Companies that run into a dispute can gain access to funding partners - such as publicly listed firms and high-net-worth individuals in China.

With the introduction of arbitration funding on February 1, Hong Kong’s small businesses can now access deep pocketed partners to help finance their contract disputes. How will this work and who will benefit? Hong Kong Business reached out to top lawyers who assessed the implications of the regulation.

Q: Who is likely to use arbitration funding?
The construction industry for one, where often there are a myriad of small sub-contractors who can be affected when a dispute arises between the main contractor and developer. Without deep pockets to fight their claims themselves, many of these sub-contractors are put under severe financial strain. Under the new laws, they can find funding partners who will foot the bill and split the rewards. King & Wood Mallesons Partner Paul Starr notes that accessibility to third party funding is likely to free up otherwise encumbered cash flow for these industry participants and has the potential to increase the number of claims brought in arbitration, allowing meritorious claims to be brought that might not have been able to without the support of such funding. Third party funders can also assist impecunious contractors or sub-contractors in managing resources during a project. With such assistance, the contractor or sub-contractor can avoid having to allocate or find funds to deal with the claim.

Simmons & Simmons consultant for dispute resolution Eric Chan said third party funding is equally relevant to businesses with sufficient funding, but would like to invest the funds in other projects, as opposed to funding an arbitration – recognising that legal costs could escalate quickly. “There is certainly a potential that the availability of third party funding could lead to an increased number of arbitration claims, although based on our experience in Europe and Asia, third party funders tend to be quite selective about the cases they wish to fund,” he explained.

Q: Who are arbitration funders and what do they need?
Starr notes some funders are publicly listed, some are backed by high net worth individuals whilst others have lines of credit available to them. The nature of a funder’s financing structure can affect not only its ability to maintain necessary funds but may influence its approach to management of claims. A funder must maintain capacity to pay all its debts and cover its aggregate funding liabilities for a minimum of 36 months, as well as maintain access to at least $20m of capital. Simmons & Simmons’ Chan added that there are not many local funders in Hong Kong and he envisages that some third party funders which operate in the Mainland will also target Hong Kong, given the expectation of increased interactions in the Greater Bay Area. “Based on our experience, it is very important for the prospective funded party to provide all the key information to the funder, to increase the likelihood that the funder will accept the case,” he added.

Q: What should companies do to prepare for third party arbitration funding?
Baker McKenzie Arbitration Partner Paul Teo said that companies must get a firm understanding of how third party funding works, what funding options there are and in what jurisdictions they are available. In particular, companies need to understand what types of commercial claims are particularly suitable for third party funding and how the cost of self-financing such claims compare to the benefits of obtaining outside funding such as increasing cash-flow and shifting some or all of the financial risks associated with pursuing a claim to the funder. In addition, companies need a proper understanding of the typical risks such as conflicts of interest, unfair terms.

Companies also need to familiarise themselves with the implications of defending claims against funded claimants. This is because before a funder has reached the conclusion that the prospects of the claim are sufficiently strong to fund it, it has made a careful assessment of the merits of the case and whether the claimed amount is realistic. Hence, the fact that a claimant is funded can increase the pressure on a respondent to settle.

When choosing a seat of arbitration, it is important for companies to take into account the legal framework governing third party funding. For example, Hong Kong permits third party funding but has imposed various safeguards to manage the risks typically associated with third party funding such as protection of legal privilege and confidentiality, ensuring that funded parties retain control over the arbitration.

WeWork Go users need only scan a QR code upon arrival to start working.

There was a time not so long ago when hotels of a certain nature and less discerning clientele charged for rooms by the hour. Certainly, they wouldn’t think of charging by the minute, but that is exactly where the office space market is going. A cheap place to work, perhaps, but in the swipe right culture of instant gratification, there is something enjoyably transitory about being able to check into a serviced office and pay for your time by the minute. WeWork, the world’s largest operator of serviced offices, will launch charge-by-minute services in Hong Kong starting from Q3 2019 after making its debut in Shanghai. WeWork Go users can search for nearby WeWork locations and see the availability of hot desks in each space. They can also start using the spaces by simply scanning a QR code upon arrival, and they will then be charged by the minute.

