Compliance work remains their strongest suit, but the way they do it drastically changed.

As clients shift their financial plans to make sure that their cash flow will withstand another few months of impact from the COVID-19 pandemic, accounting firms are still considered lucky enough that some services, such as auditing, remain essential and are just enough for them to stay strong amidst the storm. But even that has taken a turn that may change the process forever, further weighed by other services that took a severe hit.

In Hong Kong Business’ 2020 edition of the annual Accounting Rankings survey, PwC Hong Kong continues to take the helm in terms of having the largest number of employees in the industry, with around 4,600 employees as of 31 March. EY came in second place with about 3,250, followed by third placer Deloitte with around 3,000 employees. KPMG ranked fourth with an estimated 2,200, and rounding up the top five is BDO with 1,100.

Overall, the 23 largest accounting firms in Hong Kong have about 17,800 employees in 2020, which remained unchanged compared to the same period last year. Some firms have cut their headcount, whilst some hired more.

Comprehensive auditing
Even as these figures suggest that there is neither stability nor anything serious to dread, Hong Kong’s accounting scene is not out of the woods yet. Managing director of BDO Clement Chan stated that transaction-based services, such as M&A, due diligence and IPO activities, are badly hit as clients become more cautious on where they put their money into.

He also shared that they had long-term clients whose cash flows had suddenly dried up because of the abrupt stop of all economic activity. “They need us to give them a longer credit period at this difficult time. At times, we are faced with the extreme difficulty in balancing the need to collect fees before starting current year’s work so as not to compromise our independence and allow a longer credit period because of the cash-strapped situation of clients,” Chan said.

Thankfully, compliance services, like audit and tax, are keeping these firms afloat given that these services will always be required. However, firms revealed that there have been a lot of struggles in this area as well.

Prior to the events of COVID-19, accounting and auditing work would require their staff to travel to their clients’ offices and plants on a regular basis, and this field work had been crucial to accounting firms in Hong Kong as they have many clients based in Mainland China. These professionals have then begun to seek help from their mainland branches to do some of the work, stated Stephen Weatherseed, managing director of Mazars Hong Kong.

“With wide-ranging COVID-19 travel restrictions in place for an undetermined period, auditors are encountering unanticipated barriers to obtain the information needed to perform audit procedures and form conclusions when audited entities have operations in affected jurisdictions, or if there are financial reporting-related functions located therein,” said Roy Lo, managing partner of ShineWing.

Apart from increased workload because of the lockdowns implemented, RSM Hong Kong’s managing partner Eugene Liu stated that auditors became burdened with extra financial reporting considerations and facing challenges when conducting their audits. Lo further explained that accountants used to perform audits in the last two months of the financial year, but has now evolved to a continuous, year-long communication with clients.

As a result, auditors are required to perform additional procedures to better assess the management’s ability to continue their operations as a going concern, any asset impairment resulting from the direct impact of COVID-19, or the indirect impact of uncertainty in the business and wider economic environments.

However, BDO’s Chan reminded that “the work requirement will not change significantly as our regulators are rightly expecting the same quality of output and work from all stakeholders. It is really down to how one successfully renovates and evolves with new and better ways of doing things under the new environment.”

It then became fairly obvious that digitisation is the way to go forward. Weatherseed shared that in Mazars, they’ve upgraded their facilities and softwares to enable smoother internal and external communications. Ewan Clarkson, chief people officer at PwC mainland China and Hong Kong, stated that agility, leadership, and active communication across national, regional, and local businesses are critical to ensuring engagement, quality and execution addressing client needs throughout the period of social distancing and remote working.

“The event has accelerated our digital transformation journey, which involves implementing new workspace practices and getting the right technology infrastructure that enables collaboration while upholding compliance and regulation crucial for remote working,” said PwC’s Clarkson. He also added that apart from putting digital tools in place, they are also upskilling and investing towards a more agile, innovative and digitally-enabled workforce against emerging market demands.

Though most firms, especially the larger accounting firms, had always reiterated that modernising their operations was their main focus even prior to COVID-19, RSM’s Liu argues that these are not enough.

“We always need to deal with large data in person, remote communication for our staff and clients affects the effectiveness and the efficiency of the financial reporting and disclosure controls. Meanwhile, there are unique challenges for audit clients due to the COVID-19 and which may directly impact an auditor’s risk assessment and response,” Liu said.

Specifically, Liu stated that they were not able to do cross-border audit work, investigation, investment analysis and enterprise management. And as businesses halt operations or shut down, the accounting industry has suffered from a loss of clients.

“New businesses setting up in Hong Kong have dramatically slowed down, and whether its M&A transactions, or just general expansion of the businesses, or doing more businesses from one company to another, needing professional help at the back end of that have obviously slowed down as well,” Mazars’ Weatherseed added .

This, as a result, could then spill over to Hong Kong’s position as a global financial centre.

Cautious recovery ahead
Weatherseed believes that the demand for ongoing compliance work will still rise in the next few months. “I think there is likely to be more businesses that are going to be going out-of-business or finding financial difficulties. Then the shareholders, creditors or the investors, they're going to turn to accounting firms for assistance and advice and how to deal with those situations,” he said.

RSM’s Liu agrees. “There is an increase in consulting services. Uncertainty of COVID-19 created a large number of challenges for our clients on their operations, cash flow and the impairment of the assets etc. For instance, clients seek alternative financing options, transaction advisory and funding advisory to apply government funding, which can provide them a short-term cash flow,” said

Liu also added that more clients are also increasingly seeking advice on technology solutions and digital transformation given the pandemic. And even as accountants under M&A advisory have noticed that there are low to zero new clients, Mazars’ Weatherseed shared that they’ve been keeping busy from doing post-merger integration (PMI) work.

But looking ahead, ShineWing’s Lo is feeling optimistic on what the future holds for Hong Kong’s accounting scene. However, he warned that businesses should stay vigilant.

“We believe the market will gradually recover. However, in view of the business sustainability, businesses should develop and implement a contingency operation plan and risk assessment mechanism not only for the current pandemic but also any other occurrence of force majeure,” Lo said.

Further, Liu also clarified that even if things may get back to normal by end-2020, it won’t necessarily mean immediate return to growth.

“No one can accurately predict the future but many companies did take actions, such as reviewing portfolios to minimise the loss during COVID-19. It also means rebalancing portfolios of assets more frequently through acquisitions and disposals. Increase in demand on M&A is beneficial to accounting firms to address the incredible challenges,” Liu stated. 

Lenders scramble to ramp up digital offerings amidst a new normal of remote banking.

Change had come to Hong Kong’s banking industry a long time ago with the dawn of virtual banking, but never before had the lenders’ tried-and-tested ecosystem been shaken as much as it had during the ongoing pandemic crisis. Now banks are scrambling to fill up the cracks in their digital servicing capabilities to continue operations amidst a new world of face masks, health precautions, and social distancing—or else say adieu.

Despite the ongoing hard times, many banks reported an increase in their headcount compared to data from Hong Kong Business’ 2019 licensed rankings. Second placer Bank of China Hong Kong (BOCHK) reported a 2.56% rise in its employees to 12,592 as of April 2020. Standard Chartered (Hong Kong), who nabbed the fourth spot, saw its employee count jump 8.3% to around 8,500 from only approximately 8,000 in 2019; whilst fifth placer Bank of East Asia (BEA) Hong Kong reported 5,564 employees in the city, a 3.5% rise from the 5,376 in last year’s rankings. Further, Dah Sing Bank also reported a 2.4% YoY rise to 2,970 as of end-2019 over its 2018 figures.

However, many of these numbers were reported before the full effect of the pandemic was expected to be felt, which could only begin to reflect by end-Q3 2020 or even Q1 2021. Already, many of the city’s biggest financial institutions saw their numbers contract since the past year or have signaled their intention to cut employee count. Chief amongst them is the Hong Kong and Shanghai Banking Corporation (HSBC), who retained the top spot with 31,000 employees in Hong Kong as of 31 December 2019.

Since then, the lender announced its plan to axe 35,000 workers globally from its more than 232,957-strong global fleet as part of its third major restructuring in a decade. Just in Q1, HSBC saw its pre-tax profits plummet 48% to $3.2b in Q1.

"You will have seen that our profits fell in the first quarter, and virtually all economic forecasts point to challenging times ahead,” Quinn said in a memo sent to employees in June, adding that the layoffs are “even more necessary today.”

Other lenders also saw their headcounts shrink. Citi Hong Kong, who remained in sixth place, saw its numbers decline by 300 or 6.67% to 4,200 as of Q2 from approximately 4,500 in Q1 2019. OCBC Wing Hang saw its headcount marginally fall by 1.46% to 4,105 from 4,165 last year. The smallest licensed bank listed—Tai Sang Bank—lost 5 employees since 2018, totaling 33 staff as of 31 December 2019.

Overall, the number of employees across 19 local licensed banks rose marginally by 1.87% to 92,545 as of April 2020 compared to only 90,844 in 2019, on the back of dramatic increases and contractions across lenders.

Near, far, wherever you are
The past few months saw lenders rolling out a plethora of new or improvements to their digital banking services as they strive to maintain close ties with their customers despite the physical distance imposed by lockdowns across the city.

Although BOCHK kept its more than 190 branches open, the bank actively encouraged customers to access services online by rolling out additional services.

“We have introduced a number of fee concessions for our electronic services and extended service hours of certain online banking services, such as forex exchange, setting up of time deposits, opening of savings and investment accounts, and activation of mobile banking and internet banking services,” a spokesperson from BOCHK told Hong Kong Business in an exclusive correspondence.

Hang Seng Bank, who nabbed the third spot in the rankings, revealed that it has rolled out more than 140 innovations and enhancements for its digital services in 2020. Many of these involve remote video and audio meeting capabilities.

“Whilst many may prefer to use online, mobile and automated channels for their day-to-day banking, a significant number still greatly value the human touch and reassurance that comes from face-to-face assistance and advice when dealing with more complex financial needs,” a spokesperson from Hang Seng Bank said. The bank is currently using video conferencing app Zoom to have “face-to-face” meetings with their customers.

Overall, Hang Seng Bank reported a rise in its e-banking transactions, with a 50% increase in June compared with January. Average number of new e-banking registrations also rose by 110% during the same period.

Other banks reported a similar trend. BOCHK reported a 56% increase in total mobile banking transactions, and over 20,000 new US Stock Accounts since the year began—whilst the number of transactions for both setting up time deposits and securities trading online jumped by 40%.

