoned that the majority of craft beer lovers are usually more willing to spend on beer appreciation. Nonetheless, she still welcomed all walks of life to try different types of beer, being passionate in promoting the arts of beer.
of the wide-range and surprising flavors. He was deeply impressed by the fruitiness of India Pale Ale (IPA), which is a typical craft beer. Not only IPA, there are numerous unexpected yet creative tastes such as British-style Barley Wine Ale that gives you honey and toffee flavors; Herb and Spice Beer that overwhelms with flower scent; Pumpkin beer with the sweetness of pumpkin pie and so forth. So, are you ready to jump on the revolutionary craft beer bandwagon?
An amateur gourmet Mr Law appreciated craft beer in terms
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TECH | TYFP
Game Streaming Platforms Go Viral Despite Lagging Profit By James Wang Edited by Adelaide Hui
Tencent (0700), China’s entertainment and media conglomerate serving both online and offline customers, is eyeing a wave of Game Video Streaming Platforms (GVSP) which is turning over a new leaf in its online gaming business. GVSPs provide play through of online games as well as covering e-sport competitions. Leading platforms include Douyu in mainland China, while the Amazon.com’s Twitch.tv is popular in Hong Kong. These platforms cover heat online games like League of Legends (“LOL”), the major product of the US-based Riot Games which is now a subsidiary of Tencent.
Riding GVSP wave Tencent recently raised stake from 15 per cent to 20 per cent in Suzhou Youshi - the operator of Longzhu.com, which is one of the popular GVSPs in China. Youshi is now valued at around RMB1.3 billion.
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Longzhu.com currently serves over 480 thousand viewers (or IPs) each day, according to global internet traffic monitor Alexa. com. However, four other platforms Douyu, Zhanqi, Huya, and Panda TV, are fighting hand-tohand with each other in China, with their strong fists. Douyu recorded nearly 5 million users per day, nearly ten-times more than the Tencent-backed Longzhu.
High viewing not guarantee for profit No matter how many viewers these sites possess, the business does not earn a lot yet. The cash flow may come in from advertisements, VIP fees and user subscriptions, but there are only a few advertisements on Douyu’s front page, and VIP is not available yet. Platforms also share donations from fans of game casters, but most casters prefer third-party payment, like Alipay, to bypass the split of donations with the platforms.
“GVSPs need to expand their revenue streams, A former investment manager of venture capital group Matrix Partners
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Game casters can display the real-time streaming of an online game, meanwhile, interact with their viewers.
ular casters, e.g. Douyu offered RMB3 million for a grass-root player Vincent, who later breached the contract and joined PandaTV for an even higher pay.
GVSPs to save declining gaming industry Douyu’s CEO Mr Chen Shaojie also said in September that the platform has tried some profit models, but would not pursue profitability in the meantime. The costs of providing game streaming services in China are huge, in particular the hiring of popular stream casters such as: facetious grass-roots players, dream girls, and retired e-sport players like former captain of lol team WE Yu - “Misaya” Jingxi. Fans can see their favorite casters in gameplays on screen, and instantly interact with the casters by real-time floating comments. Platforms compete outrageously for pop-
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Tencent revealed that the growth from online game, its biggest revenue source, dropped to 17 per cent in the second quarter this year from 28 per cent in the first quarter. The decrease was due to market saturation of computer games and intensified competition in mobile gaming. China Merchant Securities (HK) analyst Mr Jeff Hao Yunfan believes that GVSP will help to prolong the lifecycle of Tencent’s online game like LOL. Other than actively investing in upstream overseas game design-
SCREEN CAPTURE: PANDATV
ers like Riot, reports suggested that Tencent tried to collaborate with GVSP leader Douyu in order to beef up its online game business, but the attempt was yet successful. The latest rumor is that Tencent has bought a 20 per cent stake in Douyu in late November. Mr Hao expressed his worries of the game streaming business, “Unlike traditional video sites in China, which develop diversified contents, GVSP business offer little room for competition due to the slow renewal of mainstream e-sport game. Currently all GVSPs rely on lol for most of their net traffic. As long as Tencent holds the content advantage and no other comparative games emerge, Tencent will not bother taking up the market in a rush.”