Although coffee shops used to be the go-to for on-the-go employees seeking refuge from clinical work cubicles, rising noise levels at such public spaces have provided a less than ideal work environment. As a result, both small and medium business (SMEs) and multinational players are now venturing into the co-working segment which provide them both with coffee, and the peace they need to get their jobs done.

“So if it's similar to a price of coffee, or they just have to pay a bit more, but you get peace to actually do the work you need, it could be quite attractive. I think it's quite a smart move,” Michael Glancy, director of Hong Kong Markets at JLL, told Hong Kong Business.

Olga Yung, regional director for Michael Page Hong Kong, echoed the sentiment, adding that the new charging scheme will provide a supportive and flexible environment for new entrepreneurs and startups requiring a workspace with no strict leasing commitments.

“Imagine someone starting up their new business and perhaps needing a space to host meetings, meet with investors and brainstorm with their team. This is the perfect scenario for them where they can clock in and clock out whenever they want,” Yung explained.

Glancy further noted that the appeal extends to firms located in decentralised areas who are only in major cities for short periods of time. “If you need to pop in for one to two hours to a couple of things and then move on, you might not necessarily want to sign up for a one month membership,” he noted.

Whilst only making up an estimated 3% of Hong Kong’s property market, co-working spaces have been on the rise in the last three years. WeWork opened its first Hong Kong location up at Tower 535 in Causeway Bay in February 2017 and now counts eight operating locations spread out across Wanchai, Sheung Wan, Sai Ying Pun, Taikoo, Kwun Tong and Central in its Hong Kong portfolio.

Glancy estimated that there are 10 to 15 other major co-working players across Hong Kong, with close to 50 smaller operators running a similar flexible workspace setup.

“The industry is evolving quite quickly. When WeWork and other co-working spaces originally set up, I think most of us thought it was for new startups and small businesses, and people with backpacks and skateboards,” Glancy said. “But now, especially over the last six months in Hong Kong, we’re seeing more and more of the medium to large sized businesses and multinational companies dipping their toes into flex space.”

Of course larger firms may not be so interested in having their employees pay by the minute and the large banks such as HSBC, Standard Chartered and Morgan Stanley are also big users of flexible space. And they are not just renting out three to four desks.

In September 2016, HSBC rented more than 300 hot desks at WeWork’s Tower 535 location to house its digital and transformation teams in a bid to allow its employees to collaborate in an open plan and agile working environment.

In a similar move, Standard Chartered designed and created its innovation lab, eXellerator, with WeWork to house the bank’s new business unit SC Ventures which aims to invest in fintechs and other startups. The 10,000 sqft lab, which opened its doors in April 2018 in Kwun Tong, hosts events and works cross-functionally to develop new products.

“This is very good obviously to any of these providers because they can fill large sites very quickly, but in terms of why multinationals are doing this, it’s because there’s a lot of uncertainty in the market at the moment,” Glancy explained. “We don’t know how things are going to change in the next three, six or nine years, so for any business that’s signing a lease on a long-term basis, it’s very hard to forecast headcount.”

Glancy further highlighted how having an element of flexibility within a real estate portfolio, whether its 5% or 10%, can allow firms to contract and expand easily without either taking more space, lease liabilities and capex. “Businesses are prepared to pay a slight premium, but they want to reduce their capex liability. And that’s what we’re seeing more and more in the market.”

Although location pays a substantial factor on pricing, desk prices can range from $10,000 to $23,000 per month in Central, whilst in areas such as Kowloon East, desk costs could be around the $5,000 to $7,000 price range per month. According to WeWork’s website, starting prices range from $4,800/month for a hot desk to $8,200/month for a private office at its Tower 535 location.

“We forecast that the demand for flex space is going to continue, but in terms of the bigger picture, what we’re seeing developing quite quickly is that landlords are taking a real interest. We’re forecasting that flexible workspace will hit 30% in the next 10 years,” Glancy added.

Glancy projected that should all existing co-working transactions go through, Hong Kong could see close to three million sqft of co-working space by end-2019, with WeWork accounting for a large chunk of the industry’s overall footprint.

Only 7% of locals will choose homegrown brands over global ones, a study found.

More people across the world have been putting their money to their homecourt with 56% saying that they trust local brands more than global brands in 2018, according to a study by advertising giant McCann. In APAC alone, local brand believers are a bit higher than the global average at 59%.