In an exclusive interview, Citi Hong Kong revealed that more than 77% of its clients are active users of their digital banking channels. The bank saw its institutional clients open over 1,000 accounts digitally in APAC, of which over 50% are from Hong Kong. Citi also noted that banking behaviours had already begun to change even before the pandemic struck, the latter which only hastened the inevitable.

“There has been a lot of talk on how COVID-19 will reshape the way we live, work, and do business. The current situation will only accelerate the broad shift to digital, which has already been transforming the banking industry,” a Citi representative noted in response to queries.

“The pandemic has necessitated us to engage with each other digitally, and to a certain extent, digital is now the preferred way for clients to engage and bank with [Citi].”

BOCHK echoed a similar assessment of customer behaviour. “The epidemic has become an unexpected catalyst in making more customers and businesses turn to digital channels,” a spokesperson stated, saying that they are working to digitalise their services to address customer needs anytime, anywhere.

Local lenders still have a lot to patch up with their digital and mobile banking capabilities, however. A recent report by consulting management firm Sia Partners noted that not a single Hong Kong mobile app made it into the top 10 best banking apps globally. European banks got the edge due to their breadth of investment-related and banking e-services, and for providing better in-app advisory services.

Amongst local banks, London-based HSBC and Hang Seng Bank were identified as the top-performing apps in the city. On the other end of the spectrum are the apps of family-run Hong Kong banks BEA Hong Kong and Dah Sing Bank. The last two banks have arguably relied more heavily on their historical clients and branch networks than on their mobile solutions, the report noted.

Safety first
It was not just the digital front that experienced a period of rapid change: now that lockdowns have been lifted, bankers and customers find themselves facing a new normal of social distancing and other health and safety measures.

For banks, the biggest change lies in their workforce, with remote working becoming the new norm. When the infection rate first began to spike, Citi immediately heeded calls for social distancing and enabled over 90% of their staff to work from home. The arrangements continued until mid-May, when the infection rate gradually decreased, prompting the lender to reduce its share of WFH staff down to 50%.

BOCHK also implemented a split-team arrangement, with only essential staff at the office, whilst the remainder of its staff worked remotely.

Bankers now returning to the office are met with a plethora of new measures to combat the spread of the virus. This meant an everyday life of face masks, constant temperature checks, and frequent handwashing. Many will likely get used to working confined in transparent, plastic walls and working in half-empty premises.

Hang Seng Bank, for example, placed portable acrylic screens in their open bank counters. Citi is also reportedly planning to put plastic partitions in some workstations, whilst ramping up their cleaning schedules. “Our premises cleaning protocols are elevated to include daily cleaning with disinfectant supplemented by hourly cleaning of all high touch areas, including elevator buttons, door handles, work cafés and pantries,” Citi’s spokesperson shared.

Lenders have also taken to giving extra incentives to their skeletal crew and provide further support to those who had to work at the office. BOCHK is providing free lunch to those working at their offices and branches. Skeletal team members are eligible for accrued leave extension, additional medical coverage, and provision of sanitary products, amongst other added benefits.

To the rescue
Banks also saw themselves rising to help their pandemic-stricken customers weather the ongoing crisis—at the possible expense of asset quality. A report by Fitch early this year already expects lower profits for 2020, the crisis only compounding the earlier negative effects brought about by the local sociopolitical protests.

Many lenders offered mortgage and loan relief for their retail, trade, investment, and wholesale banking customers. Amongst the very first to launch financial support initiatives is BOCHK, who rolled out a moratorium for mortgage loans for both commercial and residential properties. The measure has since been extended to cover subsidised sale flats under the Hong Kong Housing Authority.

“This measure has been well received since its launch, with over 18,000 customer enquiries and 3,400 cases being approved,” the BOCHK spokesperson said.

Similarly, in February, BEA Hong Kong offered corporate customers the chance to apply for a six-month principal moratorium applicable to all commercial loans, mortgages, and public vehicle loans. The lender also launched a mortgage principal moratorium programme for its retail customers.

Many of these measures were aimed to provide relief to small and medium enterprises (SMEs). BOCHK introduced a 100% loan guarantee that allowed SMEs to borrow as much as $4m. The bank has approved more than 3,100 applicants for the guarantee and recently launched a special loan scheme for SMEs without collaterals.

Likewise, Citi announced a principal moratorium of up to six months for eligible mortgage clients, primarily small and medium enterprises (SMEs) who were the most impacted by the downtrodden economy.

For their credit card clients, Citi and Hang Seng Bank both offer waivers on late charges on a case-to-case basis. They also arrange for customers to make interest-only payments, including on subsidised housing mortgages, again on a case-to-case basis.

Many universities have closed their campuses amidst the double whammy of protests and COVID-19.

In this year’s MBA Programme Rankings, the University of Hong Kong (HKU) emerged with the largest MBA programme, with a student population of 315. It is followed by the Chinese University of Hong Kong (CUHK) MBA with 215 students and The Hong Kong Polytechnic University (PolyU) MBA with 188. Rounding out the top five are CUHK MBA in Finance and the Hopkins Training & Education Group’s University of Northern Iowa MBA, with 140 and 116 students, respectively.

In total, the student population of Hong Kong’s top MBA programmes fell 10.13% to 1,651 in the 2020 rankings, compared to 1,837 in 2019. Hong Kong’s economy tumbled into its first contraction since the 2019 Global Financial Crisis, with the GDP declining 1.2% YoY in 2019, as industries in the city reeled amidst months of social  unrest. The massive upheaval escalated to the nearly two-week siege of the PolyU that resulted in extensive damage to its campus.

Yet it did not end there. The year 2020 saw the outbreak of the COVID-19 infection right off the bat, and this has since disrupted business operations across the globe. With the city facing this double whammy, many schools, including universities offering Master of Business Administration (MBA) programmes, had little choice but to forego face-to-face schooling. The Education Bureau (EDB) has already ordered all schools—including kindergartens, primary schools, secondary schools, special schools and private schools offering non-formal curriculum—to suspend classes until 20 April at the earliest.

Schools like HKU have suspended all classes. PolyU also said in a notice that it is unlikely for face-to-face teaching to resume in the university any time soon. “All the universities in general have been affected. We were mostly spared although Festival Walk was closed down and we had security guards at our gates. Mainly, it made students wary but in general, life continued,” a spokesperson from the City University of Hong Kong (CityU) told Hong Kong Business.

Confirming the decline in student count amongst the top MBA programmes, The Chinese University of Hong Kong Business School Associate Director (e-learning) of MBA Programmes Andrew Yuen shared that there have been challenges in student recruitment this year, with prospective students postponing their application due to the current uncertainties.

The macroeconomic situation also threatened job opportunities for new graduates. “Given the regional and local job market being under great pressure, it also posed threats to recent MBA graduates,” Yuen added.

Going online
With their scheduling affected, MBA providers like CityU had to conduct make-up classes for students to catch up with the programme. To minimise the effects of the outbreak on schooling, some have resorted to holding classes through online teaching and instruction.

A spokesperson from the HKU Faculty of Business and Economics found that advancements in online delivery have gone far enough that students could interact with the professor and with each other, in a more participative way than if they held classes in person. “We’ve had to adapt quickly to the changing situations. We were affected by the closure of our campuses, but we’ve very rapidly adopted new technologies to allow for remote teaching, to allow students the flexibility to study from wherever they want,” they said.

Likewise, some of CityU’s staff have been keeping in touch with individual students who are doing assignments and tasks, taking the opportunity to catch up and checking to make sure that everything is alright. It noted that a lot of the non-local students have been confined in their hometowns, and are unable to come back to classes yet, but are at least coping with a lot of online courses and processes. “With COVID-19, this has put us on edge but with online classes, we are coping with the classes and the interaction with the students,” CityU said.

Beyond classes, HKU has also been engaging with companies and doing virtual presentations and sessions. On the other hand, CUHK has also been putting in place some additional efforts to keep in touch with their students, including online consultation and admission talks.

Communication challenges
With their MBA programme emphasising class interaction and peer-learning environment, Yuen finds keeping a level of student engagement in an online setting to be a challenge. “In particular, group discussion and in-class work may not be as effective as in the classroom. It is also noted that students may easily be distracted from their own environment,” he said.

To address this issue, he recommends teachers to adopt a so-called Flipped Classroom Approach, where students do their part in preparation, which includes self-learning for basics, as well as activity-based learning like case discussions. Debate and games will also be carried out in online meetings. “Different from lectures, students are found more engaged in those activities in the online meeting,” Yuen noted.

Their programme is also giving further technical support for their lecturers, such as shooting and instructional design, with the goal of enhancing the teaching quality for online classes.

Weathering the uncertainties
Despite these uncertainties, HKU is confident in the remaining demand, with local companies still out looking for top talent. “Uncertain and volatile times like these also often spur waves of innovation and creativity. We might not be able to predict the future, but we need to support students as they explore alternatives to traditional post- MBA paths, whether they create their own businesses, join growing start-ups or investigate opportunities in emerging markets,” they said.

Yuen recommends further diversifying MBA programmes as well as students. “Instead of focussing on a single market in student recruitment and placement, MBA programmes in Hong Kong are required to have a more internationalised students mix. More efforts should also be placed to help students to develop their careers in different markets in the region,” he said.

He also suggested for the government to consider extending the immigrationarrangements for nonlocal graduates from 12 months to 24 months, emphasising a need to retain non-local talents in the economy after their graduation in local post-graduate programmes, in order to maintain the city’s competitiveness.

Virtual insurers are getting out fresh products for underserved segments in the insurance market.

Hong Kong Business’ annual review of the insurance sector revealed that the total assets of the city’s 50 largest insurers rose 3.54% to $643b in 2018 from $621b in 2017.

AIA International remains the top Hong Kong insurer with $139b in total assets, up from $125b in 2017. Prudential Hong Kong Life retained second place at $107b from 2017’s $99b. HSBC Life went up two places to third with $63.9b, Manulife International placed fourth at $58b, and China Life fell to fifth place with $51.7b in total assets this year.

Even with the presence of these large firms, digital insurers are rising to gain a presence in Hong Kong, which still has one of the lower penetration rates amongst developed countries. So far, two virtual insurance licenses have been issued to Bowtie in 2018 and Avo in 2019. One restriction for virtual insurers is that they are not allowed to accept any business from any channels other than their own proprietary system.