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GREATER CHINA | TYFP
Taiwan, Hong Kong Eye In-depth Travel to Beef Up Tourism By Theresa Yan Edited by Malina Yao
Taiwan and Hong Kong are searching for new ways to revive their tourist industry, as both have been suffering from declines in numbers of visitors from China.
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Sluggish
tourism
needs
deep
changes and experts suggested “in-depth” travels.
IAN MAK
Practitioners estimated that mainland visitors, the largest tourist source market to Taiwan, to decline significantly later in 2016, though the population only experienced a slight decrease of 0.23 per cent in February 2016, according to Taiwan Tourism Bureau. “The decline of mainland tourists may be related to the presidential election.” said Mr Fong Pohan, associate professor from department of economics in National Taiwan University. Ms Tsai Ing-wen, the candidate of the Democratic Progressive Party, a party Beijing loathes, claimed victory in Taiwan’s presidential election earlier this year. Mr Fong said that according to past experience, the cross-strait relations had great effect on the number of mainland visitors. Meanwhile, he mentioned that influences caused by the presidential election were mainly short-term effects, and it was more important to change the development model of the industry.
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China has been the largest source market to Taiwan since 2010. According to Taiwan Tourism Bureau, the number of mainland visitors was 4.1 million representing nearly 41 per cent of all visitors to Taiwan in 2015. Their spending accounted for about 50 per cent of Taiwan’s total tourism income. Mr Fong noted that the form of mainland tourists visiting Taiwan was monotonous: most of the mainland tourists visiting Taiwan were in groups and mainly aimed for shopping. “This type of tourists always take tourist buses, travel in the same routes and buy the same things.” said Mr Fong. “Tourists crowd into hot spots in peak season and this phenomenon negatively influences local environment and the daily life of local habitants.” The effect of presidential election just reveals the shortcoming of depending on a single market source and monotonous tourist form. Mr Fong suggested that tourism practi-
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GREATER CHINA | TYFP
tioners “should not put all our eggs in one basket”. “We should develop ‘in-depth travel’ which attracts various people so that we can spread risks and enables travelers to learn more about local customs and practices.” said Mr Fong. “In-depth travel” means diversified traveling forms, like “nature based tourism” which mainly develops natural resource to attract nature lovers. Mr Fong believed that Taiwan had great potential and abundant tourism resources. From a geographic prospective, Taiwan is one of the areas with highest density of mountains in the world with vast terrains and natural landscapes. Hong Kong tourism also needs diversification Hong Kong is facing a similar problem as Taiwan. The number of mainland visitors to the city declined 6.9 per cent year-onyear in March 2016. For the first quarter this year, there was a decrease of 15.1 per cent in mainland tourist arrivals, according to Hong Kong Tourism Board. The number of mainland visitors firstly decreased in 2015 by 2.5 per cent year-on-year since Hong Kong began the individual visit scheme for mainland residents in 2003. “Except for the economic downturn in mainland and effect of political conflicts,
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the changing of tourists’ consumption concept also has great effect on Hong Kong’s tourist industry.” said Professor Haiyan Song, associate dean of the School of Hotel and Tourism Management at Hong Kong Polytechnic University. “Since neighboring areas like Japan, Korea and Taiwan can provide similar shopping experience to Hong Kong and as the mainland is also establishing free trade area, Hong Kong no longer has obvious advantages as a shopping heaven.” said Prof Song. Prof Song said that “in-depth travel” should replace the unsatisfactory “mass travel”, which was usually described as “whirlwind tours”. “Hong Kong should develop diversified “indepth travel” products like “sport tourism” and “music tourism”, focusing on sports events and concerts held here.” said Prof Song. “As about 70 per cent of land in Hong Kong is unexploited, we can also develop ‘nature based tourism.’ ” Traditional activities like Dragon Boat Races and “Bun-snatching” were also mentioned as potential attractions. Hong Kong has the similar structural problem in tourism industry with Taiwan.