But Hong Kong is an outlier, where only 7% of consumers are inclined towards local brands, indicating success for global players that have been working overtime to establish brand recall.

“Attempting to take advantage of mainland Chinese’ spending power and to ensure that their brand is top of mind amongst mainland Chinese who are in Hong Kong, global brands have in recent years been more proactive in marketing and in connecting with people in the city. This has, to a certain extent, been washing out local brands, which often are of a smaller scale and have a tighter budget,” McCann Worldgroup Hong Kong CEO Brandon Cheung and strategy director Karen Chan told Hong Kong Business.

The McCann study found out that consumers in Hong Kong prefer global brands due to the availability of more choices and better quality.

Rupam Borthakur, Hong Kong CEO, Insights Division at research consultancy firm Kantar believes that the global over local mindset in Hong Kong has taken root because residents have been exposed to global brands for a comparatively long time than their regional peers. “As a result, [they] are more discerning than consumers in other Asian markets: they appreciate quality, understand product nuances and trust brands that offer innovations that address their needs.”

Hong Kong, unlike China and India, failed to witness an explosion of local champions challenging global players in many categories during the past decade, according to Borthakhur. “And as their [local brands] penetration increases, so does people’s trust in them, resulting in a strong response favouring local brands. The emergence of local brands in HK has not been as prolific as in some emerging economies, and we don’t see local brands competing across categories in such an aggressive way,” he added.

Additionally, both Cheung and Chan believe that consumers have become more demanding so it is all the more important for brands to listen attentively and engage consumers in a more agile, effective and creative way. This has led brands to develop certain strategies to reach out to their targets. One of which is the “抽水” culture that could be translated as ‘real time response’ or ‘newsjacking’ advertising. “Brands and consumers alike often take advantage of a certain event or ironic incident, and re-create their own version of the event or a timely response to the incident in order to poke fun at it. These memes or posts often go viral very quickly and are a great budget-friendly way for brands to stay current and top of mind,” Cheung and Chan explained.

“IKEA is a brand that has done this particularly well: someone had to saw off part of a mattress to fit it into his room because he had bought the wrong size from a furniture store that did not accept returns. In response to that, IKEA quickly put out a post saying that there is no need for sawing even if you don’t like it, because at IKEA, they offer a 100-day trial period,” they continued.

Another advertising strategy is integrating creative messages in properties to optimise the impact of communication, the two said. “An example is Nike’s ad featuring Hong Kong female high jump record holder Cecilia Yeung that was placed directly across the Wan Chai Sports Ground with an inspiring message for aspiring athletes.”

Finally, nothing beats experience. According to Cheung and Chan, brands have been leveraging experiential marketing and creating more events and activations, citing Hong Kong Tourism Board’s Art Month Campaign which turned MTR cars into mobile galleries that can reach out to millions of commuters daily. “From pop-ups to total transformation of physical space, brands are riding on consumers’ desire for experiences to create new connections.”

Who’s got it right so far?

Although it seems that a lot of local players in Hong Kong still needs to step up their game to lure more customers, it seems like some that have already won consumers’ hearts against global players. “Brands like Hang Seng Bank, Vitasoy, and Go Go Van all have very high trust ratings in comparison to global competitors in their fields. When these brands are looked at in context of their category their strong position is clear, but this may not be obvious from a broad-brush comparison of global versus local,” Borthakur said.

For Cheung and Chan, the way to the local’s heart is to improve their brands’ perception to better leverage their locality and understanding of local culture to add value to Hong Kong people’s lives. This was also echoed by Borthakur. “In particular, they need to find how their brand purpose can address the needs of modern Hong Kongers, leverage their local roots, and combine the two to communicate the message effectively.”

E-commerce startup Ztore is manifesting this strategy, according to Cheung and Chan. “Ztore’s mission is to preserve the Hong Kong local culture and has actively made connections with local creators to carry on the fast disappearing traditions and champion local businesses’ familiar intimate services through modern technology. Their recent campaign championed their mission by structuring Ztore’s services around emotional needs - if you miss the local tastes and if you need anything, Ztore is the good spirited service at a click away. The campaign did not only drive traffic to their site, but also won the heart of Hong Kong people.”