But digital insurers are undaunted. “We are able to create new insurance products that have greater levels of customisation and can be more relevant to consumers, as well as introduce existing insurance products to new channels and underserved segments,” said Avo Insurance’s CEO Winnie Wong.

Since obtaining their virtual licence, Avo has been busy developing protection for uninsured risks and diversifying their coverage. The firm offers e-wallet, cancer, and travel protections which can customised based on a client’s preferences, needs and ability to pay. Protections start from $79 per person annually for e-wallets, $125 to $159 for cancer coverage, and $39 to $69 for travel protection.

Further, Avo is building their own virtual system that will provide a quick underwriting process with simple risk assessment questions. The system will be supported by automation, and will speed up the insurance process for the customer-side. It will also lower internal operational costs. The firm utilises social media to connect with customers, particularly on Facebook and LinkedIn, and a core group of partners to help them craft easy-tounderstand insurance plans that fit their clients’ needs. Being a digital company is an edge over traditional insurers, Wong stated, since they have established themselves from the ground up and can offer a more affordable and personalised service to clients.

“We will continue to focus on enhancing our virtual insurance experience and engaging our customers through our value-added services such as an application, which is set to be launched next year.” Potential in pure protection Another licenced digital insurer, Bowtie, has offerings geared towards life and health protection.

“Penetration for digital channels is below 1% for the life and health business. Only 2% of premiums amongst the market provide pure protection. Thus, we see a very large market for pure protection products in Hong Kong,” said co-founder and co-CEO Fred Ngan. “As a visual insurer, we eliminate commissions and sales intermediaries by going direct.

Going direct allows us to keep our prices low without commissions, maximising the insurance value for customers and enables us to reinvest in the platform,” he expounded. Bowtie introduced the first fully online medical underwriting engine in Hong Kong, which instantly provides health evaluations for its users and gives fairer and more transparent insurance pricing.

They have also offered a full end-to-end digital Voluntary Health Insurance Scheme (VHIS) which can be done through smartphones, streamlining operations and eliminating the need for paperwork. “With the automatic claim process, medical examinations or paper forms are no longer required, and application process is shortened from at least three days to as fast as ten minutes.”

Just like Avo, Bowtie is reaching out to the younger generation looking for a hassle-free experience. “It reflected that most of our customers received smooth self-served experience, which 85% of applications and more than 70% claims submitted online didn’t involve assistance from our dedicated support team,” Ngan said.

All 11 applications for interim measures in HKIAC have so far come from law firms.

Deacons has maintained its position as the biggest law firm in the city, ramping up its lawyer count by 19% YoY to 275 in Hong Kong Business’ 2019 legal firm rankings. Right behind it is Mayer Brown with 214, and in third place is King & Wood Mallesons with 202 legal professionals. Rounding out the top five is Linklaters with 197 lawyers and Baker McKenzie with 170, both posting slight increase in staff from last year. As a whole, the total headcount of Hong Kong’s 25 largest law firms rose 2.86% to 2,514 legal professionals. Cross-border dispute resolution is a fast growing area of law in Hong Kong.

According to data from the Hong Kong Trade Development Council (HKTDC), 521 cases have been carried out in the Hong Kong International Arbitration Centre (HKIAC), including 265 arbitration cases and 21 mediation disputes in 2018. The total amount in dispute for the cases that have been administered has hit about $52.2b. The most involved sectors in HKIAC seated arbitrations were from international trade, which took up 29.6% of the total. It is followed  by the corporate sector with 18.6%, and maritime holding 15.1% of the total. Construction (13.7%)  and banking and financial services (11.9%) round out the total.

Amongst these arbitration cases, majority or 190 are international in scope, with Mainland Chinese parties amongst the most frequent users of their service. A spokesperson from HKIAC told Hong Kong Business that 40% of its arbitration caseload consistently involved Mainland Chinese parties, with 7-15% of it coming from state-owned entities. Singapore, the British Virgin Islands, Cayman Islands, the US, South Korea, Vietnam, Macao and Malaysia  were also noted as the most frequent source of users of its services.

“Hong Kong has a special role as the connecting jurisdiction for dispute resolution between parties from mainland China and the rest of the world. It is the go-to jurisdiction for Sino-foreign disputes,” the spokesperson said.

It doesn’t seem like it would stop there. In April, the Hong Kong government and the Supreme People’s Court of China signed an arrangement that took effect in October 2019, which would allow any party involved in arbitration proceedings in Hong Kong to apply for interim measures in Mainland Chinese courts — which includes preservation of assets, evidence and conduct — before or after the arbitral institution accepts a Notice of Arbitration, and vice- ersa. According to a news release by the HKIAC, the interim measures available in Hong Kong include maintaining or restoring the status quo whilst waiting for the resolution of the dispute, preventing actions that may cause harm or prejudice to the arbitral process, preserving assets and relevant evidence to the dispute resolution.

According to HKIAC, the arrangement is bound to create a new source of work for law firms: as it compels more parties to pick Hong Kong as a seat of arbitrations involving parties in the Mainland, it will bring more work to law firms that participate in Hong Kong seated arbitrations.

“Given that the Arrangement has only been in force for approximately two months, a party that intends to apply for interim relief under the Arrangement is likely to seek legal advice from a law firm,” they said. HKIAC noted that all 11 of the applications related to the interim measures they have so far received as of 13 December came from law firms on behalf of parties.

HFW partner Ben Bury said that the move will also provide arbitration practitioners in the city opportunities to assist lawyers from the Mainland who are acting for clients involved in the interim measures in the Mainland courts in support of Hong Kong arbitrations.

Bury added that international law firms, in particular, stand to benefit from this development, considering how their Hong Kong lawyers provide legal services to clients across the globe, including those who have disputes with parties who hold assets in the Mainland. For HFW, over half of their lawyers practice in arbitration.

In general, the firm expects to see a rise in institutional arbitrations in Hong Kong brought by this arrangement. “These measures are unique to Hong Kong and makes the city an even more attractive place for parties to resolve disputes against parties with assets in Mainland China,” he said.

Level the playing field
Parties seeking dispute resolution will also gain from this arrangement. Bury said that although arbitrations in the city enjoy a special status before the Mainland courts, how frequently that parties that seek out to enforce awards in the Mainland are unable to recover — either because the debtor moved or disposed of its assets — is not known.

With that, the interim measures could improve their odds of recovering those funds from debtors with assets in the PRC.

“Prior to the new arrangement coming into effect, clients who wanted to be able to obtain interim measures in the PRC were required to have the arbitration seated in the PRC and administered by a PRC arbitration institution with whom they were not always familiar,” Simmons & Simmons partner Amanda Lees said.

Lees especially noted that the availability of the interim measures is particularly critical for financial institutions, which will make Hong Kong seated arbitrations more attractive for them. Room for improvement Hong Kong is considered to be a leading centre of dispute resolution.

According to a survey by Queen Mary University’s School of International Arbitration in London and New York-based law firm White & Case, the city emerged as the fourth most preferred seat of arbitration. The city’s Arbitration Ordinance is already viewed to be amongst the most advanced arbitration statutes globally. HKTDC stated that arbitration awards made in the city are enforceable on most trading economies, including on Mainland China since the arrangement on mutual recognition and enforcement of awards between them established in 2000.

“Hong Kong has long had a pro-arbitration legal framework implemented through its up to date and internationally recognised legislation, its specialist and international judiciary, and its experienced legal experts and institutions, such as HKIAC, who have contributed to the development of international best practice in Hong Kong,” HKIAC said.

If there is anything that city’s arbitration and mediation landscape can improve on, HFW partner Peter Murphy believes that its industry could do more to explain their unique advantage to both local and international markets. “[No] jurisdiction can rest on its laurels, but Hong Kong is first among equals in Asian dispute resolution and our city should be proud of that,” he said.

HKIAC asserts that the city ought to continue doing its work, bringing stakeholders from the private sector, the government, and the judiciary together so it can keep its crown as a leading centre of dispute resolution. “The main activity required is to ensure users across the globe are aware of its strengths,” they said.

The city’s dispute resolution landscape has gone through changes over the past few years. In June 2017, Hong Kong amended its Arbitration Ordinance so it could legalise third-party funding of arbitration and resolution. HKTDC said that this will lighten the costs of bringing or defending a claim by claimants, as a result, spreading out their risks.

In 2018, the amendments related to intellectual property arbitration took effect, which attracted parties both locally and internationally to resolve their intellectual property rights (IPR) disputes by arbitration in the city. Online dispute resolutions have also garnered greater demand, with the city setting up an online dispute resolution platform called “eBRAM.hk” to be launched by end-2019.

According to data from HKTDC, 924 local solicitor firms and 87 foreign law firms had set up in Hong Kong, including over half of the Global 100 law firms with a presence in the city, as of end-June 2019. Thirty-nine foreign registered law firms, including Mainland law firms, have formed associations with local firms over the same period. The city’s exports of legal services jumped 16.0% YoY to $2.9b (US$374m) in 2017.

Average annual remuneration packages in accounting stands at $817,000.

The big four accounting firms continued to dominate the field with their sheer size, with the top four spots remaining unchanged. PricewaterhouseCoopers (PwC) retained the crown followed by Ernst & Young (EY), Deloitte Touche Tohmatsu HK (Deloitte) and KPMG.

From 2017 until the end of Q1 2019, headcount at PwC rose 15% to 4,600 from around 4,000 in 2017; EY staff numbers climbed 10% to 3,300 people from 3,000; and total staff from Deloitte and KPMG edged up 8% to 2,700 from 2,500 and 4.5% to 2,300 from 2,200, respectively. BDO rounded out the top five with a steady headcount of 1,100 staff members.

Overall, the 24 accounting firms that make up the rankings have about 17,794 employees, up 8% from 16,470 employees in 2017. Clement Chan, managing director of assurance at BDO, remarked that the larger firms would likely be open to integrate other non-accounting practices to enhance their advisory competencies due to market needs.

“Local firms can find their market edge if they can find a less crowded area to specialise such as tax dispute advisory, expertise in some specific countries or region, transaction advisory,” Chan added.

Hong Kong is home to 5,769 establishments involved in accounting, tax consultancy, bookkeeping and auditing services with around 31,507 employees as of end-2018, data from the Hong Kong Trade Development Council show.