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IAN MAK
The government has planned to promote cultural and creative tourism, trying to organize more conventions and exhibitions. Government will also highlight the diversified tourism and gourmet culture to develop value-added tourism.
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IPO | TYFP
New York bourse remains the second largest listing destination in the first quarter.
HERA POON
Hong Kong Still Tops IPO Markets in First Quarter By James Xie Edited by Jessica Tian
Hong Kong maintains its position as the biggest IPO market in total funds raised from new stock listings in the first quarter of 2016, after it retook the title from New York last year, according to a report by PricewaterhouseCoopers (PwC).
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The new listing market raised a total of HK$28 billion in the first three months of this year, up 37 per cent from a year ago, with 19 companies going public. Huge volatility in the local bourse in 2014 led to fewer applications of initial public offering of shares, while the market became more stable last year and at least five companies went public in almost every month. Another accounting firm Deloitte estimated that 115 to 125 IPOs to raise over HK$260 billion will take place in Hong Kong in 2016. Impact of China’s IPO suspension and RRR cut Hong Kong Stock Exchange’s Growth Enterprise Market recorded the biggest rise in the number of IPOs last year with 31 new listings, an increase of 63 per cent. “Due to the four-month IPO suspension in China, large numbers of companies were put on hold, so some of them chose Hong Kong as a listing alternative, and thus contributed to the Hong Kong IPO market
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boom last year,” said Dr Zhao Wenli, associate director of research and chief strategist of China Merchants Securities. “The most decisive reason for Hong Kong IPO market in achieving better performance in 2015 was its long-possessed developing advantages such as the high operating efficiency and experienced investors who provide enough capital to those promising industries,” said Mr Andrew Shuen Pak-man, a stock market analyst. The cut of China’s required reserve ratio and the expansion of Quantitative Easing announced by European Central Bank have further activated the Hong Kong IPO market in March, Deloitte’s report noted. Contribution from the financial sector Companies from the financial services sector, including securities brokerages, insurance financing and asset management, made up over half of the total IPO proceeds in 2015, although only 16 of the 138 newly listed companies belong to this sector,
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IPO | TYFP
according to accounting firm KPMG. The high IPO proceeds reflected that most of the 16 companies, including Heng Tou Securities (1476) and China Reinsurance (Group) Corporation (1508), were extra-large in size, Dr Zhao pointed out. Two middle-sized Chinese banks - China Zheshang Bank (2016) and Bank of Tianjin (1578), launched their IPOs in the end of March and raised HK$13 billion and HK$7.3 billion, respectively, were the two leading fund raisers
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in the first quarter this year. With the Chinese government’s reform of state-owned financial institutions, the financial service sector will remain a major IPO fund raiser in 2016, said the Deloitte report. In addition, industries like environment, healthcare and pharmaceutical companies are also forecasted to be active, given Human Health Holdings (1419) and Sinco Pharmaceuticals Holdings (6833) the famous cases in the past, the report said.
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Despite deteriorating economy, local IPO market is still robust.
Challenges from U.S. and Mainland China The US increased its interest rate at the end of last year, causing a lot of capital outflow, which may lower the number of IPOs in Hong Kong, Dr Zhao said. He also said that the reopening of A-share listing has provided mainland companies with more options to choose their locations of listing, bringing competition to Hong Kong Stock Exchange.
increases much uncertainty to the China IPO market and weakened its threat to Hong Kong,” said Dr Zhao.
“However, the reformation of A-share IPO market’s registration system needed to be operated gradually, which
“If the monopoly of Hong Kong Stock Exchange could be broken one day, Hong Kong IPO market would achieve
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The launch of the ShenzhenHong Kong Stock Connect in the second half of 2016 will also help increase liquidity between the mainland and Hong Kong stock markets and have positive influence on IPO activities, said PwC in its report.
EVER TANG
much better performance for the free and open trading environment,” Mr Shuen said. “Hong Kong is suitable for equity trading for its market depth and investors composition. The law and accounting systems are also closely connected with the international stock markets, which means Hong Kong can easily gain access to global investors, ” added Dr Zhao, believing that Hong Kong IPO market will remain strong for the rest of 2016 and can even boom for a longer period.
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