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HONG KONG BUSINESS | MARCH 2013 1

HK INVESTORS THE LARGEST

LI & FuNG’S ALARmING pROFIT dEcLINE

RISK TAKERS

HSBc VS STANcHARTWHO WINS?

HK IpO mARKET’S mAINLANd-LEd cOmEBAcK

ASIA uNpREpAREd FOR GRAyING mILLIONS

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2 HONG KONG BUSINESS | MARCH 2013


If you want to get a glimpse of what 2013 will be like in Hong Kong, you can start by flipping the pages of our first issue for this year as we bring you comprehensive industry and economic reports plus interesting features.

In this issue, we present a full analysis of Asia’s graying millions as 65-year olds are expected to triple by 2050.

Meanwhile, our channel check on Hong Kong’s IPO market revealed that it is poised for a Mainland-led comeback as PwC forecasts the total funds raised through IPOs in Hong Kong this year to be in the range of HK$120-$150 billion.

Looking at how Hong Kong’s top companies are faring, we found out that Li & Fung’s alarming 40% profit decline may have been driven by a wrong move the company made in 2010 that is now taking its toll on the business’ profitability. And those who are eagerly waiting for Wynn Cotai to open soon must be ready to be frustrated as an analyst reveals the project is not making much progress as of December 2012 and may not be ready until 2017.

In this issue, we also bring you the rankings for Hong Kong’s top 25 largest hotels as well as 20 local start-ups to watch out for in 2013.

Happy new year and enjoy the issue!

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

For the latest business news from Hong Kong visit the website

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20 Gamechangers

24 Legal Briefing

48 Motoring Report

50 Numbers

REGULAR

ANALYSIS

CONTENTS

38

32 20 Startups to watch in 2013Check out how they managed with initial funding that ranges from as little as US$4,000 to as much asUS$11 million.

36 Hong Kong’s largest hotels upbeat for 2013

Hoteliers see sustained FIT and MICE growth.

SPECIAL REPORTFIRST

OPINION

ANALYSISAsiA still unpRepAReD FoR gRAYing millions

10 Hong Kongers are Asia’s largest risk takers

10 Demand for Grade A office uneven

11 Big banks are beautiful banks

26 HK iPO market poised for a Mainland-led comeback

Hong Kong’s IPO market is likely to recover this year with Mainland firms leading the listing pack.

38 Asia still unprepared for graying millions

With the elderly Asian population set to explode, the region needs to play policy catch-up.

12 Can Hong Kong maintain its competitive advantage in air transportation?

16 Why self-motivation is crucial for entrepreneurs

30 The plight of local bank managers

32 SPECIAL REPORT20 stARtups to WAtCH in 2013

11 FIRSTBig BAnKs ARe BeAutiFul BAnKs


will also extend the period of validity for people under 18 to five years from three years.

FINANCIAL SERVICESPersonal income tax rates across Asiasingapore and Hong Kong amongst the lowest.

According to KPMG’s Individual Income Tax and social security, Hong Kong and singapore continue to offer very attractive personal income tax rates, and rates remained constant in the other Asian heavyweights (China, Japan and India) who have not altered their top rate of tax in any of the years in which KPMG has been collecting data for this survey.

INFORMATION TECHNOLOGYHong Kong’s tablet sales grew by 44% in 2012Here’s how tablets became the “in” thing in multi-tasking.

According to GfK Hong Kong, tablet devices have become one of the fastest growing technologies in recent times, with its retail audit data reflecting heightening adoption

of their retirement and savings needs to achieve their long-term financial goals,” Jim Costello, Director and Head of Wealth Insurance, HsBC Insurance said.

INFORMATION TECHNOLOGYHong Kong’s leading ICT service provider serving business customerssince it was licensed in 1995, Wharf T&T is committed to providing quality service to its clients in Hong Kong and has become the first and only comprehensive ICT service provider in Hong Kong focusing on the business sector - from small and medium companies to large organizations.

ECONOMYCredit Suisse’s fearless growth forecast for world’s economies in 2013

News from hongkongbusiness.hk

Daily news from Hong Kong

MOST READ

COMMERCIAL PROPERTY, RESIDENTIAL PROPERTYHere are possible surprises from CE Leung’s first policy addressPopulation, poverty, pollution and property likely the focus.

Barclays expects C.Y. Leung’s maiden policy speech on 16 January to focus on his road map for the next five years: population, poverty, pollution and property will likely dominate. Yet given recent political pressure on the Chief Executive, potential policy surprises should not be ruled out, adds Barclays.

TRANSPORT & LOGISTICSHere are 2 factors that will back up MTR’s momentum in 2013still positive amid fare-adjustment mechanism (FAM) buzz.

According to Nomura, consistent with its positive thesis, MTR’s share price had risen by 21% in 2012, largely in line with MsCI-HK Index and the Hang seng Index. In coming weeks, the share price might be affected by noises around a review of its FAM.

FINANCIAL SERVICESHSBC insurance products cater to customers’ wealth needs across various life stagessaving for the golden years remains the principal goal of every one in five persons in Hong Kong. But many are not familiar with retirement products and are unable to save enough for their twilight years.

“Those facing this predicament should start early planning

Wharf t&t delivers topnotch iCt service

new travel pass for mainland China

mtR gathering momentum

Surprises from CE Leung’s policy address

singapore economy to grow at a slower pace than HK.

Credit suisse constructed a color-coded heat map of its 2013 growth forecasts for major economies in the world for its online publication, The Financialist.

The singapore economy is forecasted to grow by 2% while HK’s GDP is expected to jump by 3.4%.

ECONOMYNew travel pass being issuedApplication for new pass starts January 2.

The Ministry of Public security will begin issuing a new pass for Hong Kong residents traveling to the mainland.

Beginning today, Hong Kong residents can apply for the new pass that will allow them to enter the mainland via a third country. The new pass

rate in the country. sales of this device have been on the uptrend, hitting 1.9 million units in 2012—over 44 percent more compared to the previous year.

ECONOMYHong Kong world’s 5th most trusting countryBut Hong Kongers trust NGOs more than the government.

According to The Edelman Trust Barometer, Hong Kong is ranked as the 5th most trusting country out of 26 economies surveyed. It moved three steps higher from last year.

MARKETS & INVESTINGHK’s overseas and mainland investments reached all-time high in 2012HK government also promises it will not be resting on its laurels just yet.

According to Invest Hong Kong, the country’s overseas and mainland investors grew 4% from last year representing an all-time high. Overall, the government has assisted 316 companies, both overseas and Mainland, to set up or expand in Hong Kong in 2012.


deadly serious. It now attempts to measure which country will provide the best opportunities for a healthy, safe and prosperous life in the years ahead.

ECONOMYSee how Hong Kong beat Singapore in the globalization index 2012

Ranking based on 5 pillars of globalization.

According to a release, singapore ranks second, after Hong Kong and above Ireland, on Ernst & Young’s Globalization Index 2012. The Globalization Index is part of Ernst & Young’s annual globalization report, Looking beyond the obvious: globalization and new opportunities for growth, which draws on two sources of original research: Ernst & Young’s Globalization Index, and a survey of 750 senior business executives worldwide, conducted in late 2012.

MARKETS & INVESTINGHong Kong investors buy into Philippine property firm

They paid us$1.05 billion for 450 million shares in MJC Investments Corporation or MJIC.

The Philippine

News from hongkongbusiness.hk

Daily news from Hong Kong

MOST READ

HR & EDUCATIONHongKongers take two days to resume normal work routine after being on holidayOnly 8% recovers in one day.

With at least six public holidays over the next two months, and even more if you have a generous employer, it is hard not to get excited about the holiday season. A new survey by finance, accounting and technology specialist recruitment firm Robert Half reveals that it takes an average of two days for Hong Kong employees to recover after returning from the holidays.

COMMERCIAL PROPERTYOffice spaces’ new investor darlingAfter parking lots come office and business spaces.

Hong Kong investors are turning their attention to commercial property investments as stable investment destinations following government measures that have slowed returns in the residential property market.

RESIDENTIAL PROPERTYHong Kong home transactions in December lowest in four yearsIt dropped by a whopping 53.3% MoM.

According to the latest Land Registry data December residential transactions dropped 53.3% MoM to 3,286 while total consideration tumbled 59.1% to HKD17.2b.

Kim Eng notes that in volume terms, the figure was lowest since November 2008,

HK holidays dampen productivity

Hong Kongers blessed with healthy lives

HK 2nd most frequent travelers in asia

Impact of QE3 removal on Hong Kong

RESIDENTIAL PROPERTYImpact of early QE3 removal to HK property stocks could be a re-run of 1994Property stock prices fell more than 50% from peak.

Current stock prices are evidence of central bank liquidity allowing momentum to triumph over fundamentals. Yet continued improvement in the us economy and the markets could start to focus on an early withdrawal of the Fed’s quantitative easing measures, said Barclays.

HEALTHCAREHong Kong 10th best country to live life to the fullestsingapore ranked much higher.The Economist Intelligence unit, a sister company of The Economist, has this time turned

company is the property development arm of the Manila Jockey Club Inc., one of the Philippines’ leading horseracing clubs. The Hong Kong investors are led by Cheah Teik seng, a Malaysian investment banker who sits on the board of Maybank and private equity firms in Hong Kong, China and Malaysia.

HOTELS & TOURISMHong Kong’s tourist arrivals jumped 16% in 2012Visitors from neighboring Asian countries boosted this growth.

The Tourism Board announced that Hong Kong’s visitor arrivals were up 16% year-on-year to reach 48.61 million.

COMMERCIAL PROPERTYHong Kong’s property sector to sustain rising capital growth except in residentialResidential sector seen to consolidate by 10%.

According to Colliers International, the current trend of capital growth is going to be sustained except in the residential sector which is predicted to consolidate by 10% as a result of the Buyers’ stamp Duty.

after significant capital market correction. The figure for the month was 3,264.

HOTELS & TOURISMHeat Map: Hong Kongers second most frequent travelers in AsiaAsians will be traveling more this year.

According to ITB Berlin, Asia remains the powerhouse for world tourism growth in 2012 with strong growth of 7% in outbound travel as incomes rise and consumers are able to travel more. The outlook for 2013 is even stronger, experts said at the World Travel Monitor Forum in Pisa.

China and Japan are both performing very strongly this year with double-digit growth rates in outbound travel, Hiroshi Kurosu, senior researcher at the Japan Travel Bureau, told participants.


FIRSTDeMAND fOr grADe A OffiCe uNeveNHong Kong’s office leasing demand is slated for a gradual pick up in 2013, thanks to stabilising economic conditions and positive hiring sentiments with 40% of executives planning to increase headcount. Colliers predicts overall grade A office rent will rebound by 4% in 2013. “The latest figures from the Census and Statistics Department indicated slower contraction in the Finance, Insurance and real Estate (FIrE) sector’s job vacancies, from negative 9.3% to negative 4.2%. Correspondingly, the overall grade A office rent is set to pick up in 2013,” adds Colliers.

But Jones Lang LaSalle reckons that the demand for Grade A office was not evenly distributed across the market as the restructuring of the banking sector in Central saw the demand for premium offices drop sharply, resulting in negative net absorption of around 311,000 sq ft through the first 11 months of 2012, making it the weakest office leasing market this year. It adds that although about 1.5 million sq ft of new supply is expected to reach the market in 2013, most of this is destined for the strata-titled sales market, providing limited leveraging opportunities for larger corporate occupiers. “Therefore, we do not expect new supply to have a significant impact on the performance of the rental market and we estimate a broad based recovery in the rental market by 2H13,” says Jones Lang LaSalle.

Benchmark for expected returns oninvestment

The derivatives warrant market inHong Kong has been consistentlyranked among the top in the world.