IPO boom
According to Poh Weng Wong, chairman at RSM Hong Kong, in-demand job functions include those in audit and assurance amidst heightened IPO activities; PRC tax, as clients are becoming more exposed to business and operations in Mainland China; risk advisory services, thanks to the rising demand of internal audit function and corporate governance practices requested by listed companies and sizeable NGOs; technology and management consulting, because of tech adoption; and forensic accounting & litigation support.

“The demand for accounting professionals is increasing; thus, outlook for the sector in the next 4-5 years is positive,” Wong said. The need for more professionals in this space will also be driven by the substantial increase in IPO projects. A PwC study says 2019 will see 200 IPOs, including 170 listings on the HKEX’s mainboard, for a total haul of up to $300b.

“There are more than 80 companies listed in Hong Kong in the first half of 2019 and the trend is visibly upward sloping from the data of Hong Kong Stock Exchange. The demand for accounting professionals for the position of CFO, INED, accounting staff and internal auditors will definitely increase,” Wong said.

Talent wars
In a survey by the Hong Kong Institute of Certified Public Accountants (HKICPA) conducted in 2018, 83% of its senior and middle-management member respondents from the Big Four accounting firms cited that they are finding it difficult to recruit staff and about 96% admitted that they are struggling to retain staff. Spokespersons from BDO, RSM, ShineWing and Mazars all echoed the sentiment as a survey from Robert Half notes fierce competition to recruit and retain top talent, given the growing mobility of employees seeking to move from one firm to another.

Apart from the challenge of recruiting experienced auditors, Chan laments that certified public accounting (CPA) firms are gradually losing their appeal to young graduates as much of what is associated with the industry leaves much to be desired, including long work hours, lack of work-life balance, extensive travelling and limited growth prospects.

Wong commented that long working hours are unavoidable during the peak season in the first quarter every year but work hours are expected to return to normal in the second half of the year. Stephen Weatherseed, managing director at Mazars, added that the audit profession could be seen as a “dangerous” job because of being involved with regulatory investigations and sanctions against individuals. However, managing partner of ShineWing Hong Kong Roy Lo argued that this is not the case. “Each set of financial figures can tell a different story. If people can draw an overall picture based on accounting figures, they will start analysing the situations that can be something interesting,” Lo said.

Photo source: jobsDB

In response to the talent crunch, firms have enhanced salary packages to attract top talent as big firms restructure their respective finance teams to handle increasingly complex commercial and industrial (C&I) functions, according to Hays’ 2019 Asia Salary Guide. Jobs that have seen pay hike in maximum permanent salary per annum are junior business analysts, from $300,000 in 2018 to $312,000 in 2019; management accountants, from $420,000 to $450,000 in the same period; and account clerks, from $180,000 to $204,000, a report from Robert Walters noted.

Furthermore, a HKICPA survey also stated that the sector continues to be one of the highest-paying professions in Hong Kong, revealing average annual remuneration of $817,000, whilst CPA students receive an average annual remuneration of up to $283,000.

About 87% of its respondents have also experienced a rise in pay. Lo and Chan shared that both firms enacted policies for their employees’ career growth and work-life balance. Chan added that they are looking for further improvements to compensation packages, working environment, and training schemes

Meanwhile, PwC Asia Pacific and Greater China chairman Raymund Chao added that their firm has introduced its WeFlex programme designed to give employees more flexibility. “We have designed an upskilling programme to meet this need by helping our people unlock their digital potential. This will help us to be more confident and credible in providing a digitally enhanced experience for our clients, and also, ourselves,” he said.

In RSM, Wong shared that they put emphasis on their staff’s work-life balance by having a social committee that holds recreational/ social activities for their family members to join. Events can come in the form of local tours and even two-day overseas trips.

On her part, EY’s managing partner for Hong Kong & Macau Agnes Chan believes that the accouting profession continues to hold appeal for jobseekers, noting that around 400 graduates have recently joined their team. “We are a very diversified profession nowadays. People can join us in the taxation field, people can join us in the mergers and acquisitions department, and people can also join us in the advisory department, which provides support in the areas of cyber security, in the areas of artificial intelligence,” she said.

Tech adoption
In addition to challenges related to talent, the digital transformation wave that has swept across most industries has not exempted the accounting industry. “We have a significant uptick in enquiries with cloud-based accounting and ERP/ CRM systems. The awareness and comfort level with cloud-based technologies have significantly improved,” Wong observed.

RSM adopted cloud-based business applications, including office 365, help desk ticket management and content management systems as well as intranet and cloud customer relationship management. The firm also has plans to apply cloud-based professional services automation system and foresees the adoption of robotic process automation (RPA) as the next big trend.

Despite fears surrounding the growing automation of manual tasks, EY’s Chan believes that robots will not render humans redundant. “We also thought ‘okay, it’s going to replace all the secretaries, we don’t need secretaries to type all of our reports because we all type on computers ourselves’. With computers, they actually improved the efficiency of our work, and at the same time we have asked EY people to do other even higher value work. So I do not believe it,” she said, citing cites how auditors used to check every invoice for verification but have since adopted its EY Helix platform to sort out invoices for them, leaving their employees to pursue higher-value tasks. “This is how you can appreciate it. Even technology is just moving people to do other types of work.”

“The issue would be whether the technology talents in Hong Kong would be able to catch up with the demand and market expectations,” Wong concluded.

Employers are now looking for more data scientists and full stack developers for mobile and web applications that go beyond the traditional set of tech skills.

With eight virtual bank licenses issued in 2019, it is no understatement to say that a real hiring race is underway for virtual banking talent. HSBC, which topped Hong Kong Business’ list of biggest banks in Hong Kong, saw end- 2018 headcount rise by 6.9% to 31,000 from 29,000 in 2017. Bank of China (Hong Kong) which is actively participating in the virtual banking race, nabbed second spot with 12,216 employees in Q1 2019, up 2% from 2017. Hang Seng Bank followed at third place with 8,679 employees, up 13%. Standard Chartered’s hiring figures remained flat at approximately 6,000 but still bagged fourth place, whilst The Bank of East Asia grew its headcount by 19.3% to 5,376.

Overall, the number of employees at the top 20 banks in Hong Kong surged by 243.1% to 295,005 as of Q1 2019 from 85,981 in 2017.

"Virtual banking has definitely been the buzzword of Q3 2018 when a lot of different financial services firms were eager to join the game,” said Eddie Cheng, manager at Michael Page Hong Kong, adding that investment banks, local, Chinese retail banks and insurance firms are players that have been most active in tech hiring.

Firms, in particular, have been looking for IT directors and IT managers to lead their growing tech teams. However, key tech talents have moved away from the traditional set of skills as the fintech race heats up, especially after banks realised that most of the upcoming virtual banks were backed by the major financial firms. In-demand positions now revolve around data science/analytics, digital strategy, UX/UI, cyber security and full stack development.

“We anticipate hiring will remain flat in 2019 and do not expect a sudden surge in volume. Much of the hiring will be on key hands-on positions rather than strategic/management roles. However, candidates in the cyber security, cloud, data science, and development space should remain optimistic,” Cheng added.

In a report published in eFinancialCareers, Riley King, senior manager for digital technology and accounting & finance at Hays, observed a spike in the number of data scientists job postings from six to 100 in the past two and a half years.

The most in-demand role, according to King, are full stack developers for mobile and web applications, as banks intensify efforts to enhance their front office trading systems. There is also heated demand from fintechs looking for individuals with expertise in digital payment systems, digital asset management, blockchain and cryptocurrency, according to Hays Asia Salary Guide.

“Due to the shortage of local qualified candidates in the current fintech space, both banks and start-ups have been more flexible in relocating superlative candidates from overseas,” according to the report.

However, Hays warned that traditional banks could be at a disadvantage due to their drawnout interview processes, lessflexible working environments and packages as compared to what startups can offer.

Standard Chartered’s ploy
One of the virtual banks licensees, Standard Chartered (SC) admitted that they’ve resorted to recruiting from Europe, US and Australia due to the severe talent shortage in Hong Kong. By forming a joint venture with Ctrip Financial and telco firms PCCW and Hong Kong Telecom (HKT), SC was able to create its virtual banking entity, SC Digital Solutions, which is now looking to elevate their tech hiring process for the upcoming launch of its virtual bank. SC said that they already hired around 100 people and plans to add another 40 in their team ahead of its official launch in six to nine months Harjeet Baura, financial services consulting leader at PwC Hong Kong, echoed the sentiment, adding that virtual banks only serve as a booster for tech hiring.

“We expect this trend to continue across the financial services sector for the foreseeable future as traditional banks and insurers, as well as new virtual banks and insurers, look to capitalise on the wave of technology-led disruption that is impacting all industries,” he said.

The rise of virtual banks
So far, the Hong Kong Monetary Authority awarded eight virtual bank licenses, namely: Ant SME, Insight Fintech, Fusion Bank (formerly named Infinium), Livi VB, SC Digital, PingAn One Connect, WeLab and Zhong An Virtual Finance. Two of the approved virtual banks are entities backed by some of the largest banks in Hong Kong, namely, Bank of China (BOCHK), Standard Chartered and ICBC (Asia). Ant SME Services is backed by Ant Financial Services Group.

Meanwhile, Fusion Bank is formed through a joint venture between ICBC, Hillhouse Capital and Chinabased investment firm Tencent Holdings. Insight Fintech is backed by smartphone brand Xiaomi, which owns 90% of the joint venture, and non-bank financial firm AMTD Group.

“We see [virtual banks] as an opportunity to explore new business models, and provide a more appropriate and innovative services to different customers,” an SC spokesperson told Hong Kong Business. “We are embracing digitisation and partnerships to reinforce our competitive advantage.”

SC added that its new virtual bank will bring a whole new tech stack and a whole new customer experience, complementing to its main bank.

“Whilst there will be undoubtedly many virtual banks, we believe the main value of banking will always be customer trust,” he added.

On the other hand, HSBC, which is ranked as the largest bank in Hong Kong, doesn’t seem to have any plans to apply for a virtual bank license.

“We can see no real benefit today in launching a virtual-banking only offering to our customers,” said Ewen Stevenson, group CFO of HSBC, during their Q1 2019 post-results analyst meeting. “We have the biggest mobile bank in Hong Kong.”

The bank currently has digital products, such as their PayMe mobile wallet which was launched in 2017. Stevenson described this as the largest peer-to-peer payments vehicle in Hong Kong, and even has plans for it to become a businessto- consumer platform. He also revealed that they are spending US$1b in upgrading their mobile platforms for retail banking across over 20 of their markets.