Fasting tracker Vora is part of the developer's offerings.

OliveX Limited, the subsidiary of Hong Kong-based mobile game developer Animoca Brands Corporation, has raised US$1m in funding from strategic investors including VC firm Alabaster and businessman Tony G, to enhance the body motion AI initiatives of its app offerings.

Launched in 2018, OliveX develops a wide range of AI-powered mobile apps that use gamification to improve the health, fitness and engagement rates of users. OliveX apps include 22 Pushups, an app which encourages a push-up rep for 22 straight days; Vora - Fasting Tracker which monitors and summarises a user’s fasting programmes and Lympo Squat which rewards users with cryptocurrency after performing squats.

As a result of the funding round, Alabaster founder Sonny Vu will become chairman of OliveX. Vu has had prior experience in the fitness industry after setting up wearables startup Misfit.

The proceeds will be used to fuel its expansion plans.

Automated investment platform Quantifeed has closed US$10m series B funding round in June to accelerate its regional expansion plans and open a new office in Singapore. 

Founded in 2013 by former investment banking executives Alex Ypsilanti and Ross Milward, Quantifeed provides B2B robo-advisory services for banks, online brokers, and wealth managers including Cathay United Bank, whose parent firm, Cathay Financial Holdings, led the latest capital injection into the startup.

“We are bringing about wealthcare, a service aimed at helping everyone make the most of their savings to achieve their financial goals. Our mission is to enable financial institutions transform themselves into providers of this service on a large scale. The additional funding allows us to fulfill this mission,” Ypsilanti said.

The fintech’s wide range of services include goal-based investment advice, analytics platform and sales and customer engagement tools. With a team of experienced quantitative analysts who monitor market activity, Quantifeed is also able to offer a library of portfolios across major global markets for asset allocation, thematic investments and other trading strategies.

With operations in Hong Kong, Malaysia, Singapore, Taiwan, and Australia, Quantifeed hopes that the recent round of funding will jumpstart its plans to expand into other markets and double down on research and development efforts in data science and behavioural analytics segments.

US-based asset management firm Legg Mason also participated in Quantifeed’s series B funding round.  

The proceeds will be used to boost onboarding and hiring processes.

Hong Kong digital banking alternative Neat closed US$2m funding round from Singapore-based Dymon Asia Ventures and Portag3 Ventures as it aims to jumpstart onboarding and hire tech talent for its mobile banking solution.

Founded in 2015 by former Citibank Asia Pacific managing director David Rosa, Neat provides businesses with a flexible alternative from tedious paperwork and long waiting times associated with obtaining financing support from traditional banks.

To provide credit for cash-strapped SMEs, the startup has developed Neat Business that provides businesses with a dedicated Hong Kong bank account number and a Mastercard debit card which can be used to pay for items like bills, services, flights, and hotels. Customers can also link to third-party services such as Stripe or PayPal and deposit cash and cheques.

Neat customers also get access to the fintech’s comprehensive dashboard which provides a comprehensive overview of the state of their finances and features mechanisms for employee payroll, business invoices, expense management and monthly payments all through the click of a button and without having to resort to using a personal credit card. 

All banking services are done within the app. The company is also aiming to introduce more advanced features including detailed company reporting, automated accounts, and multi-currency solutions in the coming years.

“Neat is committed to meeting the financial needs of an increasingly mobile and digital workforce. Thanks to our investment partners we can continue to address issues faced by early-stage and non-traditional businesses when they deal with traditional banks,” Rosa added.   

'Orii' allows the visually-challenged to operate phones via voice technology.

Hong Kong-based Origami Labs has raised $2.5m in its recent funding round last June to help jumpstart its vision of reshaping the consumer electronics market with its inventive smart ring ‘Orii’.

Drawing inspiration from his visually impaired father, founder Kevin Johan Wong along with Marcus Leung-Shea and Yan Shun Li, developed Orii to help visually challenged people operate their phone through voice assistance technology.

As the ring communicates with the phone via Bluetooth, users are then able to receive notifications, make and take phone calls, send text messages, and handle daily tasks all without taking out their phones as Orii “put the power of the smartphone on your finger,” according to Wong. This is achieved through Bluetooth and advanced bone conduction technology widely used for medical-grade hearing devices that transforms sound into physical vibration that proceeds to travel via the finger.