Hong Kongers are Asia’s largest risk takers

Wealthy Hong Kongers have emerged as Asia’s largest investment risk takers

who reckon they can beat the market, according to a survey by bank LGT Lichtenstein. The typical profile of a private banking client in Hong Kong is of someone who reckons they know investments well and can outperform the market. Hong Kong investors are also more interested in absolute return, aiming for inflation adjusted return and 19% aiming to beat the market. In Singapore 40% of investors aim merely to match the benchmark index and only 5% reckon they can beat the benchmark.

Failed ‘accumulators’ The spectacular failure of derivative linked products with exotic names like ‘accumulators’ has also left a sour taste in Hong Kong investors’ mouths. It is interesting to note the lower investment percentage into derivatives for Hong Kong, given that Hong Kong investors are known to be more risk-taking and also possess good knowledge in the derivatives market. In fact, the derivatives warrant market in Hong Kong has been consistently ranked among the

top in the world in terms of market turnover.

One reason, reckons LGT, may be that so many people were burned with structured products they didn’t really understand during the financial crisis. The other may be that previously anyone could buy a structured product as long as the minimum was HK$500,000, but new regulations make it harder for banks to sell these products to novice investors. Another survey finding was the Hong Kong investors tend to shun ETF’s a lot more than other investors, largely because they buy shares directly. In part because they do not believe in the efficient market hypothesis, and also because so much news is available on stocks they prefer to take a punt.

Hong Kongers take risks A feature among interviewees from Hong Kong is their high degree of willingness to take risks. Almost half of those questioned describe themselves as being comfortable with risk (Singapore 26%, Switzerland 23%). Hong Kongers also prefer to trust their own judgement rather than take advice, with 55% making their own calls without a banker compared to 33% in Singapore. Conversely they are more loyal to their relationship manager than Singaporeans, with only a third saying they would certainly not follow their RM to a new bank compared to 60% of Singaporeans. Platform is still king. But there is also the risk that Hong Kong investors are overcome with hubris, overestimating their own abilities. According to LGT, the picture of a certain “overestimation of one’s capabilities” is completed by the higher target returns specified by Hong Kong investors compared with those of Singapore and Switzerland.

Grade A office rent vs job vacancy in “fire” sector

Source: Census & Statistics, HKSAR Government; Colliers


FIRST

Seng group has lost an alarming 4.6% of the deposit market in just 9 years.

Increasing competitionBut Sabine Bauer, an analyst with Fitch Ratings, notes that Standard Chartered has caught up quite well in terms of deposits but that has to do with the additional value both banks attribute to the change in the deposit market share.

Bauer reckons that banks can easily pay up for deposits to increase market share by offering a better price, which is what the Chinese banks in Hong Kong have been doing recently. “HSBC is in the position to defend that market share but it will come at a cost,” says Bauer.

Big banks are beautiful banksHSBC may still be the world’s

local bank, but while it has been busy attempting to conquer foreign markets, its nearest competitor Standard Chartered has slowly been closing the gap on it in its home turf. Barclays analyst May Yan reveals that HSBC is still the largest bank in Hong Kong by deposit market share with 22% of the market in 2011, but this is down from 24% in 2003.

Standard Chartered, whilst no threat yet, has steadily crept up from just 6% of the deposit market to 9% over the same time period. But it gets worse for HSBC, with its sister bank Hang Seng also losing market share going from 12% to just 10% over the same period. In fact the HSBC/Hang

The broader pictureThe broader picture of HSBC, StanChart and the other large banks is good. One interesting change to the dynamic over the last decade is that Hong Kong’s smaller banks have struggled to grow both their deposit bases and also their customers tend to prefer costlier time deposits. Hong Kong is one of the best markets for banks in Asia in terms of cheap funding, with 59% of deposits held in savings or checking accounts which pay little interest.

Barclays’ Yan suggests that higher deposits per branch led to increased deposit market share gains for large banks in Asia ex-China and Japan. During 2007-11, large banks reported 77% more average deposits per branch: USD 222mn vs. USD 126mn for small banks. This indicates that large banks are 77% more deposit/branch efficient than small banks. Hong Kong’s large banks have deposits worth USD697m per branch in 2011, almost twice as efficient as the small banks.

HSBC/Hang Seng group has lost an alarming 4.6% of the deposit market in just 9 years.

2011 CASA ratios (AEJ ex-China large banks) vs. CASA increases (AEJ large and small banks) – 2003-11

Source: Company data, Central banking websites, CEIC, Bloomberg, Barclays Research.

THE CHARTIST

Annual Retail Sales (By product, %YoY)

Global GDP & HK’s Exports of Goods and Services (%YoY)

Fiscal Reserves

Source: Census & Statistics Department of HKSAR, Hang Seng Bank estimates

Source: Census & Statistics Department of HKSAR, Hang Seng Bank estimates

Source: Census & Statistics Department of HKSAR, Reuters EcoWin, Hang Seng Bank


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HongKongBussinessMag_210x280_feb13.indd 1 29.01.13 13:00

The Hong Kong International Airport (HKIA) opened for business in 1998, providing world-class infrastructure to support growth in air

traffic in one of the world’s most pivotal business and cargo markets. In the last 10 years, Hong Kong passenger traffic has more than doubled from 27.4m to 56.5m. The best years of growth in this period were 2004, 2005 and 2010, a rebound year. 2008 saw negative growth in passenger travel, freight and flights. All this growth is also reflected in an increase in flight traffic from 187,500 to over 350,000 during the same period.

But competitive advantage for Hong Kong cannot be measured on raw volume terms alone. The true value comes from the waterfall effect on Hong Kong’s business community and the perception of its citizens and visitors.

In the broader Asian context, much has changed with China’s rapid manufacturing and tourism development. Together with other economic factors, this has led to a parallel rise in passenger and freight traffic. Physical infrastructure, such as the airport, the new cargo facility and excellent road and rail connections, is clearly an important enabler for capturing growing opportunities in air transportation but there are other elements that will likely drive the next wave of competitive advantage.

The overall passenger experience has changed markedly since the Internet became pervasive around the turn of the century. People started to switch from booking their travel packages through agents to direct flight bookings. This gave more control to the consumer but required more research on all aspects of the trip, such as ground transportation, flights, connections, accommodation and sightseeing options.

It is likely that the emergence of new technology that supports a greater understanding of each passenger needs will play a role in delivering a competitive advantage to air transportation companies in the future. This technology includes sentiment analysis and ‘all encompassing’ customer relationship management systems that enable not only existing service providers to gain a competitive

Can Hong Kong maintain its competitive advantage in air transportation?

DEREK MAGGS

Technology is key

OPINION

BY DereK [email protected]

advantage but also attract new and agile entrants into this space.

While knowing more about each traveller is a major step forward, the real value comes when it is linked to automated processes and decisions that can run in real time. The emergence of true, in-memory technology has already started to drive both new business processes in this area and new business models.

For example, imagine a situation where enough of the passengers’ needs and requirements are known by various stakeholders, such as cabin crew or staff at the check-in counter, to give them a personalized service experience. This is a far cry from the simplistic situation that we find today, where silos of inadequate, and often out-of-date information often fail to meet passengers’ growing expectations.

A similar scenario occurs in the freight transportation arena, where understanding client needs at each stage of the supply chain is tough and often a manual and error-prone process. Technology exists today that can help airlines, airports, freight forwarders and tour operators overcome these challenges.

Who will be the early adopters of these systems to seek the promised advantage? The obvious candidates are the airlines and airports as well as the freight forwarders and tour operators. The adoption of technology and software that helps airlines in Hong Kong and the HKIA to run even better, and to further improve the passenger experience, is key to helping Hong Kong maintain its competitive advantage in air transportation.

“In the last 10 years, Hong Kongpassenger traffic has more than doubled from 27.4m to 56.5m.”

OPINION


Having negotiated the usually illustrious year of the dragon with some difficulty, the Hong Kong SAR must be looking

forward to the more uncertain year of the snake with some trepidation. Present indications are, however, that the local economy will experience steady, if unspectacular, expansion in calendar 2013 with quarterly real growth in real gross domestic product picking up through the year and finishing at its fastest pace for the year.

A similar, if less consistent, pattern will be evident in individual components of GDP and consumer price inflation will be slightly higher than in 2012. As a result the growth for the year will be an extension of the (very) modest improvement seen as the 2012 year progressed.

2013 GDPFinal GDP figures for 2012 will not be availableuntil the Government’s 2013-14 budget is delivered in the Legislate Council (Legco), but real growth for the final quarter of 2012 is expected to be at an annual rate of 1.6%.

Average real growth for the full 2012 year will also be 1.6% (the Government – usually conservative – estimated 1.2% annual growth in its third quarter report and updated outlook issued on November 16 last). The delayed first Policy Address by new Chief Executive Leung Chun-ying was followed by an address to the Joint Business Associations.

There is no underestimating the importance of these two addresses (especially the formal Policy Address to the Legco) this year. The Policy Address provided the first detailed policy outline of the new Chief Executive and his administration.

Leung’s own bid for greater personal and policy support will be followed closely by the Administration’s 2013-14 budget delivered by the Financial Secretary, John Tsang Chun-wah. His role will be to bolster Leung’s policy outline with concrete initiatives and a sound fiscal program suited to the immediate needs of the economy.

Towards the end of last year, international financial institutions and private sector forecasters spent much of their time moderating

Global issues to dominate; local issues to set tone for year

Ian PerkIn

Steady 2013 economy

“Average real growth for 2012 will also be 1.6%”

iAN PerKiNIndependent Economic [email protected]

expectations for the global economy based mainly on problems in the Eurozone, the US, Japan and even slower growth in Mainland China. Regionally, there was also the vexed problem of South China Sea tensions.

Some of these worries have eased in recent weeks with the US averting the so-called “fiscal cliff ”, the Eurozone crisis lifting slightly, Japan getting a new pro-expansion government under Shinzo Abe and China growth stabilising and “re-balancing” at solid (if lower) levels.

Global tradeGlobal trade prospects (vital to Hong Kong and the Mainland) still remain lacklustre. The World Trade Organisation reckons trade in goods could expand 5.6% this year, up from 3.7% in 2012 and 5% in 2011, but well down from the 13.8% rebound from recession in 2010.

The International Monetary Fund expects global output to grow 3.6% this year, up from 3.3% in 2012 and a little below the 3.8% recorded in 2011.

For its part, the World Bank sees the East Asia-Pacific region as a “bright spot” globally with predicted growth of 7.9%, up from 7.5% in 2012, but still down on 8.3% in 2011. It expects China growth of 8.4% compared with 7.9% in 2012.

Closer to home, the Asian Development Bank believes “developing Asia” is entering a “new era of moderate growth” with 6.7% expansion this year, up from 6.1% last year but down on the 7.2% recorded in 2010.

Hong Kong Economic Outcomes and Outlook 2011-2013 (per cent change)

Source: HK Government; author

gDp Component 2011 2012Q1Q2 Q3

2012Annual

(estimate)

2013(forecast)

private Consumption

8.2 6.4 3.1 2.8

government Consumption

2.2 2.5 3.5 3.7

investment 7.5 12.6 5.7 8.7 goods exports 3.4 -5.2 -0.2 4.0 goods imports 4.7 -2.1 0.9 4.3 services exports 6.7 2.7 2.9 0.1 servicesimports

3.5 3.7 1.6 0.9

nominal gDp 8.9 4.2 3.6 5.2 4.6 6.4Deflator 3.8 3.5 2.4 3.8 3.0 3.4Real gDp 4.9 0.7 1.2 1.3 1.6 3.0

ECONOMICS


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HKBusiness_Jan1.pdf 1 1/19/2013 5:25:33 PM


OPINION

Is self-motivation an innate quality or is it something that can

be learned and improved upon?- Chris Prior, Liverpool, England

If you aren’t good at motivating yourself, you probably won’t get very far in business – especially as an entrepreneur. When you’re starting up a company and for the first couple of years afterward, there are a lot of long nights and stressful days, and the workload is heavy. You have to be able to give the job everything you’ve got every day, or it will easily get the better of you.