The firm also mentioned that they are in the midst of recruiting for a new digital trading proposition that they plan to offer SMEs.

“So we’re not complacent about [launching a virtual bank], but, like most markets where we’re an incumbent. The biggest competition today is not from new virtual startups; it’s from existing competitors,” Stevenson continued. 

How banks should cope
According to a Moody’s report, the growth of virtual banks could leverage on the large number of tech-savvy customers as well on the cost savings brought by branchless operations. It would also be supported by its parent companies, benefitting from its strong financial and technology resources.

“These large banks’ sizable fintech investments will allow them to offer competing digital banking experiences to the virtual banks’ target customers. Additionally, the large banks derive significant revenue from businesses that have higher hurdles for virtual banks to penetrate, including wealth management and most corporate banking business,” Moody’s added.

However, Baura of PwC warned that virtual banks must not be wholly reliant on their parentage to gain market share.

“A new virtual bank will not come with the legacy of a large organisation and infrastructure of a traditional bank,” Baura said.

“The organisations will be extremely customer-centric, with driving and delivering a better customer experience at its heart, and addressing pain points that traditional banks have been unable to solve.”

As virtual banks can operate at lower costs, they now have more space to create more competitively priced products and services.

This will come at the expense of traditional banks, whose business models’ will be threatened by the combination of a differentiated customer experience and lower pricing. Moody’s said that the banks’ digital race may give midsize and small banks a hard time, particularly those serving small businesses and individual retail customers.

Traditional banks, Baura says, must be able to present the same level of digitalisation efforts as virtual banks.

[Photo: Standard Chartered's virtual banking team]

New modules on Artificial Intelligtence and more focus on experiental teaching over academic knowledge are changing HK’s MBA agendas.

Andrew Chan, executive associate dean, Chinese University of Hong Kong (CUHK) said that their focussed curriculum on digitalisation and technology through courses includes AI and machine learning, tech disruptions and innovative business models, and design thinking to help students keep up with changing times.

China’s increasing presence in the international business scene has also prompted MBA providers to offer electives around the Chinese business scene and China markets.

“CUHK MBA programme stays ahead of the game by offering globally competitive programme that provides the best of international curriculum with our deep China market knowledge. Our concentration option in finance and technology is a truly focused specialisation for finance professionals whilst the entrepreneurship and innovation concentration is for aspirants to start up in Asia,” Chan said.

This year, The University of Hong Kong also introduced an elective on artificial intelligence, borne out of a growing interest from the student body not only in the technology itself, but also in its current applications, its ethical dimensions, and its solutions for various business challenges.

“Finance and Technology courses like FinTech 101 and FinTech Analysis cater to the needs of working professionals who want to expand their expertise knowledge around finance, technology, especially on the FinTech front. In 2019, we continue to put a strong focus on China, and we have plans to introduce courses around business models in Greater Bay area-cum-Belt Road initiatives and the China business macro environment,” Chan said.

Practice over theory
Another trend that has emerged over the last few years is the application of concepts to real-life situations as MBAs should prepare leaders for action, and as such practice-based learning is now becoming even more critical. Silvia McCallister-Castillo, also from The University of Hong Kong, said that this year, students can look forward to developing not only the technical hard skills they need to get an interview, but also the soft skills to lead their teams.

For CUHK, students are prepared for the real world through field trips to countries like Chile and Zambia, where they are exposed to different elements of entrepreneurial and startup ecosystems, as well as technological innovation from the other side of the world. CUHK also embarks on outreach activities to Israel and the USA, and delegates their students to lead these activities.

“In the pipeline will be electives in the China markets, digital transformation, digital leadership & breakthrough strategy as well as FinTech & payments. We have also been in touch with some top-notch CEOs in the commercial world that would help deliver courses and talks that are essential to develop our students’ skills from different perspectives,” Chan said.

Who made it to the list?
The University of Chicago Booth School of Business remains at the top of the rankings with its Executive MBA Programme headed by Richard Johnson. The programme receives 80 students per part-time intake, with each intake lasting 21 months and costing $1,355,000. The City University of Hong Kong’s MBA stands at a close second, with a slight drop in the number of students from 131 in 2018 to 128 in 2019. CityU’s full-time intake lasts 12 or 18 months, whilst its part-time intake goes for 24 or 36 months. The General Curriculum for CityU’s full-time and part-time intakes cost $338,000 and $283,600, respectively.

Meanwhile, CUHK’s Executive MBA is ranked third with 98 parttime students under a 24-month part-time intake costing $635,000. At fourth and fifth places are CUHK’s MBA Programme and MBA Programme in Finance, respectively. The MBA Programme hosts 99 full-time students and 155 part-time students, whilst the MBA Programme in Finance (part-time only) has 280 enrolees at present.

Declining tourist arrivals almost pushed Henderson Land to exit the Hong Kong hotel scene.

Hong Kong Business’ annual hotel industry survey revealed very minimal movements in the largest hotel rankings this year. L’hotel Nina et Convention Centre retained its top spot with 1,608 rooms, followed by Regal Airport Hotel with 1,171 rooms. Regal Riverside Hotel, Harbour Plaza Resort City and Panda Hotel rounded out the top five with 1138, 1,102 and 911 rooms, respectively. There was also literally no room for movements in the rankings as room count dropped by a measly 0.04% from 36,324 to 36,342.

This year, declining tourist arrivals from mainland China almost pushed Henderson Land to exit the Hong Kong hotel scene. However, analysts are now positive that a recovery has thankfully sprouted providing a breather to the battered sector — one that could even grow into a sustained boom. The middle of 2017 saw a nascent recovery in inbound tourists to Hong Kong, benefiting three- to four-star operators like Far East Consortium, and there is optimism that the nearing completion of key projects such as the landmark bridge connecting Hong Kong to mainland China and Macau will further drive up arrivals.

An increase in overnight visitors led by those from Mainland China stimulated demand for hotel accomodation in the middle of 2017, enabling a recovery in hotel occupancy, particularly for three-star hotels, said Jeff Yau, analyst at DBS, in a research note. He had projected a 2.4% growth in visitor arrivals in 2017 to 58 million, driven primarily by overnight visitors, and that the number of visitors from the Mainland and outside China to grow 2.5% and 2%, respectively, in 2017.

The return of overnight visitors has been stimulating the recovery of the hotel market, said Yau, with medium-tariff hotels, or equivalent to a three-star rating, showing noticeable improvement. Meanwhile, occupancies of high-tariff A, equivalent to a five-star rating, and high-tariff B hotels, equivalent to a four-star rating, have also improved.

“Medium-tariff hotels fare much better. With rising occupancy on one hand and a low comparison base on the other, medium-tariff hotels have regained pricing power,” said Yau, citing room rate growth and occupancy gains that led to a boost in revenue per available room, or RevPAR. By comparison, five-star hotels have continued to see pressure in their room rates.

One other positive trend for the hotel sector in 2017 was the renewed buoyancy in hotel investment market. Yau said a wide array of buyers, from local investors to China-based developers, have shown stronger interest. But property yield could take more time to pick up as it has remained relatively low amid the hotel market’s early-stage recovery.

Hong Kong connectivity
The enhancement of Hong Kong’s connectivity through ambitious transportation infrastructure projects was also a key trend in 2017 as it lent support to the idea that the recovery is the beginning of a sustained boom rather than a blip. Industry analysts hold a sanguine outlook on the positive impact a new bridge, airport runway, and rail link, amongst others, will have on inbound visitor traffic growth in the coming years.

The Hong Kong-Zhuhai-Macau bridge, or HZMB, which is expected to open to traffic some time in 2018 or later, will give added value to Hong Kong as a destination hub as it will put the three cities of Hong Kong, Zhuhai in mainland China, and the special administration region of Macau within an hour’s commute of each other, said John A. Girard, vice president of development, area general manager (Hong Kong) of Regal Hotels International, and general manager of Regal Airport Hotel. 

HZMB will cut traveling time between Zhuhai and Hong Kong from more than 3 hours to around 40 minutes, which could encourage more residents in the western part of Pearl River Delta to travel to Hong Kong, said Yau. The landmark bridge project could also encourage more incoming tourists to visit Macau after Hong Kong, potentially increasing their length of stay in the latter.

Hong Kong also has other transportation projects in the pipeline, namely the Express Rail Link, or XRL, and the third runway at the Hong Kong International Airport, or HKIA, which are expected to be completed later this year and in 2023, respectively.

Yau said the XRL will connect Hong Kong to mainland China’s high speed railway network via Guangzhou and Shenzhen. Construction for the 26-kilometer rail link commenced in 2010 with Hong Kong footing an estimated $85.3b of the cost. Expected to come into service in the third quarter of 2018, the XRL “should enhance transportation links between Hong Kong and southern China, which should be positive for the city’s long-term inbound tourism growth.”

Meanwhile, the development of the third runway at the HKIA in March 2015, which is expected to be completed in five years with an estimated total development cost at $141.5b, would allow the airport to handle 30 million additional passengers by 2030. This should be crucial for inbound tourism growth over the long term,” said Yau of the planned three-runway system, citing projections that HKIA will handle 102 million passengers by 2030.

Disruptive technology
In 2017, technology-based startups continued to disrupt multiple sectors, and hotels are no exception. Hong Kong hotels are particularly focused on assessing the potential competitive impact of short-term accommodation rental platforms like Airbnb. Many are also keen on leveraging technology trends from digitisation to artificial intelligence to attract more guests and improve their service satisfaction.

“Given the constraints, Airbnb is unable to cater for the needs of group travellers and sophisticated business travellers. It may hold appeal to those seeking affordable short-term accommodation,” Yau said. “We believe that Airbnb targets mainly guests who book extended stays of more than one week. All considered, the impact of Airbnb on the Hong Kong hotel industry should not be overplayed,” he added.

A bigger concern, said Yau, is the rise of technology that could reduce the need for business travel involving face-to-face meetings. “Businessmen are now able to interact with each other using virtual alternatives such as video conferencing, which may have profound implications on the business model of five-star hotels in the long term as business travellers are their bread-and-butter clientele,” he said.

But Girard noted that technology is not only a harbinger of competitive threats. It also presents opportunities, such as enabling hotels to deliver a better guest experience, which he said leads to higher loyalty and satisfaction.