After the user presses a button, the ring will either read out the information like an audible text message or users can jump in on a current call. Orii enables users to engage with their smartphone seamlessly as it communicates with Siri or Google Assistant whilst the user is on-the-go and unable to access the phone.

Screen-free technology
Launched in 2017, Orii has already sold 5,000 boxes with orders coming mainly from Singapore, Hong Kong, Japan, and Taiwan as well as Europe and the United States. A set of rings sells for $160 after production in Taiwan and final assembly in China. “Orii breaks us away from our screens: almost all our interactions with technology involve a screen. We are screen addicts, distracting us from our environment and from people around us. Orii is the first device to deliver screen-free technology in a wearable,” added Wong.

The founders of Orii got the idea as students at the Hong Kong University of Science and Technology in November 2015. Tracing its origins, Orii was a result of 17 prototypes that could provide up to 1.5 hours of talk time and 45 hours of standby. 

Wong believes there is a wealth of opportunity in the wearables market beyond smart watches and fitness bands as the technology has since moved from being considered a fad to a global movement that has seen 21% of online adults in the US adopting the technology. “Advances in voice interfaces means that we are on the cusp of a voice interface revolution.” 

With total funds raised at $54.8b, Hong Kong holds the fifth spot in the global IPO league.

Hong Kong’s IPO activity and performance continued to be vibrant in the first half of 2018 with a total of 108 new listings, which is around a 59% increase in volume compared to the 68 new IPO listings from the same period in 2017. In terms of value, however, total funds raised of the new listings in the first half of 2018 reached $50.4b, which is around an 8% decrease from the $54.8b funds raised from the listings in the first 6 months of 2017.

Hong Kong’s GEM board, meanwhile, posted a stronger performance, which recorded 50 IPOs that raised $3.4b of total funds, according to data from PwC. This is a significant increase of 43%, in volume of companies listing in the bourse, whilst the increase in total funds raised from the same period last year is 31%. The main board, on the other hand, raised a total of 58 new listings in the first 6 months of 2018, with total funds raised reaching $47b, which is a 57% increase in the number of Main Board IPOs but a 10% decrease in total funds raised. 

“Looking back at the market performance in the first half of 2018, we can see the IPO activities are very active, with the number of IPOs reaching a new record high,” Ringo Choi, EY Asia-Pacific IPO leader said. “Whilst in terms of funds raised, due to the lack of mega-IPOs, the global IPO ranking of the Hong Kong market reaches only the fifth place temporarily. As a matter of fact, all the top 10 IPOs were not listed in Hong Kong."

Small players dominate
Edward Au, co-leader at the National Public Offering Group of Deloitte China, noted that part of the decline in terms of value in most new IPO listings in Hong Kong is because of the dominance of small and medium-sized issuers in the territory’s local bourse—something that may eventually be a boon for Hong Kong’s equity market in the long-run.

“Hong Kong’s IPO market remained vibrant in the first half of 2018. The keen public enthusiasm from small and medium-sized enterprises was not dampened by a rise in the listing requirements for both the Main Board and GEM and events like a reduction of the U.S. balance sheet, and the trade clash between U.S. and China,” he said. “However, the strong domination of small and mediumsized issuers also resulted in the average deal size.”

Also read: Hong Kong average IPO size shrunk 10% in H1 2018

Some of the top deals in the Hong Kong equity market in the first half of 2018, as mentioned previously, have mostly been dominated by local issuers preferring domestic listing. Analysis from Baker McKenzie showed that during the first half of 2018, 53 Hong Kong-based companies went public by listing on the HKEx and HK GEM, which is a 33% year-on-year increase, and raised total capital reaching $725m.

Notable deals
Some of the largest domestic IPOs by Hong Kong issuers in the first half of 2018 include Chinese smartphone maker Xiaomi’s lacklustre IPO that raised $4.7b in late June. Another anticipated deal was China Tower’s mega-IPO priced at $6.9b in August. Other notable deals include medical provider C-MER Eye Care Holdings Limited’s $83.99m in proceeds in HKEx in early January. C-MER closed at $5.11, which was 76% higher than its opening price of $2.90 and the marketed range of $2.35 to $2.90, according to Baker McKenzie. Other top deals include the $66.74m in proceeds from Tsit Wing International Holding in the consumer staples sector; the $29.42m in proceeds from Time Interconnect Technology Limited in the industrials sector; the $28.53m in proceeds from Thing On Enterprise Limited in the real estate sector; and the $28.04m in proceeds from LH Group Limited in the retail sector.