The ability to tap into your determination and grit is not just an innate skill. You can teach yourself to get up every day and try to keep a new business going despite long odds, partly by structuring your life and job to make sure you are working toward your larger goals.

I learned a lot about this from my mother, who is a very energetic and strong-willed individual. As I wrote recently, I’m thankful for the life lessons she taught me, without which I would probably not be where I am today.

I always wanted to go out there and prove myself, but I was very shy when I was young, and it was clear that I would have to master this if I was going to succeed. My timidity could have easily held me back if she hadn’t helped me come out of my shell. She feels that shyness is very selfish, as it means you are only thinking of yourself, and so she was very insistent that I look adults in the eye

and shake their hands, and carry on conversations with guests at dinner and at parties – no excuses.

My mother also taught me to dive into situations even if I wasn’t completely sure about my own abilities, and then solve the problems that came up as I went along. When I was almost 12, she once sent me alone on a long bike-riding expedition to another town, knowing that I would be fine, but also that I’d have to find water and ask for directions along the way.

Before I left school at 16, I was already working on launching what became one of my first businesses, Student magazine. Then when my friends and I put ourselves in a position that forced the issue, by moving into a basement in West London that served as both our office and our living quarters, we really gave our magazine everything we had.

There were times when we struggled to pool together enough money to afford a proper meal – that in itself was a great motivator to follow through on calls to potential advertisers. In the larger picture, we were willing to live with such uncertainty because we wanted to give our generation a voice on issues that we felt strongly about, such as the Vietnam War; this shared goal meant a great deal to everyone involved.

It’s important to understand what your main motivation is so that you can focus your efforts on reaching those goals. Then structure your job – perhaps by delegating some work – so that you can spend

as much time as possible turning this energy to your company’s advantage.

These days, one of my goals is to keep challenging myself. I see life as one long university education, in place of the one I never had – every day I learn something new. And perhaps I didn’t miss out, since there’s only so much you can learn sitting in a lecture hall. I’ve found that I often learn a great deal from the people I meet, and some of them have inspired me.

Meeting Mick Jagger and Steve Jobs had a big impact on me. They accomplished so much in their respective fields that spending time with them made me think about what I might do in mine. Afterward, I was more motivated than ever to do the best possible job in my own business.

Above all, you should work on building a business you’re proud of. This has always been a motivator for me, from my Student magazine days, through to our latest startups today. I have never gone into any business purely to make money. If money is your only motive, then I believe you shouldn’t launch the business at all.

Once you know what your own motivations and aspirations are, talk to your employees and colleagues about theirs, if you haven’t already. Then structure their jobs in a way that allows them to tap into this energy, too. With you and your employees approaching your work with renewed energy and commitment, you’ll find that there’s little that you can’t accomplish together.

“ If you aren’t good at

motivating yourself, you

probably won’t get very far

in business – especially as an entrepreneur.”

Why self-motivation is crucial for entrepreneursRICHARD BRANSON


run into trouble and appear to be chronically under-per-forming.

Worrisome profitssharma notes that the ongoing business’ profits are tracking us$150m below ex-pectations for 2012, and this concerns analysts the most.

Reasons for this slip-page are fairly obvious, says sharma. Though Li & Fung managed to eke out 3% revenue growth in 1H12, it failed to accelerate to 9% in the second half. This revised guidance for flat revenue growth implied a revenue shortage of us$1.5bn and sharma reveals that if one applies the 5% EBIT margin that Li & Fung earned in 2H11 to this number, one gets to an operating profit shortfall of us$75m on account of this revenue shortfall.

“The remaining us$75m slippage($150m less $75mn)is on account of worse than expected gross margins in the LF usA business, in our view. LF usA has a revenue run-rate of around us$3.5bn and a 2 percentage points lower than expected gross margin could explain the entire remaining us$75m slippage,” sharma adds.

Nomura’s shori notes that as a part of Li & Fung’s three-year plan from 2011 to 2013, Dow Peter Famulak, having strengths in building new

businesses and the incumbent head of LF Europe, Beauty and DsG, will assume the role as the President of LF usA, taking over Richard Darling’s role beginning December 2012.

New president onboard Clearly, Dow has a lot of work to do in reviving the group’s profitability. And it appears that since his appointment in December 2012, Famulak has been facing the hurdles head on with Li & Fung’s acquisition of Lornamead which owns and manages a portfolio of traditional and heritage u.s., German and u.K. personal care brands.

But Lina Choi, a senior analyst at Moody’s views the acquisition negatively as the company is clearly struggling balancing growth objectives and new product manage-ment amidst unfavorable macro conditions. “While Moody’s expects no material impact on Li & Fung’s credit metrics from this transaction, we will monitor the compa-ny’s future acquisitions closely. Acquisitions inevitably involve execution and integration risks, and Li & Fung’s model of growth through acquisitions can be vulnerable to global economic down-cycles,” says Choi. Li & Fung is likely cross-ing its fingers that this acquisi-tion won’t do more bad than good a few years from now.

Global supply chain manager Li & Fung is in for a rocky 2013 if its 2012 profit warning is anything to go by. The black sheep is no other than the us arm of the com-

pany’s distribution business, which is blamed for the estimated 40% decline in Li & Fung’s 2012 profits. Management admitted that the ongoing restructuring of LF usA’s business, including the reduction in the number of brands distributed in the usA negatively impacted the company’s margin. Not to mention the group’s loss of about us$25m due to Hurricane sandy and the dock strike in Los Angeles.

Tanuj shori, an analyst at Nomura, says the lowering of core operating profit was mainly attributed to LF usA’s restructur-ing. The surprised incremental cost of over us$100m in LF usA during 2H12 was mainly composed of the termination of several brands which hold high contingent liability, selling at discounts, the impact of Hurricane sandy (us$20m-us$25m), and several others. “The discontinued brands would take a few hundred millions away from the top line sales of LF usA and cost around us$200 million as a total for restructuring, including around us$80 million for non-cash provisions,” adds shori.

It appears that the company made a wrong move in 2010 that proved to be more destructive than Hurricane sandy and is now taking its toll on the business profitability. Recall that Li & Fung embarked on a joint venture with star Branding called Music Entertainment sports Holdings or MEsH to launch licensed brands ‘inspired by music, entertainment and sports celebrities.’ Barclays analyst Vineet sharma reckons that a major-ity of LF usA’s restructuring pertains to brands in the MEsH joint venture and it seems that several brands in this business have

Li & fung’s alarming profit decline

COMPANY SNAPSHOT: LI & FUNG

Find out what’s to blame for the depressing 40% decline in the company’s profits.

Li & Fung premium/discount to peers

Li & Fung in the doldrums

Source: Bloomberg, Nomura research


GAME CHANGERS

New crowdsourcing platform launched

AnyIdea.hk bills itself as today’s biggest online crowdsourcing platform for design services in Hong Kong. The name AnyIdea conveys its core

value - ‘Any one, Any idea!’ It welcomes all people around the world to share his or her creativity regardless of profession. On the other hand, small- and medium-sized enterprises (SMEs) can now screen potential designers who are obliged to send finished artwork before joining a pitch.

As a common practice, SMEs have been keen on referrals when it comes to seeking help from design houses. The founder of AnyIdea.hk, Ivan Wong, shares with Hong Kong Business that he used to suffer headaches in evaluating referred designers for a new or renewed product or services to be launched. He claims that there had always been mismatches due to miscommunication and misunderstanding.

Humble beginnings turned to sucessInspired by other B2B business matching platforms, Ivan started to investigate the real causes of mismatching. A former I.T. professional, Ivan started his research on possible solutions to the deadlock. In 2006, AnyIdea.hk was launched on the Internet with a ‘crowdsourcing’ mechanism which lets clients post their requirements for a specific job, such as logo and packaging design,

and invites all willing designers to submit their finished artwork in order to join the pitch.

AnyIdea.hk not only minimizes the costs for SMEs and designers when looking for a good match-up, it also shortens the transaction period by putting all workflow transactions online, including communications, payments and artwork submission. Designers and their clients do not even need to meet and talk if clients have provided the requirements in detail. The business model has minimal risk and promising cash flows.

The best advantage of crowdsourcing is efficiency. Clients no longer need to take too much time and effort in assessing a number of designers that are suitable for a task. All the artworks are uploaded for quick evaluation. They just need to choose which one they like best and download their choice. It saves a lot of business time.

Despite its many advantages, crowdsourcing has been a controversial business model in the past few years. Many say that crowdsourcing puts the designers in a disadvantageous position. Crowdsourcing requires designers to finish their work for free in order to join a bid. As only one designer lands the deal, majority of the participants gain nothing for their work. This setup, therefore, only works for designs that are not labour-intensive, in which designers will be willing to spend less than an hour to finish an artwork that could end up pro-bono.

In response, Anyidea.hk takes care of their designers by introducing two solutions: First, by increasing the number of tasks versus the number of designers. This increases any designer’s chance to land a deal. Second, by paying in advance. Clients are required to deposit 100% of the contracted amount before posting their requirement online. It is non-refundable and hence, every bid winner is assured to get the prize.

past achievements and future plansAs of January 6, 2013, AnyIdea.hk has 1,700 SME clients and 5,700 designers in its membership roster. They also have few competitors in the market.

AnyIdea.hk’s growth over the last six years can be divided into three phases. The first phase was in 2006-2008, when the members grew to one third of the current volume. The second is in 2008, when membership surged to 2,000 in just six months despite the global financial crisis. During that time, many retrenched employees sought to start a business or looked for freelance job opportunities which padded AnyIdea.hk’s membership. The last phase was in 2009-2012, when the number of members have grown at a steady pace.

AnyIdea.hk plans to extend its design service from Hong Kong to the Greater China market. They have realized that the design quality from Hong Kong is very much appreciated within Greater China.

They seek to set up a website for Mainland China and Taiwan in the near future. The only challenge that they foresee is promotion. As Hongkong’s design reputation remains highly esteemed, AnyIdea.hk believes that going regional is the best move forward.

AnyIdea.hk taps into a revolutionary business model for cost-effective design transactions

Ivan Wong, founder of AnyIdea.hk


AbACUS

Wynn Cotai may only be ready by 2017Is Hong Kong’s gaming industry growing too dense?

Hong Kong’s gaming industry is feared to be too crowded by 2017, which is in no way an advantage for late entrants in the market. In fact one of the

more established operators, Wynn Macau, seems to be hurt already by the intensifying competition in Cotai as it reported a 12.1% drop in VIP turnover and 13.2% in slot handle in the third quarter of 2012, reveals Edward Fung, head of research at Maybank Kim Eng.

Fung expects Wynn Cotai to be completed in the first half of 2016, but Nomura analyst Charlene Liu says it may only be ready by 2017. Liu reveals that awaiting a construction permit, Wynn’s Cotai project has not made much progress, based on their company visit in December 2012. “With the rise in competition, competitors have narrowed the gap with Wynn in terms of product quality. We believe lack of capacity has deprived Wynn from benefiting from the overall market growth in 2H12,” warns Liu.

CITIC Telecom’s latest acquisition spreeCITIC Telecom is bound to transform from being a mere telecommunications service provider to an integrated telecoms operator should its latest acquisition push through. The company recently announced on HKEx that it will acquire a 79% stake in Companhia de Telecomunicacoes de Macau or CTM from Cable and Wireless and Portugal Telecom for HK$9bn. Not only will the acquisition make for a good opportunity to diversify, it will also raise CITIC Telecom’s annual profit by over 150%, predicts steven Liu, an analyst at standard Chartered. “With over 80% revenue coming from the telecoms business after the acquisition, CITIC Telecom will transform into an integrated telecoms operator, with its business spanning fixed-line and mobile services in Macau, telecoms hub in China, and VPN and data serving Hong Kong and Asian enterprise customers,” adds Liu.