Regal Hotels enhanced their online room booking platform Regal Web with new features that led to a better customer booking experience. The hotel also introduced a Guest Indulgence programme that provides privileges, a welcome gift and a personalised greeting upon arrival. The program targets corporate travellers that are on their first-time stay to ensure they are delighted enough to make a repeat booking, which is encouraged with an e-gift for the guest’s next visit. 

Regal Hotels also installed an e-housekeeping system to improve the delivery of guest personal services, as well as a high-definition LED wall that allows for enhanced visuals during events or meetings.

2018 outlook
Girard expects 2018 will remain a challenging year, but holds a “positive” outlook amidst a concerted push by the Hong Kong Tourism Board and its travel partners to keep the territory a preferred tourist destination. He foresees hotel supply growth to accelerate at a five-year CAGR of 4.3% between 2016 and 2021, higher than the 3.6% growth in the 2011 to 2016 period, but also said concerns should not be overplayed. The hotel is counting on the strong performance of the MICE meeting business segment and support from the trade fair business.

He anticipates buoyant commercial property valuations, which could convince owners to redevelop well-located three- to four-star hotels into office or commercial buildings. “If The Excelsior, J Plus, and Crowne Plaza Hong Kong Causeway Bay are redeveloped into commercial properties, hotel inventory in the area would be cut by 1,200 rooms or 12%.”

Factoring in growth projections in supply and in overnight visitors, he expects hotel occupancy to stand at 90% in 2017, and then hover around 89% to 91% in 2018 to 2021.

“With consistently high occupancy expected, hotel room rates and therefore RevPAR should see upward pressure,” said Yau.

No robot could ever replace a good lawyer, according to our legal experts.

For Hong Kong Business’ 25 largest law firms, Deacons retained the top spot with 231 legal professionals last year, an 8.5% increase from the 213 legal professionals registered with the firm in 2016. Deacons is followed by Clifford Chance with 199 legal professionals in 2017 at second place and Linklaters with 191 legal professionals registered last year, jumping to third place from being fifth place in 2016. Rounding out the top 5 are Mayer Brown JSM and King & Wood Mallesons which saw their staff pool numbers for 2017 decrease to 186 and 177, respectively. The number of legal professionals for the top 4 and top 5 firms in 2016 were 190 and 184, respectively.

More and more law firms are welcoming the advantages and opportunities that technologies provide to improve their services and products, and this will likely be the trend for most, if not all, legal firms in Hong Kong for the next few years.

“Clifford Chance is embracing innovative resources and ways of working to provide the very best combination of people, processes, and technology solutions to deliver a service that exceeds evolving client expectations,” said Andrew Beasley, Continuous Improvement Portfolio Management at Clifford Chance.

Kirsty Dougan, head of Axiom Asia, noted in an article from Asia Law Portal that the rise of legal tech—not just in Hong Kong—will be inevitable and that the evolution is well underway. “Law is currently going through an evolutionary phase—from artisanal to industrial to digital—and law in the future will be tech-enabled, but services-led,” she said. This is echoed by Beasley, saying that “We are witnessing a technology revolution that is transforming our client base and our clients’ business” which are largely paving the way for the future of the legal sector not just in Hong Kong, but elsewhere in the world.

Scrutinising tech
Sumit Indwar, partner for Linklater’s Financial Regulation Group, said that there has been an ever-increasing trend towards both private practitioners and clients being more open to the use of legal tech in the delivery of legal services. “Legal teams within clients, particularly in the financial services sector, are facing more pressure to demonstrate that legal output is delivered in an efficient way,” he said.

Baker McKenzie have been deploying a number of high-tech tools including artificial intelligence and machine learning to improve and process their due diligence, contracts review, and e-discovery activities for more efficiency and organisation. However, Milton Cheng, partner at Baker McKenzie Hong Kong, noted that despite the rise in technology and innovation, human interaction and comprehension will remain an integral part of the future of Hong Kong’s legal landscape.

“No robot could ever replace a good lawyer. We still need lawyers to meet with clients to understand their business needs and come up with an appropriate strategy and tactical plan,” he said. “Ultimately, lawyers who can embrace technology to become more efficient and innovative in their service delivery not only will add value to the law firm itself, but also to its clients.”

The rise in technological integration in the legal sector in Hong Kong has been both timely and gradual. King & Wood Mallesons’ Peter Bullock noted that until recently, the belief has been that technology will have its primary impact on the commodity end of practice. 

For example, work being undertaken by legal process outsourcers such as due diligence reviews, discovery, and repetitive document management tasks.

“Our focus has been on investigating the best use cases for new technologies to ensure the best possible results, and we believe we are front-running in this space with artificial intelligence products such as Nakhoda,” said Indwar. At the same time, such technology will enable our lawyers to have more time to focus on the parts of the work which require specialised judgement, bespoke analysis, and advice based on experience.”

However, with sufficient scrutiny, there are caveats on the usage of technology in the legal industry. Bullock noted that perhaps the greatest area of concern is maintaining the confidentiality of client materials, and compliance with privacy laws.

Caveats on tech usage
“This can be as simple as being sensitive to avoiding overuse of social media platforms for client communications,” he said. “Like most multi-jurisdictional regulated businesses, international law firms need to grapple with the movement of personal data of clients and employees.”

Hayden Flinn, co-chief executive of King & Wood Mallesons Hong Kong, noted that with the Belt and Road Initiative from the Chinese government, more investments across the entire spectrum of the foreign policy can be expected, particularly in financing, corporate, investment funding, infrastructure, and construction. “The legal and operational risks that may arise in reaching these markets may bring opportunities for litigation and international arbitration to control risks and avoid disputes, and so much more in the year ahead,” he said.

This sentiment is noted by Cheng, saying that his firm’s Belt and Road report predicts that China-linked Belt and Road projects will be worth US$350b over the coming five years.“Lawyers with strong mergers and acquisitions and project financing capabilities are likely to be in hot demand,” he explained. “Same can be said for experienced lawyers in the areas of anti-trust/competition, compliance, regulatory, employment, and tax—issues that Chinese companies are likely to face in their efforts to go global.”

Another is the increasing importance and significance of the fintech industry, with the rise of online banking, digital payments, and virtual currencies or cryptocurrencies but also in fundraising for startups.

Flinn added that the Hong Kong Exchange’s plan for a third board targeting “new economy” companies, including both tech startups and mega-firms, Hong Kong listings for Chinese fintech companies (online peer-to-peer platforms) should be noted.

Broad outlook
In terms of broad outlook for the next 12 months, Flinn noted that Hong Kong will remain one of the Asia-Pacific region’s biggest legal tech hub, but the territory should make sure that the potential gains from strengthening transactions with mainland China, as well as with the fintech industry, are crucial. 

“Hong Kong is still the gateway to China and much activity is generated through Hong Kong’s close connection with the mainland,” he said, adding that the city’s well-developed capital markets and strong legal, regulatory, and financial regimes provide an ideal backdrop for expansion of Chinese entities.

For Urszula McCormack, partner at King & Wood Mallesons,  2018 would see an exceptionally strong pipeline of work for the legal tech industry, particularly on digital payments and cryptocurrency, AI solutions, and cybersecurity, to name a few.

“Law firms have no choice but to adapt, to ensure that they can add value to the ‘new economy’,” she said. “This often requires innovative pricing solutions for startup clients, as well as pushing the boundaries to apply the law to very different models. Sustainability and success in this space also require being part of the solution, which involves becoming good strategists, risk managers, and helping develop new regulation.”

For Indwar, legal tech adoption is not any more an option, but a requirement. “Adoption of legal tech will soon become a necessity rather than simply a nice-to-have. We expect to see an increasing awareness of and willingness to use new technologies both in private practice and on the client side and we hope [to see] lots of very interesting use cases for legal tech,” he noted.

There is a huge demand for trust-related services due to looming data risks.

Our annual accounting survey revealed that PwC, EY, Deloitte, and KPMG cemented their positions last year, with PwC taking the lead with a total number of employees at 4,000, up 100 from last year’s figures. EY comes at second with 3,000 employees, also up 100 from last year’s 2,900. Deloitte Touch Tomatsu grew the most with 235 new recruits to add to its 2,265 employees in 2016. KPMG and BDO retained their fourth and fifth places with steady 2,200 and 1,100 employees, respectively.

Deloitte’s global workforce increased by 70,000 new recruits in 2017 to meet the ever-expanding scope of the company’s work. The increase is 8% higher than that of the previous year, considering that Deloitte China is now 13,000-strong across 21 offices, with 2,500 based in Hong Kong.

As the age of big data continues to transform business and recruitment models across sectors, the accounting industry has already stepped up to the challenge by revolutionising traditional tasks such as bookkeeping, tax, and audit. To attract top talent, top accounting firms have also added more recruitment benefits such as flexible work schedules, health and wellness programmes, diverse interest classes, and mobile apps for work.

Points of interest
Over the next few months, the accounting sector expects a huge demand for trust-related services as a result of uncertainties in information security, data privacy, corporate culture and governance, risk management, and regulatory compliance. Major areas of public concern such as food safety, climate change, and sustainability are also expected to be on accounting executives’ recruitment agenda. 

Wong Poh Weng, chairman, RSM Hong Kong, believes that the biggest change in the industry during the year were the changes in auditing and accounting standards. According to him, significant provisions relate to the auditing standards requiring an extended format of audit reports and extending the auditor’s responsibilities to cover other information.

Furthermore, the accounting sector may have a breakthrough in terms of audit regulatory reform. “The Financial Reporting Council (FRC) have already taken over the investigation of listed company audit failures from the Hong Kong Institute of Certified Public Accountants (Hong KongICPA), but the industry body still retains the duties of routine inspection and disciplinary roles. The reform will make FRC a fully independent audit industry regulator. We envisage the draft legislation may finally find its way to the Legco in the latter part of 2018,” said Johnson Kong, managing director of non-assurance, BDO. 

China’s Belt and Road Initiative will also remain a top consideration as it is expected to rake in huge profits from investments and developments. China’s new cybersecurity law will also have a significant impact on network operators and firms with operations in the mainland. Nevertheless, Hong Kong is set to benefit from China’s economic resilience, particularly from the Belt and Road Kong-Macao Big Bay Area.

