Upfront
OPINION INTERNATIONAL FINANCING REVIEW ASIAWeaker hand
H
ong Kong’s attempt to entrench environmental,
social and governance principles into its business
life have been rather overtaken by events.
The city can claim some progress in the E and S areas
after the stock exchange proposed better and speedier
disclosure of environmental targets and social performance
indicators in a recent consultation paper.
But the ongoing political crisis has dealt a huge blow to
the G side of the equation – governance.
Proper governance was not much in evidence on August
ûWHENûTHEûRESIGNATIONûOFû#ATHAYû0ACIlCSûTOPûTWOû
executives was announced by Chinese state media half
an hour before the carrier released the news in a stock
EXCHANGEûlLINGû4HEûCLEARûMESSAGEûESCAPEDûNOûONEûTHEû
two men were singled out under pressure from Beijing for
failing to stamp down hard and early enough on airline stafftaking part in Hong Kong’s pro-democracy protests.
#ATHAYû0ACIlCûISûONLYûONEûOFûAûHOSTûOFûCOMPANIESûRUSHINGû
to fall in line. Since then several local property tycoons
have turned up at a rain-soaked pro-government rally. The
BIGûFOURûACCOUNTINGûlRMSûDISTANCEDûTHEMSELVESûFROMûAû
crowdfunding campaign in support of the protests by some
of their employees.
Alibaba, which is planning a secondary listing of up
to US$15bn in Hong Kong, is now holding off until the
political crisis abates. Doing otherwise could be interpreted
as supporting the SAR in its hour of need.
And then there’s HSBC. The bank has angered China by
providing Huawei-related information to US investigators
and there has been speculation that this may have played
a role in the surprise ousting of CEO John Flint and
subsequent resignation of Greater China head Helen Wong.
The bank denies this, but its exclusion from the panel of
banks used to set China’s new loan prime rate has also
raised eyebrows.
The number of companies caught in the political
crosshairs is turning into a major governance headache
for businesses in Hong Kong – and for Hong Kong itself.Its lucrative perch as the place where Chinese economic
potential meets global business standards is now at stake.
Asked last week whether the city can sustain its claim
to be the world’s freest economy in the face of a more
assertive China, Hong Kong Chief Executive Carrie Lam
argued that the rule of law remains its strongest card. She
is, of course, absolutely right. And she – and her bosses in
Beijing – need to keep that in mind when working out what
to do next.Syndicate shuffles
C
razy competition in China’s offshore bond market is
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with titles and fee pools often changing dramatically.
Arrangers need to get used to the idea.
The line-up of lead managers has changed during
bookbuilding on 30% of this year’s G3 issues from China,
compared to less than a handful in the rest of Asia. Such
late changes show there are too many bookrunners chasing
these deals, and there is little sign of that changing.
Right now, Chinese issuers can get away with pretty
much anything. Renminbi-based investors are hungry for
53ûDOLLARûASSETS ûANDûDOZENSûOFû#HINESEûBROKERSûAREûlGHTINGû
to move up the league table to validate their offshore
expertise.
With China’s economy cooling, those dynamics are likely
to run for the foreseeable future – especially if regulators
curb the supply of offshore issuance.
But it’s worth thinking about what happens when
conditions change, and Chinese issuers need to look beyond
this friendly buyer base for their offshore funding.
Companies that repeatedly change their advisers
or reward a small order with a bookrunner title will
inevitably earn a reputation for opportunism, and that’s
not something global investors like to see from a frequent
issuer. And will global banks make the effort to maintain a
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Perhaps the offshore China bond market would be better
off with the equivalent of an IPO sponsor – a regime that
makes it clear which bank is ultimately responsible for
bringing a deal to market, even if there are 20 bookrunners
in the syndicate. Tougher disclosure rules to protect retail
buyers mean equity syndicates hardly ever change once a
PROSPECTUSûISûlLED
But the bond market is an institutional world, where
investors do not get the protection of a prospectus and
a deal is done in a day. Unless there is evidence that
AûSYNDICATEûRESHUFmEûAFFECTSûSECONDARYûPERFORMANCE û
bookrunners will continue to fall over each other for a slice
of the action.The number of companies
caught in the political
crosshairs is turning into a
major governance headache
for businesses in Hong Kong