In terms of sectors, the most active issuers were from retail, with 9 IPOs raising $111m during the period, whilst in terms of capital raising, consumer staples was the most active sector, with 8 deals raising $141m in the first half of 2018. For the Main Board, PwC data noted that the top industries in terms of number of new listings include industrial products (36%); retail, consumer goods, and services (35%); financial services (14%); information technology and telecommunications (12%); and energy and mining related (3%).

As for trends, industry experts and observers are in agreement that new economy unicorns or enterprises, particularly those from mainland China, will largely benefit Hong Kong’s equity market and IPO activities for the rest of 2018 and the coming years.

 “The mainland enterprises are going towards the Hong Kong market. New economy enterprises in healthcare, technology, and mobile payment sector listed in the first half of the year,” said Choi. Some of the largest IPOs so far, he further added, came from Ping An Healthcare and Technology, which raised $8.77b, along with Jiangxi Bank and Bank of Gansu ranking second and third, raising $7.37b and $6.84b, respectively.

New listing regimes
This trend is likely brought by the new listing regimes and regulatory breakthroughs that have been implemented in Hong Kong’s equity market last April. The Stock Exchange of Hong Kong Limited announced a proposed list of new rules to Hong Kong’s listing regime, which took effect on 30 April. The reform includes allowing the public listing of issuers in the biotech sector that do not have a track record of profitability as well as listing of companies with weighted voting right structures. 

The biotech sector was said to have been chosen as the initial focus in widening market access as they make up a majority of companies in the pre-revenue stage seeking a Main Board listing, and activities like clinical trials tend to be highly regulated under the current regime that sets external milestones on development progress.

Also read: US biotech firms seeking larger valuations rush to Hong Kong 

Another effort put in place was allowing for a concessionary secondary listing route for Greater China and international companies seeking a secondary listing in Hong Kong. Industry experts and observers are in agreement that these new listing reforms, considered monumental in certain aspects and significant since the last few decades, will propel Hong Kong’s local bourse as an attractive venue for international listings, and putting the territory at the top of global IPO rankings.

Maggie Lee, KPMG China’s head of Capital Markets Development Group for Hong Kong, explained that the implementation of the new listing rules for emerging and innovative companies has driven market sentiment and attracted the attention of companies which were previously seeking US listings, particularly in the New York Stock Exchange. As a result of these new rules, Lee forecasted the possibility of at least 10 biotech companies to apply for Hong Kong IPOs by year-end. “In addition, a number of TMT firms are also eyeing large Hong Kong listings,” she said.

“The market response regarding listing opportunities has been very encouraging following the implementation of the new listing regulations for Hong Kong’s IPO market in April 2018,” said Eddie Wong, partner of Capital Markets Services for PwC Hong Kong. He added that, currently, the Hong Kong IPO pipeline is looking strong for the rest of the year with around 200 IPO applications already being processed by HKEx, across both the Main Board and GEM.

“In the second half of the year, there will be several large-scale IPOs with targeted fundraising in excess of $10b,” Wong noted. “They will help cement Hong Kong’s global leading IPO market position.”

Deloitte China’s Au echoed these sentiments, saying that through diversifying the listings to the new economy and new sectors, removing certain listing “obstacles” like companies with different voting classes that are in general accepted by other international markets such as the United States, and allowing H-share issuers to fully convert their domestic shares, Hong Kong’s IPO market status as an international fundraising centre is poised to elevate to a new level. Its role as a springboard to support the growth of Chinese small and medium-sized enterprises will also be underscored.

Deloitte, in one of its analysis, noted that the new listing regime and hot market expectation have given a strong boost to the share flotations of new economy companies in both markets, including some well-known Chinese unicorns which started in July. These trends are likely to help raise the rankings of both the stock exchanges in Shanghai and Hong Kong in the global IPO fundraising league by the end of 2018.