Innovation is key
PwC has begun focussing on recruiting talent with backgrounds in science, technology, engineering, and mathematics (STEM) as well as new blood skilled in food supply and integrity and cybersecurity. Raymund Chao, chairman, PwC Asia Pacific, said that PwC has also instituted flexible work schedules with emphasis on work results and not the number of hours clocked in. Furthermore, its employees can access a suite of online applications and services through which they can work from home more efficiently.

“With today’s technology advancements and disruptive forces, professional services providers play a bigger role in facilitating business transformation—helping companies
reconsider business models, either to establish new revenue streams, radically reduce their cost base, or diversify their business by entering new growth markets,” Chao added. Dennis Chow, southern region managing partner, Deloitte China, said that Deloitte has recently established an innovative Asia Pacific Blockchain Lab in Hong Kong. The Lab aims to support clients across the region in solving various business problems through the application of Distributed Ledger Technology. 

He added that Deloitte has also launched Deloitte Technology Fast 20 programme in Hong Kong, a programme which seeks to acknowledge fast-growing companies with viable business models and to encourage the development of innovative and promising local industries. Amidst all these developments, Chow said that what matters most for the accounting profession is how they help clients tackle the challenges and opportunities that arise from present economic initiatives from China and Hong Kong. Deloitte, in particular, has recently unveiled a strategic investment program of US$200m, wherein US$40m will be earmarked to help Chinese companies capture and capitalise on the benefits of the Belt and Road project.

For PwC, the Belt and Road Initiative has enabled it to serve 36 Belt and Road projects in 20 countries, with a total investment value of US$43b. The company also launched the  Belt & Road United in September this year. Belt and Road United is aimed to be a membershipbased platform that promotes the exploration of business opportunities along the Belt and Road.

Inclusive offices
Deloitte’s astounding staff growth is also a result of the company’s goal to improve service capabilities in the technology, consulting, and advisory areas. With millennials comprising an increasing share of the workforce, Deloitte also ensures that this generation’s personal values and career expectations are prioritised Chow said that it has been necessary for them to devise new human resource strategies and initiatives to accommodate millennials’ needs by offering flexible work arrangements with good investment on technology—from telecommuting to nursing rooms for working mothers—based on the needs of the individual, the team, and the client.

BDO’s Kong said that its decision to retain staff numbers over the past year is part of its strategy to accommodate staff needs with a more comprehensive package. BDO offers services from learning and development, career advancement, and staff wellness for work-life balance.Moreover, BDO encourages longer staff retention by offering a clear career path for the first five grade levels, with promotions expected every year. According to him, many of BDO’s fast trackers can be promoted to managerial grade within four to five years, with the possibility of being a director at a young age of 33.

Competition heats up amidst limited supply and increasing demand.

With steady inbound arrivals from mainland China and Southeast Asia, Hong Kong’s hoteliers are suiting up for what looks like a busy year ahead. The city’s occupancy rates and tourism numbers are signalling the need to add more supply and reevaluate the property market. And developers are rising to the challenge with some promising projects and enhanced service offerings this year.

Hong Kong has been plagued with land shortage and skyrocketing property prices in the past years, but this has not barred investors from buying in. According to Frank Sorgiovanni, head of research Asia Pacific at JLL Hotels and Hospitality Group, Hong Kong’s property market remains competitive and boasts strong trading fundamentals.
This is why high net worth investors like the Chinese are very keen on positioning themselves here. In fact, Chinese firms looking into growing internationally as well as businesses aiming to expand into the mainland have both made Hong Kong their hub.

Bleisure – a growing trend of business travellers who extend their stays for touring purposes – has been gaining traction in Asian financial centres such as Hong Kong, Singapore, Seoul, and Taipei. Hotels are jumping in on the bandwagon to offer services to meet bleisure travellers’ evolving needs, which range from digital accessibility to short evening tours after a long day at a conference room.

Regional rendezvous

When faced with a sluggish property market, Hong Kong looks to its business sector for relief. As a result of the territory’s key position in the region, the meetings, incentives,
conferences, and events (MICE) industry saw the growth of overnight visitors amidst an otherwise lacklustre year for Hong Kong real estate. The Hong Kong Tourism Board (HKTB)’s MICE division, which introduced its Hong Kong Top Agent Award in 2016, recognised top agents from mainland China, India, Indonesia, and South Korea for raking in the numbers.

HKTB recognised an overall 9.9% growth in MICE arrivals in the previous year. Kenneth Wong, general manager of the HKTB MICE and cruise division, adds that Hong Kong saw a staggering double-digit growth in some of its long-haul and short-haul markets. “We foresee the rebound may continue due to the growth in the number of Southeast Asian tourists and overnight visitors who came to Hong Kong to attend meetings, conventions, and exhibitions,” says John Girard, vice president of development, area general manager (Hong Kong) of Regal Hotels International. “We continue our strategic alliance with the Asia World-Expo and partners in promoting Hong Kong as a meeting destination, and attracting more visitors and business travellers from China, Korea, and across Asia. For example, in March and April, we have the Asia Jewellery Fair and Global Sources,” he adds.

Girard, also the general manager of Regal Airport Hotel, believes that Hong Kong’s varied tourism offerings will keep travellers coming. He says that travellers can expect the government and the HKTB to initiate more versatile tourism projects with a local touch and an infusion of environmental elements. Girard shares that Regal is the first airport hotel in Hong Kong to introduce a built-in high-definition 9-metre width, 4-metre height LED wall in the pillar-free grand ballroom, thus levelling up the visual experience for events or meetings. Regal also introduced the convenience of its Regal MICE app, which services meeting and conference events and is greatly valued by its clients.

Meanwhile, Renaissance Harbour View’s former lobby lounge has been transformed into a brand new Mirage Bar & Restaurant where clients can enjoy a stunning view of the harbour whilst having dinner or conveniently holding meetings. “Its full-length windows offer guests panoramic view to mirage an airy environment. The iconic 25ft high island bar is covered in lush greenery, creating an oasis away from the hustle and bustle of the city for guests to unwind day and night,” says Alice Tiu, director of marketing, Renaissance Harbour View Hotel.

Unparalleled leisure

Alongside developing innovations for the bleisure market, Hong Kong’s hotels continue to roll out creative offerings for the traditional tourism crowd. Girard shares that Regal
Airport Hotel has established a state-of-the-art gallery which showcases rare and regional works for varied audiences. Regal also introduced the world’s first smart storage facility
at the Regal Airport Hotel, which provides a convenient and secure service to store valuable items such as art pieces and expensive souvenirs.

A visit to Hong Kong is also not complete without a trip to Disneyland, and tourists who will be arriving in May 2017 will get to enjoy the new Disney Explorers Lodge, Hong Kong Disneyland’s third hotel. With reservations now open, tourists can book in advance and choose from 750 hotel rooms which have an open sea view or a landscape view of one
of the four lush themed gardens that exemplify the cultures of Asia, South America, Africa, and Oceania. “Hong Kong Disneyland is committed to investing in new offerings for our guests. Disney Explorers Lodge is not only a fantastic getaway for Disney guests, but it’s also a one-of-a-kind hotel experience for those visiting the cosmopolitan city of Hong Kong,” says Samuel Lau, executive vice president and managing director of Hong Kong Disneyland Resort.

The Disney Explorers Lodge brings Hong Kong Disneyland Resort’s hotel rooms to a grand total of 1,750. Since 2013, the resort has undergone massive expansions and implemented plenty of innovations. At present, the resort has seven themed lands and a whole suite of entertainment offerings. It is the first Disney park to feature a Marvel-themed attraction, the Iron Man Experience.

Physical growth

Renaissance Harbour View Hotel’s Tiu shares that one of the biggest changes in 2016 was the acquisition of Starwood by Marriott Hotel, making it the world’s largest hotel company. Tiu adds that, currently, they have a total of nine hotels under the family. And it’s not just Starwood on the acqusition trail, with mainland Chinese investors driving the purchases in Hong Kong, according to Savills. “In Hong Kong, activity continued to be boosted by mainland Chinese investors’ purchases, based on confidence fuelled by relatively limited new supply and high occupancy rates. Total transactions in Hong Kong reached US$287m.

Last quarter, the Butterfly on Morrison Boutique Hotel was sold for HK$880m (US$113.5m) to the Hong Kong-based Gale Well Group,” says Simon Smith, senior director of research Asia Pacific at Savills. Smith adds that despite the moderate decline in occupancy across Asia Pacific, most of the regional markets showed strong growth rate. He says that the average daily rate (ADR) will continue to drive performance in Asia Pacific’s hotel sector in 2017.

“As a mature market, Hong Kong’s inbound market is expecting a slow but steady increase in arrivals to Hong Kong. Overall, we think HK remains an attractive visiting destination, as this compact city is safe and it has a good legal environment for businesses. A number of new hotels will open in 2017, which will give tourists and business clients more options,” says Tiu.

Who made it to HKB’s list?

With the MICE boom in Hong Kong, Nina Hotel Tsuen Wan West takes the top spot this year with 1,608 rooms. Regal Airport Hotel and Regal Riverside Hotel grab second and third spots with 1,171 and 1,138 rooms, respectively. Harbour Plaza Resort City places fourth with 1,102 rooms whilst at number five is Panda Hotel with a total of 911 rooms. Combined room count for the 50 hotels is 34,506.

HK rides InsurTech wave amidst ageing population.

FWD Hong Kong, for instance, has committed to invest HK$500m in the development of proprietary InsurTech solutions.

When the banking industry started embracing the fintech revolution, the insurance industry thought twice about going all out for InsurTech. Product diversity enables the banking industry to reach out to almost all age levels, but the insurance industry’s traditional business models are proving it more challenging to hop on the digital bandwagon. After all, there’s an age-old stereotype that insurance, especially life, is for the elderly.

However, with the growing number of insurance products and the increasing wealth of the Hong Kong population, insurance has become a primary option for professionals, young or old. The city has one of the most developed insurance industries in the region and has for years attracted the world’s top insurance companies. HKTDC Research economist Kenix Lee cites Hong Kong as amongst those with the most developed insurance markets, with the per capita insurance premium standing at high levels.

Mainland connection
Hong Kong’s connection to China is a welcome factor, as global insurers and reinsurers are particularly attracted to China and the many opportunities for insurance in the mainland. HKTDC Research reports that the Chinese mainland recorded a year-on-year growth of 32.18% in premiums income to about US$32.3b from 1Q16 to 3Q16, with long-term insurance business and general insurance business growing by 37% and 7.8% over the year respectively.

