VOLUME ONE 2O23
FINDING THE NEXT OPPORTUNITY
FINANCEASIA.COM
TOWARDS NEW REALITIES
FINE WINE OUTPERFORMS TRADITIONAL MARKETS, CHINA RAISES ITS GREEN BONDS GAME, HONG KONG’S VIRTUAL ASSET AMBITIONS AND MORE
EXCLUSIVE INTERVIEWS Charles Li, Micro Connect founder & chair Anthony Zhang, Vinovest CEO & co-founder
ACHIEVEMENT AWARDS 2022 Read the rationale behind our jury’s selection of winners
Chow Tai Fook Enterprises Limited (“CTFE”) is the flagship private invest- ment holding company of the Cheng Family and is part of the group of companies under the “Chow Tai Fook” name founded by the Cheng Family in 1929. CTFE is a premier family investor with strategic investments in energy, healthcare, educationand media; marquee investments in prime real estate and hospitality services; private equity investments in quality growth companies mainly in the technology sector and a liquid portfolio of equities and bonds. CTFE is also the largest sharehold- er of New World Development Company Limited (Hong Kong stock code 0017), a constituent stock of the Hong Kong Hang Seng Index with assets of over US$81 billion as of June 2022. CTFE, together with its subsidiaries and jointly controlled entities, has operations in 27 countries globally.
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NWS Holdings Limited (Hong Kong Stock Code: 0659), as the diversified industries flagship of New World Development Company Limited (Hong Kong Stock Code: 0017), connects people, goods and capital through a portfolio of market-leading businesses. We innovate and create the essential building blocks that allow people and businesses to thrive in an evolving world. Our business portfolio spans over toll roads, construction, insurance, logistics and facilities management, predominantly in Hong Kong and the Mainland.
With successful completion of the transaction and the subsequent Best M&A Deal award, we would like to thank the teams at CTFE, NWS and Goshawk; as well as the financial and legal advisors for their concerted efforts across this landmark deal. CTFE’s investment journey in Goshawk began in 2013 and NWS joined the platform as a strategic shareholder in 2015. Since, both shareholders have supported the Goshawk team in growing the company into an industry leader with an asset portfolio that comprises state of the art aircraft and serves a large and diversified base of lessees. We thank every team member in Goshawk for their dedication and hard work in our nine years of partnership. We wish the team every success as the world steps into a post-pandemic era, complete with a transformed aviation sector!
The FA jury commended the participants involved in the sale of Goshawk Management Limited (GML) and associated assets, for their award. “Aviation deals are inherently complicated, and to complete this deal in the current volatile environment is quite creditable. This is the best M&A deal of the year.”
FROM THE EDITOR
Toasting 2023
While the dire human crisis in Ukraine remains; markets reflect escalating geopolitical concerns; and the World Health Organisation (WHO) maintains global pandemic status; there is a degree of buoyancy permeating 1Q23, so far. China’s reopening heralds a new era of cautious optimism. In Hong Kong, there are positive murmurings around the likely lift of the mask mandate. I find it pertinent that in trying times, consumers seek solace in small pleasures. Hair salon appointments soar, fragrance sales flourish, and – as I’ve discovered through research for this edition’s features – for those with cash to spare, luxury goods outperform traditional markets. It’s certainly the case that during peak Covid-19 restrictions, my own apartment “bar” was kept well stocked to unwind at the end of my home office day. Meanwhile, in interviews, globally acclaimed Hong Kong-based wine critic, James Suckling, attributes the pandemic to having saved his Staunton Street establishment. With equal measure of hope and hedonism in mind, in this issue, senior reporter Sara Velezmoro and I explore Asian investors’ increasing allocation to fine wine: Sara conducts an exclusive interview with tech-entrepreneur, Anthony Zhang, who is working to democratise access to the alternative asset class through digital platforms; we discuss the sector’s robust returns; and investigate the ever-expanding geographic scope of wine production that sees viticultural advancement in Asia. I speak to Hong Kong-based master of wine (MW), Sarah Heller, who is just one of 498 individuals to have passed the MW exam since 1953 (fewer than those to have travelled to space!) – and rates the Mainland’s cultivation of the Marselan grape. Then of course, there are the stellar sales by the region’s top auction houses, including Christie’s trade of property tycoon, Joseph Lau’s own wine collections. Echoing the opportunity offered by forging new connections with China, is ex-CEO of the HKEX, Charles Li, who is on a mission to connect global capital with the market’s burgeoning SME community. He discusses the opportunity for international investors to contribute to on-the-ground social impact. In the sustainability space, we turn to China’s efforts to align its bond frameworks with international best practices in a bid to achieve its net zero goals; and in feature format, Christopher Chu explores the implications of the FTX crypto collapse on Asian virtual asset regulation. It is also in this first edition of 2023, that I am so delighted to announce the launch of FA’ s inaugural Editorial Board. I am very honoured to welcome the involvement of nine esteemed Asia-based experts who cover different corners of the region’s capital markets. Offering guidance to help shape content coverage, the members will work closely with the editorial capability to ensure that published work remains timely, refreshed and relevant. Finally, I hope you’ll join me in raising a glass to toast the outstanding winners of the FA Achievement Awards, as we celebrate their much-deserved
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success in the face of economic adversity. Chin, chin: here’s to a positive year ahead.