There is also the recent agreement between the HKEx and China’s National Equities Exchange and Quotations (NEEQ), which opens the door for NEEQ-listed firms to float in Hong Kong under a dual-listing model. Benson Wong, Entrepreneur Group leader for PwC Hong Kong, said that this initiative will go hand in hand with the listing reform to drive HKEx’s ambition of attracting more Chinese tech and innovative companies to the local bourse. “It will also establish a more open and multi-layered capital markets and promote mutual access between the financial markets of mainland (China) and Hong Kong,” he added.

Outlook and risks
KPMG noted that, with more IPOs in the pipeline, Hong Kong’s equity market is forecast to have total fundraising of $250b in 2018 and ending the year amongst the top three (at the very least) IPO destinations globally. There is also the emergence and proliferation of cross-border IPOs, which, according to Choi, may also become a supporting force in promoting prosperity of the Hong Kong market. For instance, a total of 29 Singapore-based companies have successfully listed on the Hong Kong Exchange, particularly on the back of plans to expand operations in the Greater China Market, as well as to tap on the multi-trillion dollar investor market in China.“Cross-border listings will become more active. Singapore and the United States will go public in Hong Kong, and Singapore companies will be the major force of cross-border listings,” he said, whilst adding that the retail and consumer products, TMT, financials, construction, and healthcare sectors will launch IPOs this year.

Also read: Hong Kong could break into top three IPO destinations by year-end

Choi concluded that whilst optimism is permeating all throughout Hong Kong’s equity market and IPO landscape with the more benign and competitive landscape and proximity with new market unicorns and companies from mainland China, there remain risks including the territory’s exposure to a complex and volatile global market environment, particularly the increasing trade tensions between the United States and China.“We should realise the threats brought by the Sino-US trade war, the current trend of net outflows of funds in the Asian market, and competitions from other markets around the world,” he said. “These will have different degrees of impact on the prosperity of the Hong Kong IPO market.

Performance tracking mechanisms should be implemented.

When T-Pain shared Origami Labs’ campaign for its voice-powered Smart Ring ORII, not only did the campaign page receive significant traffic, T-Pain’s interest in the product also opened opportunities for collaboration like customising the ring with diamonds or featuring ORII in his next music video. Influencer marketing is bringing products closer to their intended consumers, and is transforming solutions so that they become more innovative and functional along the way.

Randal Hung, CMO and co-founder of Clickful, said that influencer marketing has emerged alongside the increase in internet speeds, a factor which is critical in driving success as influencers often need frequent and on time interaction with their fans. More importantly, small brands which could not have competed with the larger ones in the past, will now be able to benefit from influencers who can help them gain trust from their target markets. However, firms must not be so quick to jump in on the influencer bandwagon.

In July, Christian Dior received backlash from Chinese netizens after Hong Kong influencer Elle Lee modeled the
brand’s Saddle Bag in what was perceived to be a poorlydirected video that took away the bag’s cult status.

When asked for comment, Dior China said that Lee maintains a good relationship with the brand, but the video was not part of the official campaign for the Saddle Bag in China. Nevertheless, brands must be wary of launching huge influencer campaigns considering that influencer marketing also has its own share of risks and challenges.

According to Kim Leitzes, founder of Parklu, some risks associated with influencer marketing include, amongst others, the lack of ability to determine an influencer’s actual influence, the lack of ability to determine if an influencer’s audience is a brand’s target audience, the stigma associated with sponsored posts, and the PR risks of association to a notable individual who poorly represents the brand.

To set themselves up for success, Leitzes said that marketers should maximise influencer partnership. “First, the content the influencer creates has value and should be repurposed by the brand across other channels, with the content of the influencer. Second, designing an interactive campaign that generate greater engagement is a must. Some of the best campaigns often incorporate giveaways or prizes. Third, implementing performance tracking mechanisms is a great way to make sure you are getting what you paid for,” she said.

For Origami Labs, relying on a pure digital marketing strategy is a no-go. Co-founder and CMO Emile Chan said that the novelty of ORII makes it hard for consumers to believe it actually works. Through the firm’s efforts to allow everyone to try the product, they were able to meet not only T-Pain, but other influencers such as Gary Vaynerchuk, Eric Migicovsky, and Metta World Peace.