DBs analyst Tsz Wang Tam reckons the HK$9b consideration is fair given that it involves CITIC Telecom’s stake to rise from 20% to 99%. “The valuation is similar to earlier market expectations of about HK$6bn for a 51% stake. But now the transaction size is bigger at HK$9bn after including PT’s 28%,” says Tam, adding that the company will fund the transaction with new bank loans and it will also consider refinancing part of such facilities at a later date through equity issuance or bond issuance.

Hong Kong banks face intense competitionLocal banks in Hong Kong are in for a bumpy ride this 2013 as foreign banks up their game by aggressively expanding in the region. The rising number of Chinese banks, in particular, is signalling an intense competition in Hong Kong’s banking industry. Fitch Ratings notes that Chinese banks significantly increased their presence in Hong Kong to about 15% of system-wide assets at end-1H12 from 9% at end-2009.

Wing Hang Bank, Dah sing Bank, and Chong Hing Bank are the most sensitive to competitive pressure in light of their weaker market position, customer base and regional connectivity, not to mention their combined market share fell to 2.4% at end-1H12 from 2.7% at end-2009, notes Fitch.

The ratings agency adds that the foreign bank-dominated market with significant cross-border exposures also renders the system-wide liquidity vulnerable to stress in other banking systems and economies. The system’s cross-border claims and liabilities, notes Fitch, accounted for 51.4% and 37.7%, respectively, of total assets/liabilities at end-9M12. Claims on China increased substantially to 13.8% at end-9M12 from 4.3% at end-2008 while claims on Europe declined.

“Foreign banks may view the small Hong Kong banks as takeover targets as they look to boost market presence via these banks’ established branch network. Chinese banks will continue to expand their Hong Kong operations and use them as an offshore banking platform to source us and Hong Kong dollar funding.”

But the larger banking groups - HsBC, Bank of China, and standard Chartered - are still well placed to defend their leading positions and dominate the Hong Kong market, thanks to broad retail deposit bases, strong brand recognition and wide branch coverage.

“However, rating upside is limited as competition continues to put pressure on profitability, in turn causing the banks to expand into higher-risk markets, including China via credit lending and minority stakes in Chinese financial institutions,” says Fitch.

CITIC Telecom’s transformation Local banks’ game face on

Wynn Cotai not making much progress

HONG KONG BUSINESS | MARCH 2013 23HONG KONG BUSINESS | OCTOBER 2012 23

HKB Nov2012+++.indd 23 10/11/12 11:45 AM


Stephen Birkett

mark Shipman

Benedict Tai

LEGAL bRIEFING

The Securities and Futures Commission or SFC published its eagerly anticipated consultation conclusions concerning the regulation of IPO

sponsors on 12 December 2012. Morrison & Foerster senior consultant Stephen Birkett notes that one of the most closely watched aspects of the SFC’s consultation paper was the proposal relating to civil and criminal prospectus liability for sponsors.

In the consultation conclusions, the SFC reiterated its view that the existing prospectus liability provisions in the Companies Ordinance (CO) already apply to sponsors, but acknowledged that there were diverging views and a lack of case law on the issue. Accordingly, the SFC, Birkett says, will recommend to the Hong Kong Government that the applicable provisions in the CO with respect to civil liability (Section 40) and criminal liability (Sections 40A and 342F) be clarified so that sponsor firms have civil and criminal liability for untrue statements in prospectuses. However, the SFC agreed with certain concerns raised by the sponsor community about the existing criminal liability provisions of the CO, under which the prosecution need only prove that a prospectus contains an untrue statement, and in response the defendant must establish that it had reasonable grounds to believe and did believe at the time of issue of the prospectus that the untrue statement was either true or immaterial. This concern is what SFC will attempt to address in the proposed amendments.

What does the CO currently say about prospectus liability?According to Mark Shipman, partner at Clifford Chance, section 40 of the CO provides that every director, promoter and every person who has authorised the issue of a prospectus is liable to pay compensation to all persons who subscribe for any shares on the faith of the prospectus for any loss or damage they may have sustained by reason of any untrue statement included in the prospectus. Section 40A of the CO, he adds, provides that if a prospectus includes any untrue statement, any person who has authorised the issue of such prospectus is liable to imprisonment (3 years at maximum) and a fine (HK$700,000 at maximum) unless he proves either that the statement was immaterial or that he had reasonable grounds to believe and did up to the time of the issue of the prospectus believe that the statement was true.

Finally, Shipman notes that section 342F of the CO imposes similar criminal liability on any person who has authorised the issue of a prospectus relating to the offering of shares in or debentures of a non-Hong Kong

HK pushes for new regime on obligations of sponsors

company which included any untrue statements.

How will these rules change under the proposed amendments?According to Benedict Tai, partner at Jones Day, the SFC recommended that the current statutory liability provisions be amended so that a person who has authorized the issue of a prospectus includes a sponsor. Shipman notes that it will amend sections 40A and 342F in line with comparable provisions in the Securities and Futures Ordinance to shift the burden

of proof onto the prosecution to prove in Court that a person authorising the issue of the prospectus knew that, or was reckless as to whether, a statement in the prospectus identified by the prosecution was untrue; and the untrue statement was materially adverse from an investor’s perspective.

Tai clarifies that under section 40 of the CO, a defense against liability is provided if the person had reasonable grounds to believe that the statement was true. If a sponsor has conducted reasonable due diligence, Tai notes that it is difficult to see how it could be found liable under section 40.

According to Tai, a sponsor may have criminal liability together with an issuer and other persons if there is evidence that each of them knowingly or recklessly participated in issuing a prospectus containing false or misleading information. It is not, however, intended that a due diligence failure will of itself involve criminal liability under the Companies Ordinance, he says.

Tai adds that the SFC clarifies that the criminal liability provisions under section 40A will apply directly only to a sponsor firm. Nevertheless, in situations where there is evidence that an individual (not limited to directors or senior management) in the sponsor firm has colluded in the making of an untrue statement in a prospectus, or where a director or other officer has participated in or consented to the commission of the offense, Tai notes that it is possible for these individuals to be prosecuted for aiding and abetting, consenting, or conniving to commit an offense under general law.

Extending prospectus liability to sponsors in the spotlight

“CO imposes similar criminal liability on any person who has authorised the issue of a prospectus relating to the offering of shares in or debentures of a nonHong Kong company”

HONG KONG BUSINESS | JANUARY 2013 23

HKB Jan2013.indd 23 2/13/2013 12:49:59 PM

HONG KONG BUSINESS | MARCH 2013 25HONG KONG BUSINESS | JANUARY 2013 23

HKB Jan2013.indd 23 2/13/2013 12:49:59 PM


HK iPO market poised for a Mainland-led comebackHong Kong’s IPO market is likely to recover this year with Mainland firms leading the listing pack.

After heavily subdued activity in 2012 that brought total funds raised

and number of IPO deals to record lows, Hong Kong’s IPO market is expected to regain the interest of businesses who were temporarily scared off by soft pricing and global economic jitters, analysts say.

Mainland firms, particularly small and medium-sized enterprises looking to solidify their foothold locally or to expand internationally, will form the core group of IPOs in 2013, according to analysts. These firms will be more emboldened to go public due to a predicted easing in market

uncertainties, additional stimulus to the Chinese economy, and accommodative IPO policies by the new Chinese leadership.

IPO market forecastsAs market conditions somewhat improve by the second half of 2013, PwC forecasts the total funds raised through IPOs in Hong Kong this year to be in the range of HK$120-$150 billion, up from HK$89.8 billion in 2012. In a separate outlook, KPMG predicts funds raised for this year to reach HK$125 billion.

“We expect that while market volatility will persist, there exists a backlog of deals to be launched as

market sentiment improves,” says Paul Lau, partner at KPMG China. “We expect the market to pick up from mid-2013 when economic uncertainties ease.”

“There is no doubt some companies qualified for listing are waiting for a better market sentiment. Once pricing has improved, these companies will immediately re-commence their listing plans. This is evidenced by the increase in new listings at the end of 2012. The IPO market is tipped to build momentum,” says Benson Wong, Hong Kong assurance partner at PwC.

PwC expects 80 new IPOs to list in Hong Kong this year, including

PwC forecasts the totalfunds raised through IPOs inHong Kong this year to be in the range of HK$120-$150 billion

ANALYSIS: IPO MARKET


65 on the Main Board and 15 on the GEM Board. KPMG pegs the number of expected deals at roughly 85 on the back of a revival of China’s economy and as IPO sentiment improves.

“Chinese enterprises looking for expansion and fund raising will once again try to tap the IPO market as sentiment improves. With most of the large Chinese state-owned enterprises having gone public in the last decade, private-sector enterprises will be a key driver for the Hong Kong IPO market,” says Roy Leung, p artner at KPMG China.

2012 proved disappointingThe Hong Kong IPO market is coming off from a very disappointing 2012 performance. Funds raised fell to a four-year low to HK$89.8 billion or down over 65% from HK$272.32 billion in 2011. The number of newly listed companies totaled 64 in 2012, a decline of nearly 40% from the previous year.

Hong Kong took small comfort in the fact that its IPO market was not the only one that performed poorly in 2012. PwC data showed that the amount of capital raised by all IPO markets was down 30% to $118.5 billion, while the number of IPO deals declined 37% to 768 IPOs.

“Corporate performance has been affected by the continuous uncertainties of the global economy. Investor interest for IPOs slightly cooled. This made the performance of the IPO market in 2012 less encouraging than that in previous years,” says PwC’s Wong.

“The weakening economy, unstable equity market conditions and poor performances on some IPO transactions undoubtedly impacted investors’ confidence,” adds Ringo Choi, Asia-Pacific IPO Leader at Ernst & Young.

Deloitte China further noted that the top five IPOs of 2012 only managed to raise proceeds of HK$57.45 billion, or just 40% of the $143.22 billion proceeds raised by the top five IPOs of 2011.

Supportive policiesAnalysts agree that the IPO market

will perform better in 2013 thanks in part to incoming economic policies, which are seen to boost the confidence of both issuers and investors.

“Looking ahead to 2013, we expect a better outlook, as many new supportive policies – which were on hold amid leadership change – will start to take effect,” says Ernst & Young’s Choi, referring to the quinquennial leadership change which occurred last November and saw Xi Jinping voted in as the next leader of China.

Xi Jinping and the rest of the new seven-man Politburo Standing Committee are expected to focus on revitalizing economic growth.

“The 18th National Congress of the Communist Party of China has clearly stated that China will accelerate its economic development. And the world is bullish on the development of China’s economy in the medium and long term,” says Edmond Chan, Capital Market Services Group Partner at PwC.

“Revival of China’s economy is key in order to help stabilise the IPO market and create a more attractive environment for issuers to re-launch IPOs in Hong Kong,” says KPMG China’s Leung.

Mainland enterprises go globalDeloitte China believes Hong

Kong’s IPO market will be bolstered by this ‘go global’ strategy of Mainland companies in 2013.

Mainland private enterprises will be encouraged to grow their businesses under the 12th Five-Year Plan for Financial Sector Development and Reform overseen by the new Chinese regime. Doing so will require large financing needs through capital markets. This will then push the firms to consider raising the needed funds via IPOs.

Companies in the infrastructure-related and retail and consumer sectors will also raise funds to seize opportunities brought by policies favourable to new urbanization and domestic demand.

Previously, many smaller-sized Mainland enterprises were unable to qualify for an IPO. But newly lenient H-share listing requirements will make it easier for small and medium-sized Mainland enterprises to list in Hong Kong and fund their expansion plans, says Mr. Edward Au, Co-Leader of National Public Offering Group at Deloitte China.

“In 2013, Hong Kong has a strong potential to become one of the top three global IPO venues again,” says Au.