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Ella Arwyn Jones, Editor
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Contents
FEATURES
16 | FEATURE High spirits Asian investors toast fine wine’s terrific returns.
10 INTERVIEW Exclusive interview with Charles Li Read about Micro Connect’s aims to link global capital to China’s burgeoning community of MSMEs.
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Bottoms up Exclusive interview with Vinovest CEO and co-founder, Anthony Zhang.
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HAYMARKET BUSINESS MEDIA 12/F, 1202-05 FWD Financial Centre 308 Des Voeux Road Central Sheung Wan, Hong Kong Telephone +852 3118 1500 To email one of the FinanceAsia team members listed below, please use firstname.lastname@haymarket.asia EDITORIAL Editorial director Robert Sawatzky Editor Ella Arwyn Jones Senior reporter Sara Velezmoro Strategy and content director for AI, FA and CT Andrew Crooke Contributors Christopher Chu, Peter Shadbolt, Studio EAST (Commissioned photography) COMMERCIAL Commercial director Carolyn Law Business development director Vicki Shaw Business development manager Crystal Lau CONTENT LAB Head of Content Lab Sarah Bang Commercial editor Ravi Balakrishnan MARKETING Marketing manager Belinda Leung Assistant marketing manager Betsy Wong Senior marketing executive Luis Hau DESIGN Head of design Jacqueline Kwok Lead designer Jill Cruz Graphic designer Yik Tung Tam DATA Data operations manager Michelle Tai LICENCES & MEMBERSHIPS Head of memberships Tim Cresner MEMBERSHIPS FinanceAsia memberships are available for a annual package fee of USD 690. You can become a member by calling +852 2122 5222, emailing subscriptions@financeasia.com, or via www.financeasia.com/account/subscribe. Printed by Elite Printing (Hong Kong) Co Ltd, Rm 1401-8, Hong Man Ind. Centre, 2 Hong Man Street, Chaiwan, Hong Kong. © Haymarket media Limited all rights reserved. ISSN no. 1026-8898. No part of this publication may be reproduced without the prior written permission of the publishers.
26 | FEATURE Real world solutions for virtual ambitions Hong Kong’s regulatory progress challenges Singapore’s endeavours as Asia’s virtual assets hub.
30 | FEATURE China’s green bond market: The next frontier Efforts to align with international best practices show that China is serious about reaching its net zero goals.
34 | FEATURE Editorial Board Meet the capital market experts who are helping shape our content coverage.
40 | AWARDS Achievements Awards 2022 Read the rationale behind our jury’s selection of esteemed winners.
MANAGEMENT Managing director Atifa Silk
MOST READ ON FINANCEASIA.COM
HKMA: DIM SUM BONDS “OFF TO A GOOD START” Dim sum bonds will continue to attract global investors in 2023.
HKEX VIES TO REGAIN TOP IPO SPOT Global capital markets have shown signs of recovery.
Produced by HAYMARKET BUSINESS MEDIA
Haymarket Business Media produces magazines, web sites and events for FinanceAsia, AsianInvestor and CorporateTreasurer
Insights
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EXCLUSIVE INTERVIEW
BOTTOMS UP Vinovest CEO & co-founder Anthony Zhang on democratising wine 22
CRYPTO Hong Kong’s virtual asset ambitions reach new heights 26
GREEN BONDS The next frontier in China’s green bond market 30
EDITORIAL BOARD Meet the members of FA’ s Editorial Board 34
Charles Li, founder & chair of Micro Connect 10
HIGH SPIRITS ASIAN INVESTORS TOAST FINE WINE’S TERRIFIC RETURNS SEE PAGE 16
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EXCLUSIVE INTERVIEW
Charles Li, Exclusive interview: founder & chair of Micro Connect FinanceAsia learns about Micro Connect’s aspiration to enable one million small businesses to achieve individual annual profits of RMB1 million ($150,000).