Major mainland insurers which have been listed in Hong Kong include China Life Insurance (largest commercial insurance group in mainland China), Ping An Insurance of China, and The People’s Insurance Company (Group) of China (PICC). Lee also says the region has seen the growth in multi-channel distribution for insurance products.

Traditionally, these products were primarily distributed by insurance agents. However, there has been a rapid growth in bancassurance penetration, where the distributors of insurance products are banks. InsurTech’s role As for InsurTech, insurance companies have been exploring the varied distribution channels that are available in the digital dimension.

FWD Hong Kong believes that InsurTech will be the buzzword for 2017 and has committed to invest HK$500m in the development of proprietary InsurTech solutions, more than five times the investment in this area over the past three years.

After launching iFWD, its digital commerce platform, the company has become the market leader in direct sales of life insurance products in Hong Kong as of 3Q16. Beyond offering digital platforms for customer engagement and sales, insurance companies have been exploring mobile services, the Internet of Things (IoT) as well as big data analytics.

For mobile services, insurance companies are looking at integrating their services into social media like Facebook and Instagram. Several of these companies have already gone out of the box and introduced mobile applications customers can use to access their policies, pay their premiums, and engage with customer relations.

AIA International takes the lead in Hong Kong Business’ 50 Largest Insurance Companies with a gross premium of HK$71,368,836,000 from the previous gross premium of HK$64,422,448,000. From 3rd place, Prudential (HK) Life went up to 2nd place with HK$68,609,458,000 in gross premiums after accumulating only HK$49,027,667,000 in 2015.
Last year’s 1st placer, HSBC Life, went down to 3rd spot with gross premiums of HK$61,919,115,000 from HK$66,166,888,000.

Firms seek younger lawyers willing to drop old ways.

Expect more junior partners and less physical presence amidst rising rents.

Rapidly rising costs and intensifying competition are pushing Hong Kong’s lawyers to rethink their business models and methods of practice. Recent developments in the physical and digital spaces across industries are also leaving marks on Hong Kong’s legal sector despite the fact that it remains to be a robust industry with a stable clientele.

According to a report by Colliers, Hong Kong remains the gateway of choice for many international law firms entering and servicing Asia. In fact, the legal sector of the city constitutes a large portion of the space in the central business district, with 94% of these international law firms located in the CBD. However, traditional perceptions of the legal sector may likely shift soon.

BLP and Ince & Co. have signed themselves at Quarry Bay, a trend that Colliers says is likely to continue as both the Causeway Bay and Quarry Bay districts reposition themselves. However, it notes that this will be limited to law firms with greater exposure to shipping or insurance clients and those with small litigation practices. Other law firms have seen it fit not to relocate but to restructure existing leases.

Breaking traditions “The increasing awareness amongst law firms that more efficient business models are essential to progress. The rigorous challenging of existing practices continues through greater deployment of aligned technologies and the questioning of traditional processes. We see in Europe and Hong Kong firms continuing to question their use and location of physical space and their deployment of lawyers,” says Roger Parker, managing partner Asia at Reed Smith.

According to the 2016 Deloitte report “Future Trends for Legal Services,” in-house teams are looking for tech-savvy, integrated service providers who offer more than traditional legal advice. It says law firms across the globe are trailing behind other professional services when it comes to offering integrated multidisciplinary services.

Beyond increasing technological innovation, law firms are also investing more in the area of regulatory compliance. Dean Stallard, regional director, Hays Hong Kong, says that they are seeing a high demand for financial regulatory lawyers and legal talent for corporate mergers and acquisition work. “This is to support private equity activity and we expect this to remain the case over the year ahead. Competition for these candidates will be fierce especially if they are mid-level and trilingual with English, Cantonese, and Mandarin language skills. On the remuneration front, salaries within private practice are again on the rise, particularly amongst firms doing well and anxious to stop talent leaving to join direct competitor,” Stallard adds.

The need for more lawyers
Law firms are also seeking younger talents in favour of senior lawyers who have a tendency to hold to traditional business models and perceptions of practice. Whilst years’ worth of experience is definitely considered an asset, young professionals bring in lots of creativity and flexibility without too much of a demand on remuneration. Hiring activity is expected to come from both private practice and large MNCs. Mainland businesses also continue to enter Hong Kong whilst many in the territory are planning to expand,
thus a need for more lawyers.

In terms of the number of legal professionals per firm, Deacons tops Hong Kong Business’ list, with 213 legal professionals. Clifford Chance moves up from 3rd to 2nd place after an increase in the number of legal professionals, from 186 in 2015 to 191 in 2016. Mayer Brown JSM moves down to the 3rd spot, with five less legal professionals compared to 2015.

The sales pace should moderate in 2016 as investors play it safer.

Hong Kong has had an impressive hot streak in hotel investment sales, even clinching the second-largest transaction worldwide in 2015, but the acceleration will likely abate this year. Hong Kong hotel investors, for one, are taking a “wait-and-see’ approach due to the flailing inbound tourism from Mainland China, says Craig Collins, chief executive officer, Australasia at Jones Lang LaSalle.

“Over the past few years, Hong Kong has been increasingly reliant on Mainland Chinese visitors. Consequently, Hong Kong’s tourism and hotel market is vulnerable to the impact from a Chinese economic crisis, changes in travel preferences of the Chinese or jeopardised political links with Mainland China,” says Collins. He expects limited growth in trading performance in all sectors as visitor arrivals continue to be weak, including leisure demand which has so far continued to show a decline in 2016.

Collin reckons Hong Kong visitations from Mainland China have declined partly because of the removal of unlimited Hong Kong entry to Shenzhen residents back in April, and amending it to only
one visit a week. Tempering the interest spike Analysts are arguing that the pessimism on inbound tourism and the state of the local economy will temper the interest spike among investors, many of whom flocked the market and hunted for deals in 2015. The past year was one of the strongest years in Asia Pacific hotel investment with total value of investment sales increasing 1.2% year-on-year to US$9.04 billion, according to Simon Smith, senior director, research, Asia Pacific at Savills Research.

The majority of the Asia Pacific transaction volume came from 4 countries: Japan, Hong Kong, Australia and China, in descending order. Hong Kong recorded US$2.24 billion in hotel investment sales or 24.8% of the region’s total volume and at a whopping 677% increase from the previous year. In contrast, while Japan still led the region with US$2.46 billion in sales or a 27.2% share in the region, this was 2.6% lower than the previous year. The explosion in Hong Kong transaction volume was led by the sale of one of Hong Kong’s premier luxury hotels, InterContinental Hong Kong, which sold for $938 million.

Collins says this was the largest single hotel transaction in Asia Pacific and the second largest in the world. Selective investors Investors will continue to keep Hong Kong hotels within their radar, based on pwc’s Emerging Trends in Real Estate In 2016 Asia Pacific report. The survey respondents indicated ‘fair’ investment prospects for the hotels sub-sector with a a 3.30 rating out of 5. This was only slightly lower than the ratings of the industrial/distribution (3.56 rating) and office (3.37) subsectors, and slightly higher than the ratings of the residential for sale (3.08), apartment residential (3.07) and retail (3.07) subsectors. The lowest rating of 1 means ‘abysmal’ investment prospects and the highest rating of 5 means ‘excellent.’

Who made it to HKB’s list?
L’hotel Nina et Convention Centre remains the city’s largest hotel based on number of rooms. It has 1,608 rooms this year. The list welcomes a new entry - the Hong Kong Harbour Hotel at 47th place which has 500 rooms.

Check out who made the cut.

Here are the city’s promising startups providing products and services ranging from an all-in-one destination guide to a medical breakthrough to cure osteoarthritis.

For the fifth consecutive year, Hong Kong Business brings you 20 of Hong Kong’s hottest startups worth watching over the coming months. Get to know more about the companies and find out how the founders managed to make their ideas blossom into one promising startup endeavour. The companies listed started their operations from 2012 and are ranked according to the generated funding to date, as provided to us.

An MBA is still advantage, but maybe not as much as it used to be.

For Hong Kong professionals planning to get an MBA in the hopes that it will fast-track their fledgling career, their investment may yield underwhelming returns. Recruitment experts reckon an MBA is becoming a commodity in the territory, and that employers are putting more emphasis on work experience than a shiny master’s degree in business administration, eroding the bargaining power of MBA graduates unless they came from top schools with strong alumni networks or have developed expertise in mainland China.

“As more higher institutions offer MBA programmes and more professionals hold such qualifications, an MBA is no longer a guarantee for a big jump in salaries or managerial positions,” says Matthew Bennett, managing director – Greater China at Robert Walters.

“In Hong Kong, hiring managers generally value work experience more than someone who holds an MBA degree. An MBA degree is seldom a pre-requisite for positions across middle management and below,” he adds.

Bennett also explains that an MBA does not immediately guarantee a pot of salary gold, especially in Hong Kong where experience is very highly prized.

Jack Lee, president of the Hong Kong MBA Toastmasters Club, reckons in recruiting senior level managers earning at least HK$100,000 a month, an MBA is viewed merely as a nice-to-have that complements the far more critical employee asset: Industry experience.

When evaluating candidates, Hong Kong employers seem to consider previous and current employers, regional exposure and team size as far more important than an MBA. But for employers that do hire MBA graduates, the perceived prestige of the school comes into play, so a graduate looking to raise his hiring prospects will want to enroll in more esteemed institutions instead of just any MBA school.

“Branding of the schools is very critical to the point that the interviewers would associate the profiles of the graduates from that school with the interviewees,” says Lee. But then again, there is increasing hesitation to enroll in such expensive prestigious programmes as sectors that have traditionally clamored for MBA graduates face headwinds, says Richard Hanson, co-founder and CEO of Jobable.

“The financial services and consulting industries have tended to be the biggest hirers of MBA graduates in Hong Kong and also been some of the biggest and most consistent payers of high salaries and total compensation,” says Hanson.

Hanson observes a shift in the opportunities available to MBA graduates from the financial services sector to other industries such as technology.

Who made it to HKB’s list?

Hong Kong Business’ annual list of HK’s largest MBA programmes based on total number of current students enrolled in the course is now on its third year. Data compiled from MBA providers show the basic information that potential students should know including the programme’s minimum cost, duration and number of intakes per year. The list welcomes 4 new entries - HKUST EMBA for Chinese Executives, HKUST MBA for Professionals, KelloggHKUST Executive MBA Program, and The University of Hong Kong EMBA-Global Asia.