“We think the recent relaxation of the H-share listing requirements for Mainland companies would spur some of the A-share IPO applicants

Amount of capital raised by all IPOmarkets was down 30% to $118.5billion, while the number of IPO deals declined 37% to 768 IPOs.


Number of IpO by industry

Source: HKEx, Deloitte Estimate; Assume the successful listings of China Machinery Engineering Corporation on 21 December 2012 and Wilson Engineering Services Co., Ltd., and China Silver Group Ltd. on 28 December 2012, with the latter two priced at the mid-point of the indicative range

Manufacturing sectors topped the ranking


The Hong Kong IPO market isan ideal destination for enterprisesto raise funds and global investorsto seek opportunities.


to switch to list on the Main Board of Hong Kong. At the same time, as the valuations of A shares and H shares are narrowing down due to the A-share market reform, we believe those, which can meet the listing requirements of the Hong Kong Stock Exchange, would be some of the 400 companies that are queuing up for listing on the Shenzhen SME Board and Shanghai Main Board.”

“More foreign enterprises will be encouraged to list in Hong Kong under the anticipated changes of secondary listing requirements,” agrees PwC’s Chan.

“The Hong Kong IPO market is an ideal destination for enterprises to raise funds and global investors to seek opportunities as the market is highly transparent, supported by a good track record, and is well regulated.”

Another key IPO trend will be increased listings among homegrown bands. Deloitte says that family businesses will be looking to tap the IPO market to expand and gain increased brand recognition.

Focus sectorsAnalysts differed slightly when naming which sectors will see the most IPO market activity, but common picks include energy

& mining, infrastructure and property, finance and banking, and retail.

“International retail and consumer product brand names and energy & mining-related companies are still keen to list in Hong Kong,” says PwC’s Chan. “We expect to see a more active IPO market in the second half of 2013 and major applicants will likely come from financial institutions, energy & mining-related companies and retail & consumer products.”

Ernst & Young’s Choi concurs that the latter half of 2013 will see the bulk of IPO deals. “With expected reduced stock market volatility, supportive new economic policies, and better and brighter economic prospects, IPO activities in the latter half of 2013 is set to improve – suggesting that it could be the right time for companies currently in the pipeline to list.”

Deloitte says the financial services, property, and retail & consumer sectors will be the foci for IPOs under the “new urbanization” development trend until 2015.

Banks and securities firms will use the raised funds to meet capital and liquidity ratios and aggressively expand their products

and reach wider international coverage. Meanwhile, the property sector will more confidently fund their projects as the overall property market sentiment gets stabilized and macro-economic controls constricting the sector see a bottoming out. Lastly, retail & consumer businesses will attempt to tap into the Mainland market, now the second largest economy and luxury goods consumption market.

“While 2012 IPO activities in Hong Kong for international companies have been severely hindered by market volatility, Hong Kong is still viewed as a nexus for Chinese companies looking for expansion abroad and overseas companies looking to solidify a China story for their businesses,” notes KPMG’s Lau.

Four risksDeloitte warns though that despite the upbeat outlook on the Hong Kong IPO market, four major risks could stymie its rebound, including heightened Eurozone worries if beleaguered countries continue to worsen, the specter of the U.S. fiscal cliff, uncertainty on the pace of China’s recovery, and keen competition from other bourses in the region.

Overview of the two IpO markets-2012Dwindling appetite dried market in all dimensions and top five IPOs shrunk

Source: HKEx, Deloitte Estimate; Assume the successful listings of China Machinery Engineering Corporation on 21 December 2012 and Wilson Engineering Services Co., Ltd., and China Silver Group Ltd. on 28 December 2012, with the latter two priced at the mid-point of the indicative range


OPINIONOPINION

The plight of local bank managersTIm hamleTT

Most of the world’s banks have survived the financial turbulence of the last few years. Surveying the wreckage, though, we cannot say the same thing for bankers’

reputations.In the small towns where I spent much of my youth, the bank

manager was a part of the local leadership, a figure who attracted not only respect, but trust. He would be considered as a peer of the local doctor, vicar or solicitor, a respectable pillar of the community. Your bank manager was a professional, in the sense that he had an ethical obligation to his clients, as well as to his employer. You could ask his advice and he would not see this as an opportunity to sell you something.

Investment or merchant banking on the other hand had a low profile, or indeed no profile at all. It barely surfaced on the business pages. The heads of large High Street banks were the sort of people who finished up with knighthoods without making large donations to political parties. Their work was essential, mundane and praiseworthy in a solid, boring sort of way.

Times have changedWell times have, as they say, changed. Bankers are now regarded as a sort of financial drunk driver epidemic: people with no sense of the danger their rashness can inflict on other people, or themselves. At best, they are regarded as the sort of weekend sailor who goes out without checking his engine because the Coast Guard will rescue him if necessary. At worst they are regarded as a sort of Savile Row suited extortion racket.

Bankers are not the only people to suffer a catastrophic drop in public reputation. Journalists, I regret to say, have seen a similar swoop since the heroics of Watergate and are now regarded by many as roughly on a par with used car salesmen. Catholic priests are suspected of unmentionable sex crimes and politicians are widely suspected of dishonesty (thank you, Tony) and corruption.

No doubt many of these aspersions are unfair - the result of the public’s willingness to generalise from memorable particulars to whole groups who may or may not follow the stereotype. I expect there are many local bank managers whose word is still their bond and from whom you would get disinterested advice if you asked for it. Similarly, there are no doubt many trustworthy journalists, numerous chaste priests and even a few honest politicians.

No room for immunityAlthough the business community has generally regarded this as “nothing to do with us” there is no room for immunity in the new critical environment. If the Emperor has, or appears to have no clothes, then someone will say so. This is a particular problem for business. Business people may suppose that money is just a way of keeping score, but when money is the way of keeping score then most outsiders will expect to see it raised to the status of a primary, if not the only, objective.

This is actually a particular problem for bankers. We

tiM HAMLettFormer Editor of Sunday Standard and Associate Professor of Journalism

may suppose, or be persuaded, that Rupert Murdoch has feelings for newspapers which extend further than their balance sheets. We may believe that Steve Jobs took a pleasure in his creations which was not only, or even mainly, due to their profitable possibilities. People go into airlines because they like flying, shipping because they like ships, films because they like films, the widget business because they are interested in widgets. But why do they go in for banking? Presumably because they like money.

Profit sacrifice?People in other areas can point to examples of behaviour in which business logic or the prospects of profit were clearly sacrificed to some idea of the public good. It is also difficult to think of examples involving bankers. Still, no doubt that the bankers can console themselves with their ample salaries. People in more precarious businesses should perhaps be more concerned. After all it is a fact of life that the business environment is much influenced by the government and the government is much influenced by public opinion.

Hostile public opinionPublic opinion is not too keen on business generally at the moment. This is unfair on people who are not part of the business establishment. Property developers are held to be a bunch of greedy market manipulators, whose construction sites are death traps on which are produced flats which are either minute or over-priced or both. Manufacturers are no longer regarded as people who create wealth and employment locally, but as cringing sycophants who have done well by moving all their operations over the border. It appears that big business expresses behind the scenes views which it dare not voice in public, and officials then follow the instructions given, under which their main function is to sell the protection of private interests to a long-suffering population. This impression is reinforced by the growing ranks of civil servants - the Information Services Department, fleets of politically appointed “assistants”, the Central Policy Unit - devoted to “explaining government policy”, or as we used to say in the old days, propaganda.

Fact of lifeNo doubt, much of this is unjustified. Still it is a fact of life, and it behoves those of us who do not like it to try to change it, or at least to try to make it no worse. To start

with, we could refrain from greeting every proposal to provide some new right to local workers with the

bleat that it will harm Hong Kong’s competitiveness. Predictions of this kind were tried when the government threatened to introduce the minimum wage. The wage was introduced. The sky did not fall. People will not buy the

same lemon twice.

Bankers lose their reputations


Hong Kong Business brings you 20 of the hottest start-ups in the city that started operating from 2008. Find out how the founders managed to make their business flourish with initial

funding that ranges from as little as US$4,000 to as much as US$11 million. We have gathered some exclusive information on who the founders are, how much funding each startup received and what products they offer. Read on and see how each startup can best serve you this year.

1. APPGreeN Founders: Kenneth Lee, Carter Lam, Eric TangFunding: HK$1.26m, research funding from Hong Kong Innovation and Technology Commission (HKITC), Four DirectionsStart of operation: 6 October 2011AppGreen is a self-help portal for corporates to create their own mobile catalog application. Founders say that AppGreen aims to have its own unique mobile catalog application with focus on product display. “We believe texts are a bore to people, and that’s never the case for graphics. Yet, most of existing mobile catalogs are more focused on complicated functionalities that they rarely give attention to the graphic presentation of the products which could easily help draw customers’ attention,” the founders say. Currently, AppGreen has over 800 catalogs generated from its platform and customers coming from over 140 countries around the world.

2. DreAM CHeeKyFounders: Julie & Michael PetrisFunding: HK$33,000, KickstarterStart of Operation: October 2008Dream Cheeky is an Apple approved developer and design

“Dream Cheeky was the inventor of the USB Missile launcher or so-called office warfare.”

20 Startups to watch in 2013Check out how they managed with initial funding that ranges from as little as uS$4,000 to as much as uS$11 million.

HONG KONG’S HOTTEST START-UPS

house for ‘quirky’ gadgets. It aims to constantly introduce highly inventive and contemporary products that creatively utilize the interaction between software and firmware driven devices that have high play value and depth. Dream Cheeky was the inventor of the USB Missile launcher or so-called office warfare. It’s latest creation is the iStrike Shuttle, a flying drone that is directly controlled by iDevice via Bluetooth. “What makes this unique and unlike any other flying object out there, is that you can make the iStrike Shuttle drop ping pong balls. We have managed to get our first Utility Patent filed (patent pending) for the release mechanism used in this item,” say the founders.

3. AFTerSHIPFounders: Teddy Chan, Andrew Chan, Dante TsangFunding: HK$100,000 micro funding from Cyberport Micro Fund Program, and undisclosed amount from Australian company “Business Switch”.Start of operation: March 2012Aftership helps online merchant stores to auto-track packages in one place from dispatch until delivery and notify customers with updates through email, SMS and social media. The service supports USPS, UPS, Fedex, DHL and 40 other major couriers worldwide. Aftership also provides online stores a reporting tool detailing any problems incurred during shipping and delivery.

4. eNTerPrOIDFounders: Andrew Toy, Alexander Trewby, David ZhuFunding: HK$13M; Comcast Ventures, Google Ventures, and Qualcomm VenturesStart of Operation: 2011Enterproid helps organizations and individuals get the most out of mobile technology and corporate BYOD policies. The company’s flagship Divide platform combines cloud-based management with advanced on-device technology that according to founders ensures enterprise security and control without compromising personal freedom and privacy.


HONG KONG’S HOTTEST START-UPS 5. GOIDD MArKeTING

Founder: John T. WongFunding: less than HK$100K; Softlayer Incubation Program in US/Asia.Start of operation : August 2012GOIDD is a mobile VOIP telecommunication services company that claims of providing a ‘very affordable’ and ‘convenient’ for consumers and small businesses to make international calls and SMS on the go. This service is offered worldwide, but with an Asia focus, through an easy- to-use iOS and Android app. GoIDD’s unique value proposition and competitive service advantages include: IDD rates up to 95% less than major mobile carriers and 60% less than Skype; Ability to call any mobile phone or landline; Capability to call without the need for WiFi/3G & 4G data through Call-Through; Virtual Numbers from 60+ countries call-forwarded to any phone/fax; and 24/7 real-time web-based self-managed customer account dashboard fax for selected territories It is offered through pricing subscription plans starting from just US$2 per month, or can also be purchased as an easy pay-as-you-go plan.