BY ELLA ARWYN JONES
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EXCLUSIVE INTERVIEW
C harles Li is renowned as a pioneer within Asia’s financial markets. Having started his working life as a teenager in the oilfields of north-eastern China, it was in the 1990s that he emerged as an up-and- coming lawyer on the Wall Street scene, before further rising to serve in leadership roles at international banks, Merrill Lynch and JPMorgan. But it is perhaps his service from 2010 as chief executive of Hong Kong Exchanges and Clearing (HKEX) that solidified his status within the region’s capital markets. He orchestrated a number of strategic initiatives that would transform Hong Kong’s position as a truly international finance hub, including the bourse’s acquisition of the London Metal Exchange (LME) in 2012, and the introduction of key listing reforms in 2018. While he may have retired from the stock exchange in 2020, the sixty-something football fanatic is far from sitting on the sidelines. In fact, following his successful introduction of the Stock Connect cross-border trading schemes in 2014 and Bond Connect in 2017, he is set to score a hat-trick through the launch of his new consumer-focussed vision: Micro Connect. Founded in early 2021 alongside his contemporary, Gary Zhang, the digitally forward Hong Kong and Shenzhen-based firm has a clear objective: to alter China’s financial ecosystem through a new asset class for trade and investment – daily revenue contracts (DRCs). In line with the market’s ambition to deliver 'Common Prosperity', Micro Connect seeks to identify quality investment opportunities in China’s vibrant – but crucially, underserved – micro, small and medium enterprise (MSME) economy. Its ultimate aim? To connect global capital with China’s consumer cash flow. So far, the firm has invested in 2,300 brick- and-mortar stores in 164 cities, across 168 sub-sectors ranging from food and beverage (F&B) to culture and sports, and it is cultivating a proprietary data platform. With a live US dollar-denominated fund, and a recently acquired licence to operate a Financial Assets Exchange in Macau, it plans to invest in over 500,000 shops over the next five years. Q: How did you conceive of the idea for Micro Connect, alongside Zhang? A: Gary and I have been friends for a quarter of a century now. We met in Tianjin back in the mid-1990s, during the early days of red chip IPOs. Over the years, we’ve formed a habit of getting together to discuss projects and pick up ideas. Although we pursued quite distinct career journeys, we kept in touch. While I was involved in landmark deals at HKEX, Gary was involved in exciting projects related to biotech and Belt and
“We wanted to find a way to leverage China’s digital progress to expand beyond the financing available via traditional markets, to support the ‘little guys’.”
Road. We are both adventure-seeking individuals. Towards the end of my tenure at HKEX, I started considering what to do next. I bounced around ideas with a few close contacts that I trusted and during our spare time, we began exploring business proposals. The underlying theme was clear: we wanted to find a way to leverage China’s digital progress to expand beyond the financing available via traditional markets, to support the “little guys” – China’s mom-and-pop shops, its MSMEs, which is where real money can be made. It was at this point that I started to involve Gary in periodical Zoom calls. We were right in the middle of the pandemic and things developed quite rapidly. As Covid-19 meant that we couldn’t go to an office or go out to eat, we would hike together in the mountains. We became quite committed to this activity and as we spent more time discussing the idea behind Micro Connect, we began to think “this is going to work, this is going to be very new”. In 4Q20, I departed the exchange and embarked on setting things up. I camped out in Gary’s office for a
Gary Zhang
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EXCLUSIVE INTERVIEW
comes from banks and the fixed income universe. But the very nature of fixed income is based on “fixed” or limited risk, so it doesn’t sit well with the high- volatility, high-risk nature of China’s vast consumer economy. This has led to a gaping chasm between the world’s biggest source of capital, and the largest potential source of returns. It is a divide that can only be addressed through digitalisation – by exploring digital synergies that can help close the gap. Micro Connect’s role aims to “neutralise” the equity pool between these entities. Instead of pursuing a traditional finance path involving shareholders, we enable a kind of mutual equity pool where investment is made into small little businesses and small cash flows. This equity-like funding is much smaller than the offerings of the fixed income space. But the model we propose offers secondary potential – bigger players can become involved at a later stage. Micro Connect is the vehicle that can facilitate equity investment from the middle – it can protect external investors from excessive risk exposure and instead, absorb risk directly. We take on the risk and enjoy the high returns. Meanwhile, investors pay cash for limited risk and return, which allows capital to flow immediately back into the business in a cyclical manner. This cycle brings benefits – it shields banks from risk, so there’s no need to charge small businesses high fees. Diversification helps mitigate our own risk. Micro Connect aims to invest in many MSMEs, so that while individually, these businesses may be considered unbankable or may be subject to a 30% failure rate, when considered as a whole, overall risk exposure is low. The concept is similar to the Shanghai-Hong Kong Connect and the Shanghai-Shenzhen Connect. We aim to connect micro businesses with the global
few weeks before renting a small space on the 29th floor of Two Exchange Square. It started from there.
Q: Would Micro Connect have been able to progress from concept to fruition at speed if it weren’t for the pandemic? A: The pandemic was not a good thing. But without it, we wouldn’t have been able to materialise our concept so quickly. The early stages required us to talk to local chains and franchises on the ground in China. In “normal” times, we would have had to travel to conduct the usual business formalities with brand founders in person. But the pandemic facilitated quick, virtual introductions. We were able to execute business quickly and to implement an important feedback loop. We tested and flooded out what didn’t work, and solidified what did. The pandemic accelerated the start-up’s progress by at least a couple of years. Q: You published a white paper identifying China’s consumer economy as accounting for 60% of the market’s GDP. Yet, the segment is massively underserved. What opportunity does Micro Connect seek to address? A: Our data and intelligence supports that Micro Connect will contribute to the development of China’s MSME sector from an economic perspective – by facilitating investment and offering returns to investors, as well as through social impact. Working in the financial sector, we had not really felt the harsh realities of the “real economy”, which is propped up by MSMEs. Despite constituting a vital component of the economy, these have always been kept from the core financial services offered by Wall Street. Equally, China’s blue ocean of opportunity is not easily accessible by global capital. Typically, the largest source of business funding
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