6. FeTCFounders: Di Wu, Lu QinFunding: HK$3.5m; angel investors, Innovation and Technology Commission, The Innovation and Technology Fund(ITF) and Cyberport Hong KongStart of operation: 2012FETC provides financial engineering services to individual investors. It specializes in developing financial models, trading strategies, algorithmic trading solutions, and other trading technologies. Its very first product, ProVesor, is an online stock investment management tool. It combines risk management mechanism and investment strategies and provides retail investors, who manage their own stock investment, a one-stop solution to achieve reliable and consistent trading performance, according to founders.

7. PerPeTuFounder: Ryanne Lai and Andrea LivottoFunding: HK$530K from Cyberport’s Incubation Programme; $100,000 from Cyberport’s Creative Micro Fund SchemeStart of operation: 2012Perpertu bills itself as ‘a final will for online

“Kites is dedicated to creating products that redefine how users discover stores and merchants market to customers. On the consumer side, itis building a “personalized Yellow Pages in your pocket.”accounts’. It provides management tool for people’s collection of digital contents. Perpetu lets users decide how they want to be remembered, and gives them control over their online content. For example, it can help them hand over their photo albums to their friends and family. It can delete their emails, or forward them to someone who can handle them for them, including future incoming emails. It can let them leave final messages to their loved ones, which will only be emailed or posted to social networks in case they pass away.

8. KITeS AWAyFounder: Alan Tsui, Edwin ShaoFunding: ~HK$0.5m seed; ~HK$1m angel fund from Samuel Chan, public educator at AB Hunter;~HK$0.5m Cyberport Incubator.Start of operation: Dec 2012Kites is dedicated to creating products that redefine how users discover stores and merchants market to customers. On the consumer side, it is building a “personalized Yellow Pages in your pocket.” Founders say that Kites is a mobile-first experience where consumers can expect all searches, reviews, recommendations, promotions, and multimedia to be staged and accessed through a smart and location-aware gateway.

9. DANDelION reSeArCHFounder: Kaya Kaplancali, Bora Samman, Sandeep ChauhanFunding: US$350,000: Sino Global Investments, Modern Concept Development, AGIO Holdings, private investorsStart of operation: Feb 2010Dandelion Research is an HK-based manufacturer of plant-based bioplastics but with Europe as its major niche market. It signed an agreement with a major European mobile device accessory company based in Sweden to market and distribute “bioserie” branded mobile device accessories. The distributor has presence in more than 3,000 sales points all over Europe. It was only Q1 of last year when it started expanding its Asian distribution. Founders say that the firm aims to produce bioplastic consumer goods that are


“Flipter is billed as the standard for opinion polls in the big data era.”

HONG KONG’S HOTTEST START-UPSas durable, functional, stylish, and almost as inexpensive to produce as goods made of conventional plastics through bioplastic injection molding technology.

10. reFer.MeFounder: David Beatty and Andrew PrimroseFunding: <US$500K; BMSStart of Operation: March 2012Refer.me provides crowdsourced recruitment through referrals. Companies can advertise a vacancy along with the cash bounty they will pay to the person who successfully refers them a candidate they decide to employ. It is free for companies to post their vacancies so the pricing is ‘no hire, no fee’, and the company can set their own bounty. Larger bounties obviously attract more attention and a greater number of referrals. Individual users can refer candidates from their network and the first person to refer a successful candidate receives the bounty. Refer.me operates a proprietary algorithm called ReferRank to review people who have been referred, screen them for relevancy and then shortlist the best candidates for that role.

11.FlIPTerFounder: Salvador de la BarreraFunding: HK$100,000 from HK Cyberport Creative Microfund; undisclosed amount from Startup Chile, private investorsStart of operation: February 2010Flipter is billed as the standard for opinion polls in the big data era. Flipter’s suite of tools facilitate the distribution of questions and the collection, storage, organization, analysis and re-distribution of social-opinion based data through the use of the most innovative survey suite of tools. “Flipter has developed a powerful, intuitive, cross channel and social engagement platform. Our technology enables individuals and organizations to monitor and analyze valuable data and insights including the demographic profile, interests, feedback and opinions of the community, their fans, followers, customers, employees, and segmented targeted groups,” says the founder.

12. eCerT.MeFounder: Ole Filippov Funding: Less than HK$100,000; private investorsStart of operation: December 2010Ecert.me takes certificates and diplomas and puts them on-line in electronic form so that they are easy to store, share, print and verify digitally. The founder says that the fact that electronic certificates are easy to share, creates a marketing opportunity for training companies, colleges and universities. “35% of Ecert.me users share their certificates on social networks. Every certificate published with Ecert.me allows the institution to reach out to an average of 21 prospective customers from the student’s social circles.”

13. MPAyMeFounder: Alessandro GadottiFunding: US$11million; private investors from Japan and SingaporeStart of Operation: 2010MPayMe aims at simplifying the fragmented and cumbersome mobile payment experience nowadays. The founder says that MPayMe has developed a multi-factor, secure, and comprehensive payment solution with a single mobile app - Znap, bundled with customizable software and applications to manage payment across various physical, online, and billing channels. Znap is based on an innovative QR code technology with sophisticated algorithms and security standards. Znap is a cross-platform app for everyone to pay with their mobile phone anytime anywhere. With Znap, users simply need to scan the payment QR code and enter a self-defined PIN to complete the transaction safely and securely. MPayMe has a global presence with headquarters and R&D Centre based in Hong Kong, as well as offices in New York and London.

14. ONe lANDSCAPe DeSIGN Founder: Viraj Chatterjee Funding: HK$1.5 million; Arun Excello Urban Infrastructure (India) Start of operation: April 2011ONE is a boutique design studio that specialises in high-end contemporary landscape architecture, urban design, public art and environmental planning in China, India, South East Asia and the Middle East. The founder says that their architectural designs are rooted to context and responds to local art and culture. “ONE’s market focus remains in Asia. Inspired by historic trade routes of Indian Ocean, ONE’s portfolio stretches from UAE to China through India and Vietnam.

15. ASIA SuuPS Founder: Anthony Lam, Stephen LeungFunding: HK$ 200,000 seed fund ; HK$ 330,000, Cyberport Incubation and Youth Business Hong Kong


HONG KONG’S HOTTEST START-UPS

“PhoneJoy Solutions is working on a unique game controller that turns mobile phones into portable game consoles.”

Start of operation: 2012Asia Suups is a software development company with a digital marketing focus. Its core product, ReservBle, is an iPad based reservation system tailored for restaurants. ReservBle system includes three elements, such as the iPad apps for restaurants, administration website for super-admin and a website for users to search and make reservations. “We understand that the value that restaurants look for in a reservation management system is not merely managing tables and making the reservation process easy for diners. Instead, restaurants are concerned on how the reservation system is able to bring more diners to the restaurants,” the founders say.

16. 8 SeCurITIeSFounders: Mathias Helleu and Mikaal Abdulla Funding: US$10 M; Velocity Capital B.V. and Leitmotif Private EquityStart of operation: April 20128 Securities bills itself as Asia’s first socially networked trading portal. According to founders Mathias Helleu and Mikaal Abdulla, the company was born from a mission to empower individual investors and reinvent the way people trade. Through a personalized trading portal, the founders are proud to give their customers global trading, market data and research and a private social network on a single dashboard.

17. PHONeJOy SOluTIONSFounders: Martin Kessler, Alexander MoroFunding: uS$75,000 Kickstarter, HK$7.5M seed fund, private investorsStart of Operation: 2013PhoneJoy Solutions is currently working on a unique game controller dubbed the PhoneJoy PLAY that turns mobile phones into portable game consoles. The PLAY does that with a patented sliding mechanism that allows attachment of any smartphone (Android, iOS & Blackberry 10) right into the controller’s centre. “Thanks to the physical buttons and analog nubs console, games can be played in a much easier and comfortable way than by using the phone’s touch screen,” say the founders. The PLAY was announced in January 2013 in Las Vegas and is launching soon in major retail and online stores in America and Europe, as well as Asia.

18. ONe eArTH DeSIGNSFounders: Scot Frank, Catlin PowersFunding: $1M from winning environmental prizes and innovation awardsStart of operation: 2012One Earth Designs is an alternative power company providing household energy self-sufficiency - from electricity to heating to water purification. It works alongside rural communities to create products that harness sunlight to provide solar cooking, heating, electricity

generation, and water purification through a process of community-based innovation. Founders boast that SolSource S1, released in October 2012, is >90% energy efficient. “Our pipeline products (under field testing) will turn our stoves into household power plants generating clean energy to power lights, cellphones, and televisions; heat homes; warm bathwater; and purify water for drinking.”

19. TAlKBOx VOICe MeSSeNGerFounders: Sunny Kok, Danny Kok, Jacqueline ChongFunding: US$2m; Shanda CapitalStart of Operation: January 2011TalkBox Voice Messenger bills itself as the world’s first voice messenger with its patent-pending signature “hold to talk” button. It is a smartphone application that enables users of iPhone, Android, Windows Phone and Blackberry to easily communicate via push-to-talk instant voice messages as well as sharing geo-location, pictures and group chat with one another. A user’s voice is carefully curated and delivered by TalkBox voice bubbles of maximum 1 minute in length. “TalkBox makes asynchronous voice chats possible,” say the founders. TalkBox has grown to a global user base of 13 million.

20. SponfedFounders: Kevon Cheung, Herelle Cheung and Kenneth LeungFunding: HK$300,000; BootsrappedStart of Operation: 2012Sponfed bills itself as the first and foremost online marketplace in Hong Kong that connects event organizers with sponsors. All event organizers need to do is to sign up on Sponfed and post their events’ details on the platform. Sponfed will then send alerts to the associated brands in their growing database. Brands can also search the site for events to sponsor with the right target audience.


HONG KONG’S 25 LARGEST HOTELS

Hong Kong’s largest hotels upbeat for 2013Hoteliers see sustained FIT and MICE growth.

L’hotel Nina et Convention Centre has topped Hong Kong Business’ inaugural

largest hotels in Hong Kong for 2013 based on the number of rooms.

It boasts of 1,608 deluxe rooms with an average size of 36sqm.

Next in rank is Regal Airport Hotel with 1,171 rooms. General manager John Alexander Girard said that for the first time, guests in 2012 were able to enjoy the convenience of airline check-in process through “Self check-in” kiosks located at the hotel concierge, available for nine airlines.

Girard said that the 15-year old hotel has completed the refurbishment of all its executive club rooms and Grand Ballroom in the past year.

Regal Riverside Hotel is the third largest in the city with 1,138 rooms, yet general manager Peter Chiu boasts that it has achieved a room occupancy in mid-90%, outperforming the citywide-average 88.3%.

According to Chiu, Regal Riverside carried out facility upgrading projects for guest floors - guestroom renovation, carpet replacement and interior refurbishment in 2012. “For 2013, our hotel will go through interior renovation for three more guest floors. The hotel will continue offering more flexible room type choices, such as family and quadruple rooms.”

A major challenge for the hotel, Chiu said, is the fact that Shatin is located out of the city. The management thus, he said, welcomes opening of new hotel properties in Shatin which will help in changing the area’s landscape as far as hotel accommodation selection is concerned.

Panda Hotel, formerly known as Kowloon Panda Hotel came in fourth with 1,026 rooms and followed by the Excelsior Spa with 886.

Harbour Grand Hong Kong, billed as the only 5-star hotel in Hong Kong with all 828 guest

rooms overlooking the spectacular Victoria Harbour, came in sixth.

According to general manager Benedict Chow, 2012 was a difficult year for hoteliers with the Euro crisis dampening travelling budgets of corporations in Europe and US. “The length of stay and spending from individual business travelers have significantly reduced, and there are less MICE groups coming to Asia. Focus will be shifted from long-haul markets to short-haul ones which are more promising.”

Together, the 25 largest hotels have a total of 19,890 rooms or 796 rooms on the average.

OutlookRegal Airport’s Girard is positive of the hotel industry in 2013, thanks to expected pickup in FIT and MICE arrivals. “March, April, September to November is the trade fair season in Hong Kong /China, it has long been a traditional sourcing period, when suppliers and buyers from around the world descend on the HKCEC and AsiaWorld-Expo, along with delegates to conferences, meetings and incentives will definitely benefit the hotel business in Lantau. Should the economic situation outlook continues, the FIT guests pick up in the next six months and may impact the room rate.”

Regal Riverside’s Chiu also sees 2013 to be a strong year with in-bound traffic expected to increase. “The Kai Tak International Cruise Terminal scheduled to open its first berth this summer will surely benefit all the hotels in Hong Kong. However, slow economic recovery from United States, GDP slowdown in China, political tensions between China and negatively.”

Chiu cautions that that discussions over minimum wage revision and standard working hours guidelines would surely give rise to more challenge in Hong Kong hotel industry’s labor market.

Harbour Grand’s Chow is optimistic yet cautions. He notes that staffing will be another issue with the opening of several new hotels.

“The Kai Tak International CruiseTerminal sched-uled to open its firstberth this sum-mer will surely benefitall the hotels in Hong Kong.


HONG KONG’S 25 LARGEST HOTELS

Largest Hotels in Hong Kong

16

5

4

3

1

2

9

6

10

7

11

8

12

13

15

14

18

17

20

19

21

22

23

24

25

HOTEL NumBER OF ROOmS GENERAL mANAGER

L’HOTEL NINA ET cONVENTION cENTRE

REGAL AIRpORT HOTEL

REGAL RIVERSIdE HOTEL

pANdA HOTEL

THE ExcELSIOR HK

HARBOuR GRANd HONG KONG

RAmBLER OASIS HOTEL

HARBOuR pLAzA mETROpOLIS KOWLOON HK

THE pARK LANE HK

RAmBLER GARdEN HOTEL

SHERATON HK HOTELS ANd TOWER

THE KOWLOON HOTEL

HARBOuR pLAzA 8 dEGREES

ROyAL pLAzA HOTEL

KOWLOON SHANGRI-LA

THE ROyAL pAcIFIc HOTEL ANd TOWERS

HARBOuR pLAzA NORTH pOINT

LANGHAm pLAcE HOTEL mONGKOK

mARcO pOLO HK HOTEL

HK SKycITy mARRIOTT HOTEL

HARBOuR pLAzA RESORT cITy HK

HOLIdAy INN GOLdEN mILE

cITy GARdEN HOTEL

JW mARRIOTT HOTEL HK

dISNEy’S HOLLyWOOd HOTEL

1608

1171

1138

1026

886

828

822

819

809

800

782

737

702

693

688

673

669

665

665

658

617

614

613

602

600

GEORGE KuK

JOHN ALExANdER GIRARd

pETER cHIu

Judy TSANG

mIcHAEL zIEmER

BENEdIcT cHOW

ANTHONy LuI

ANdy cASTILLIJOS

TEd THEOBALd

ANTHONy LuI

cHARLES WOO

VIcTOR cHAN

cHRISTINA cHENG

pETER WONG

TImOTHy WRIGHT

KEVIN cHuc

VIRTINIA TIm

SHAuN cAmpBELL

mARK HAyWOOd

NIcHOLAS TSE

dIcKSON LEE

BRAdLEy KIRK

ANNIE JEA

mARc cONKLIN

cEcILIA HO

Data provided by CBRE from its latest survey as of January 2013.


Asia still unprepared for graying millionsWith the elderly Asian population set to explode, the region needs to play policy catch-up.

The number of elderly Asians is set to double or even triple by 2050 to close to a

billion 65 year olds. Unfortunately, Asian countries still lack policies and programs to support this fast-increasing cohort, said economists.

Asian economies have been booming in the past decades, a spectacular growth pace that has been partly driven by the region’s mostly young and healthy workers. Yet the demographic tides are turning – and maybe turning faster than governments and the private sector are prepared for.

Asia aging fastest in the world“Populations are aging in Asia far more rapidly than anywhere else in the world,” said Julia Wang, Economist at HSBC. Wang pointed

to data from the United Nations Population Division (UNPD) and HSBC which suggest a doubling or even tripling number of 65 year olds across Asia by 2050, barring a few exceptions such as Japan.

“In China for example, this ratio will rise from 9.9% to 30.8%, less than elsewhere, but still a significant increase, while in Korea, the over 65 ratio will jump from 13.8% currently to 40.2% in 2050. This implies that nearly 1 in 2 Koreans will be over the age of 65,” said Wang.

In this decade alone, Asia-ex Japan will see the number of 65 year olds rise almost 50%, growing at about double the rate of Japan, according to a separate forecast from Amar Gill, Head of Asia Research at CLSA.

HSBC’s Wang further predicted that the Asian region, including

Australia and New Zealand, will be home to close to a billion people aged 65 and over by 2050 from 300 million currently. The region’s ratio of 65 year olds to the total population by then will have spiked to 1:6 from 1:14 currently.

CLSA’s Gill said that for some countries like Hong Kong, Australia, Singapore and Taiwan, crossing the 1:6 elderly-to-population threshold will be reached even as early as the current decade.

Median age to hit mid-50’sUNPD and HSBC data also peg the median age in Asia to spike from the current low-20’s to early-40’s range to a much older mid-20’s to mid-50’s range. Countries like Taiwan, Japan, Korea, Hong Kong and Singapore will see the highest median age increases

Populations are aging in Asia far more rapidly than anywhere else in the world.

ANALYSIS: ASIAN AGEING


of more than ten years each.“Although median age is set to

rise throughout the region, smaller Asian economies are more at risk. In particular, note that median age will hit around 55 in Taiwan, Japan, Korea, Hong Kong and Singapore. In contrast, US will stay relatively young at 40 thanks to a higher birth rate,” said HSBC’s Wang.

“A direct implication of rising median ages and over 65 ratios is a much larger old age dependent population vis-à-vis a shrinking workforce. In other words, dependency ratios – the number of 0-14 plus over 65 year olds to those aged 15-64 – will rise sharply. Over the next four decades, dependency ratios will more than double in Hong Kong, Japan, Korea, Singapore and Taiwan. The ratio will be higher than 1:1 in Hong Kong, Japan, Korea and Singapore,” added Wang.

The fast graying of Asia is not merely a possibility, but more an inevitability, according to Wang.

“Bear in mind that demographic projections are based on parameters such as fertility, mortality and life expectancy, which are largely known and unlikely to change short of major catastrophes or scientific breakthroughs. As such, demographics are more like projections than forecasts.”

Driving forces of agingAsia’s demographic transition toward older populations is part of a natural progression, said Donghyun Park, Principal Economist, Economics and Research Department at Asian Development Bank (ADB).

“The region is simply following in the footsteps of the advanced countries. As in the advanced countries, Asia’s demographic transition is driven by rising life expectancy - i.e. people are living longer - and falling fertility - i.e. women are having fewer babies,” said Park.

The biggest headline is not that Asia is getting older, it is that it is getting older at such a brisk pace that it might catch unprepared countries flat-footed. “What separates Asia from other parts of the world is the exceptional speed and scale of the demographic transition. This

is especially true in East Asian countries,” said Park.

Different strategiesAsian countries, Park said, face different strategies for coping based on their stage of aging, which can range from early to advanced.

“Some Asian countries such as Korea and Singapore are at the advanced stage of aging. Other countries such as India and Philippines are still at the early stages while yet others such as China and Thailand are in between,” said Park.

Advanced-aging countries should be the most aggressive in addressing the impact of population aging, according to Park. Relatively younger countries have some more leeway, but it will do them well to begin preparing earlier than later.

“Addressing the impact of population aging is an urgent priority for advanced-aging countries. In contrast, the much more important priority for early-aging countries is to take full advantage of their youthful populations and thus reap the demographic dividend,” said Park.

“However, even for younger Asian countries, the time to prepare for population aging is now even though a greyer future may seem to lie on the distant horizon. This is because policies implemented today will affect the ability of individuals to prepare for their retirement two to three decades down the road.”

Two socio-economic challengesABD’s Park said population aging poses two strategic socio-economic challenges for Asia: Sustaining growth that has so far been driven by the now-shrinking youth cohort, and providing the rising number of elderly with sufficient support, financial or otherwise.

“First, the region must find ways to sustain growth in the face of less favorable demographics. A relatively youthful population and consequently an ample pool of workers gave Asia a sizable demographic dividend in the past but, as a result of rapid aging, the dividend is gradually turning into a tax across the region,” said Park.

“Second, Asia must strive to deliver affordable, adequate and sustainable old-age income support for its fast-growing elderly population. Failure to do so poses a serious risk to inclusive growth since a large and expanding segment of Asia’s population may become poor and marginalized,” said Park.

underdeveloped public transfer paymentsThere are three main forms of old-age income support, according to ADB’s Park. First is private transfer payment in which adult children support their parents financially. Second is asset draw down in which the elderly spend their savings to pay

A direct implication of risingmedian ages and over 65 ratios isa much larger old age dependentpopulation vis-à-vis a shrinkingworkforce.


percentage over 65 in total population: graying fast.

Source: UNPD, HSBC

Chart 1. Percentage over 65 in total population: greying fast

0%5%

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CH IN HK JP KR AU ID MA NZ PH SG SL TH VN TW US W.Europe

2012 2025 2050

Source: UNPD, HSBC


The 65-and-over age group willalso spend more on housing, foodand drinks, healthcare, householdgoods, hotels and leisure.


median age projected to rise across Asia

Source: UNPD, HSBC

for post-retirement expenses. Third is public transfer payment in which the government directly supports the elderly.

Of these three, Park said public transfer payment is particularly underdeveloped in Asia compared to the advanced economies and Latin American countries. The fast graying of Asians though will likely spur the region’s governments to develop more comprehensive public transfer programs, if only to court their increasingly elderly – and influential – constituents.

“Due to the sheer speed and scale of population aging, aging-related liabilities, such as those for public pensions and health care, are projected to rise sharply even if there are no big systematic increases in public transfers. But political economy considerations suggest that systematic increases are likely since the growing elderly population will yield more political power,” said Park.

rudimentary public pension systemsPark also said that Asian countries must strengthen their public pension systems which he said still remain “rudimentary and fragmented.”

“In the advanced economies, where concerns about fiscal sustainability have escalated due to the growth of public debt to unhealthy levels, there is a growing role for the private sector in the provision of health care insurance and pensions. This trend is likely to emerge in developing Asia as well, especially in middle and high

income countries,” said Park.Asian governments face the

challenge of forming sound regulatory frameworks that will ensure healthy competition in the insurance and pension markets while protecting the elderly consumers, added Park.

Better, more productive workersWith much of Asia getting older, the region’s economies will rely less on their youth to drive growth. Instead, Asian countries should be looking at improving the productivity of future older workers, or tapping into untapped labor force groups such as housewives and mothers, or even raising the retirement age.

“The basic idea here is to make up for fewer workers with better, more productive workers,” said Park.

“Countries such as Korea, which have relatively low female labor force participation rates, can expand child care facilities to encourage more women to work and women to work longer. Yet another solution is to raise the retirement age and enable older workers to participate more actively in the labor market,” added Park.

“In many emerging markets, including in China, the retirement age is currently lower than 65. A rise in the retirement age to Western levels could thus restrain the increase in dependency ratios a little,” said HSBC’s Wang.

Asian countries can ill afford to twiddle their thumbs at implementing policies aimed at addressing the fast

population growth, according to CLSA’s Gill.

“Even if this seems far off, the tracks need to be laid now. In essence, this entails setting aside an ever growing share of national income for the inevitable boom in retirees. For governments, this means less and less cash is available for generous infrastructure spending. For employers, this means higher wage costs as surcharges are applied to build up pension assets. To avoid a slowdown in growth as a result, as well as rising inflation pressures, productivity growth will have to rise,” said Gill.

With millions of elderly entering the consumer market in the next decades, there will also be a shift in economic spending patterns. Demand for savings products, including life insurance, will be robust, said CLSA’s Gill.

The 65-and-over age group will also spend more on housing, food and drinks, healthcare, household goods, hotels and leisure. Meanwhile, expenditure on education, transport and communications will decline relative to the elderly’s overall spending.

Massive growth in elderly productsCLSA’s Gill also noted specific product industries that will be emerging along with the rise of elderly Asians. These include robotics, which is expected to boost the productivity of the active labour force but also for the care of parents and grandparents “given the Asian cultural norm of avoiding placing ageing parents in homes.”

“Demand for incontinence products will follow Japan where the market for adults diapers is crossing over the number of units for infants. Anti-ageing skincare is set to be a fast-growing cosmetics segment as it has been in the developed world. China’s cosmetics market is already the largest globally, but per-capita spend is just one-quarter of the USA, indicating massive growth in the region for products catering for the elderly,” added Gill.

Chart 2. Median age projected to rise across Asia

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CH IN HK JP KR AU ID MA NZ PH SG SL TH VN TW US W.Europe2010 2025 2050

Source: UNPD, HSBC


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210x280mm_computerworld_4c.ai 1 29/1/2013 14:36:33


2013 HIGH-FLYERSHONG KONG BUSINESS

Hong Kong’s outstanding enterprises

LIST OF HONOREES

Hong Kong’s top business leaders and celebrities gather to celebrate excellence on January 25, 2011 at the Hong Kong Business High-Flyers Awards, now in its sixth year. Publisher Tim Charlton was on hand to congratulate the winners at a soiree full of great food and wine followed by cigars and cognac on the terrace at the magnificent Duetto restaurant. Congratulations to all the winners.

MOST OUTSTANdING ENTERpRISE AIA PensIon And TrusTee Co.

LIfE INSURANCE AgeAs InsurAnCe Co (AsIA)

fINANCIAL pLANNING ALTruIsT

pROfESSIONAL AV/AUTOMATION CONSULTANT AV ConsuLTAnT (InT ’L)

INTERNATIONAL SCHOOL CAnAdIAn InTernATIonAL sChooL

GENERAL INSURANCEChArTIs InsurAnCe hong Kong

ENVIRONMENTAL pERfORMANCE CLP Power hong Kong

GREEN CITY HOTEL Cosmo hoTeL hong KongCosmo hoTeL mongKoK

CRYSTAL LIGHTING & HOME dECO Bao Gallery By Crystallize•Me

ENAMEL JEwELRY FreywILLe

TOTAL OffICE SOLUTION FujI XeroX (hong Kong)

LEAdING ICT SOLUTIONS ANd SERVICE pROVIdER FujITsu

LEAdING INTEGRATEd RESORTS gALAXy mACAu

pREMIUM CHOCOLATIER godIVA

LUxURIOUS BEddING häsTens

MATCHMAKING SERVICES hong Kong mATChmAKers

wEALTH INSURANCE hsBC InsurAnCe

INTELLIGENT TELECOM SOLUTIONS pROVIdER m800

SERVICEd ApARTMENT shAmA mAnAgemenT

LEAdING HOSpITALITY & HOTEL MANAGEMENT rhomBus InTernATIonAL hoTeLs grouP

CONSUMER BANKING sTAndArd ChArTered BAnK (hong Kong ) LImITed

BUSINESS HOTEL The CITyVIew

BOUTIqUE HOTEL The merCer

LAw fIRM ThomAs, mAyer & AssoCIATes

INNOVATIVE AUdIOVISUAL TECHNOLOGY uLTrA ACTIVe TeChnoLogy

AV SHOp unIVersAL AudIo & VIdeo CenTre

fIxEd NETwORK ANd BROAdBANd - TELECOMMUNICATIONS whArF T&T

INTERIOR dESIGNZChron desIgn


Galaxy Macau™ receives the Leading IntegratedResort in Asia Award

EVENT I HONG KONG BUSINESS 2012 HIGH-FLYERS AWARD

Cosmo Hotels accepts the Green City Hotel Award

Fuji Xerox (Hong Kong) Limited bags the Total Office Solution Award

Frey Wille GmbH & CoKG bags the Enamel Jewelry Award

Ultra Active Technology Limited accepts theInnovative Audiovisual Technology Award

Universal Audio & Video Centre receives the AVShop Award

Canadian International School of Hong Kong receives the International School Award

CLP Power Hong Kong Limited accepts the Environmental Performance Award Bao Gallery by Crystallize•Me Ltd receives theCrystal Lighting & Home Deco Award

Ageas Insurance Company (Asia) Limited accepts the Life Insurance Award

Stephen Fung of AIA Pension & Trustee Co. Ltd. accepts the Most Outstanding Enterprise Award Altruist Financial Group Limited receives the Financial Planning Award

Fujitsu Hong Kong receives the Leading ICTSolutions and Services Provider Award



The Cityview accepts the Business Hotel Award

HSBC accepts the Wealth Insurance Award

M800 Limited receives the Intelligent Telecom Services Provider Award

Shama Management Ltd. bags the Serviced Apartment Award

The Mercer receives the Boutique Hotel Award

Rhombus International Hotels Group accepts the Leading Hospitality & HotelManagement Award

Wharf T&T accepts the Fixed Network andBroadband - Telecommunications Award

Zchron Design receives the Interior Design Award

Standard Chartered Bank (Hong Kong) Limited receives the Consumer Banking Award


Cosmo Hotels team

Fuji Xerox (Hong Kong) Limited team

Thomas, Mayer & Associés receives the Law Firm Award Hong Kong Matchmakers accepts the Matchmaking Services Award


Awarding Ceremony

Bao Gallery by Crystallize•Me Ltd team

Welcome Remarks by Tim Charlton, editor-in-chief of Hong Kong Business Magazine

Hastens Store Hong Kong bags the Luxurious Bedding Award Chartis Insurance Hong Kong Limited receives the General Insurance Award



The Mercer team HKB Associate Publisher Louis Shek and guests

Networking cocktail

Hong Kong Matchmakers team

Frey Wille display

Networking cocktailGuests enjoying the networking with their peers

High Flyers Trophies

Shama Management Ltd. team

Tim Charlton, Louis Shek, Julie Nunez, Daniela Gujilde, and Aichu Congbalay of Hong Kong Business Magazine


Shooting from the HipMercedes-Benz CLS Shooting Brake

It’s an unusual concept in the present century. Back in the Sixties, shooting brakes of all kinds were popular forms of transport, particularly in Britain – where the concept, and certainly the

name, probably originated. Mercedes-Benz has taken the unusual step of introducing such

a vehicle based on its successful CLS four-door coupé. The CLS Shooting Brake was launched here in Hong Kong in early January and has been met with universal approval from both the motoring press and the all-important public.

With a choice of three engines, as is usual in any Mercedes-Benz line-up, there is performance and price to suit all. All are limited electronically to a top speed of 250 km/h but in terms of acceleration, the top-of-the-range CLS 63 AMG is quite stunning, reaching the benchmark 100 km/h from rest in just 4.4 seconds. And, remember, this is a large five-door, luxury coupé.

The CLS 63 is powered by a 5.4 liter V8 developed by Daimler AG’s tuning arm AMG. Producing a strong 525 bhp at 5750 rpm, there is also a strong torque output of 700 Nm, which is delivered consistently between 1700 and 5000 rpm.

On the roadIt is a large coupé but it does not feel like a big car when driving; easy to place, simple to maneuver and completely empathetic to the driver’s wishes. Visibility in all directions is excellent and should you wish, there is a Sport mode selector to increase acceleration. Generally though, it is far more relaxing to just leave the CLS to its own devices: it is quiet, comfortable and should you require rapid acceleration, it is readily available.

There is an automatic stop-start system fitted, but if you feel more comfortable with a steady 500 rpm tickover at standstill, this can be de-activated.

The test car was the CLS 350 which provides more than adequate power and performance on the roads of Hong Kong. Its 0-100 km/h time is a respectable 6.7 seconds, while the engine is virtually silent and the 7-speed transmission faultless. However, on some of the territory’s less well finished roads, there is some tire thump and suspension noise. Nothing intrusive however.

What is good about this motor car is that, although the interior resembles pretty well any other Mercedes-Benz, externally it is extremely distinctive; few other cars have such an impressive

MOTORING REPORToutline. A normal four-door styling is transformed by the addition of the rear door; it’s not quite a hatchback but it’s close.

Venturing into the interiorThe inside is pretty much as other Mercedes-Benz models, but there is a distinctive analogue, center-mounted clock which catches the attention. All ancillary controls fall readily to hand and standard equipment includes a sophisticated audio system with CD, cruise control, a column-mounted paddle shift, with a separate button on the end to select ‘Park’, automatic climate control, and a load compartment cover. Optional items include a keyless entry package with start-stop button, park assist and dark-tinted glass rear of the B-pillar.

The rear cargo compartment is vast – rarely needed in Hong Kong – and is available as an option with a luxury wooden floor in open-pore American cherry with black trim. Standard trim is ash in high gloss black.

Inspired by yachtsThis extravagant feature inspired by the interiors of exclusive yachts is the wooden luggage compartment floor, which serves to emphasize the hand-crafted nature of the interior. Cherry tree is a classic among wood varieties and contrasts perfectly with the inlaid smoked oak and aluminum rails. This affords the luggage compartment a touch of elegance normally found on luxury yachts, combined with the exciting worlds of technology and precision craftsmanship. The wood is characterized by its flexibility and elasticity, as well as its density and fine texture.

For the American cherry wood luggage compartment floor, specially selected veneer sheets are glued and pressed by hand in five layers to attain a high level of dimensional stability. The blanks are milled to their exact format and the surfaces are ground smooth and impregnated to bring out the wood’s natural beauty.

Dark fumed oak inlays, precision-cut in narrow three-millimeter strips using laser technology, lend a definitive finishing touch to the design of the luggage compartment floor. Four lavishly produced aluminum rails feature a brushed finish and rubber inserts, and not only help to protect the wooden floor but also feature anti-slip properties.

For additional flexibility, the rear seat backrests fold down from the luggage compartment. The rear seats themselves provide room for three people,


MOTORING REPORTwith individual outer seats and a third seat in the middle. The three saddle-type head restraints on the rear seats barely affect the view towards the rear, and can be lowered at the touch of a button. The rear tailgate opens automatically at a touch. Useful if carrying a great deal of shopping or a number of bags

There is an additional spacious stowage compartment under the luggage compartment floor.

Standard air suspension at the rear helps to ensure consistent road holding in all conditions.

The car tested, the CLS 350 Shooting Brake sells for HK$523,953 not including options, which can add a substantial amount more if required.


NUMbERS

How Hong Kongers use social media and smartphones

For more information contact: ipsos, tim Hill ([email protected]) and nicolas Bijuk ([email protected]); nielsen, Cuijpers, ellen ([email protected])

Hong Kongers go social General feeling after participating in social networking

Where we connect

How we connect 2011/2012

Source: Ipsos Global

Source: Ipsos Global

Source: Nielsen

Source: Nielsen Global

Source: Nielsen Global

Smart phones on the increaseAccording to research firm Canalys, mobile phone shipment in southeast Asia is still growing and expected to reach 163 million by 2015. “this is indicative of a continued strong demand for mobile phones and services in southeast Asia. this can also be seen from the mobile penetration rates of various countries in the region.”

97% 94%

COMPUTER MOBILEPHONE

TABLET HANDHELDMUSIC PLAYER

GAMECONSOLE

INTERNETENABLED

TELEVISION

E-READER

37%

3% 3% 3%2% 2%4% 4%7% 7%

46%

16%

AGES 18-24

AGES 25-34

TM1? Nearly a third (32%) of people aged 18-24 use social networking in the bathroom.

More than half of people aged 25-34 use social networking in the office, morethan any other age group.

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