On top of these, Origami Labs also strengthened its influencer network through its brand and distribution partnerships. ORII’s synergy with telcos gave it access to the HKT iOT store launch in Elements Hong Kong, where the firm met actor Vincent Wong Ho Shun who was then playing a TV drama role as a visually-impaired lawyer.

“His role correlated with our own ORII story of originally being inspired by the blind, and we immediately connected. For the rest of the event, Vincent Wong Ho Shun wore the ORII ring, which gave us some notable buzz in Hong Kong,” Chan added.

Hung said that it is important for a company to find the right influencers, not necessarily the largest ones. Sometimes it may be more beneficial to find those with the smaller fan bases, as long as they are the right fit.

For Easyship co-founder Tommaso Tamburnotti, working with B2B influencers is a long-term investment. Tamburnotti said that it takes time to build a relationship with a B2B influencer because the firm needs to prove that their product or service is high-quality.

According to him, influencers are more than just about the money, many of them do care about what’s in it for their audience and want to make sure that the product is good and exciting enough and they can get a good deal by following the influencer.

“Oftentimes, results may seem indirect and challenging to measure, as they can have a different role in the conversion funnel. Our approach is essentially to create win-win relationships that is organic instead of transactional ones. In the end, we just need to be creative in what we could offer to the influencers,” Chan said.

Photo from Elle Lee's Instagram

A streamlined health app framework will soon be launched.

The Hong Kong Hospital Authority is crafting a centralised mobile app which will give patients and doctors a single framework to access disease information and treatment options.

“What we have done over the last few years is to develop a series of apps for various things. What we're doing now is that we're putting it all together into one common framework so that it becomes an extensible framework for all interactions with the Hospital Authority and with their own healthcare providers. This is what we are building and it's going to be called HA Go,” says Dr NT Cheung, Head of Information Technology and Health Informatics/Chief Medical Informatics Officer of the Hong Kong Hospital Authority.

The app, which is slated for launch in the first half of 2019, will be designed to address the inherent limitations that current health-related mobile applications face.

“There’s a big limitation when you do clinical apps because you have to be very careful about the security of the data. The idea here is when we say framework, part of it so that we have a consistent way of registering patients and their carers. Within this framework we can then allow our clinicians to communicate with the patient with the assurance that we know who they are,” Dr. Cheung explains.

Continuous innovation
The HA first started its big data push by developing simpler healthcare apps to improve patient experience, such as an app to reduce pharmacy queuing and to automate bookings for specialty outpatient clinics.

“And then we started building more disease-specific apps. We found that we are starting to build more and more of these apps. There are hundreds of thousands of different diseases, and in theory you can make an app for each of them. But for a patient that will be unworkable. So the idea here is that all they need to download is HA Go, and if they need the diabetes app, the doctor will press a button on his system and the diabetes app will get pushed to their machine and they wouldn’t be bothered with the apps that they don’t need,” Dr. Cheung says.

HA Go is part of Hong Kong’s effort to better engage patients in their own care. “A more involved and more educated patient is a healthier patient. We have a comprehensive medical record system within the Hospital Authority already. It’s called the Clinical Management System and the doctors use that for all of their care and orders and things. But the thing is that when patients go home, their behavior doesn’t make it to the system—whether they are exercising or eating well or anything. They might be keeping a paper diary or this and that. The idea here is that the information about what the patient is doing outside the hospital also gets recorded, and when the doctor sees them again they will know exactly what the patient has been doing."

With HA Go, each patient becomes a contributor to their own record as the app reminds patients of things when they need to do them, and all under a single framework which allows doctors to prescribe apps as needed to patients.

“And then the app will be able to take relevant patient data from the system and customize the experience for the patient. And the patient data will also then flow back into the medical record for the doctor’s review. It’s a complete picture end-to-end involving the patient and tying in with the workflow of the doctor who is already electronically enabled, but at the moment the last mile of the patient is not available,” Dr. Cheung notes.

The HA receives the lion share government healthcare allocations which have been steadily growing by an average of 7% over the past decade, data from BMI Research show. Finance secretary Paul Chan boosted the recurrent financial provision to the HA by $6b to $61.5b in his latest budget address, representing a year-on-year increase of 11%.

Thanks to the budget boost, the HA has been able to tap on emerging technologies such as big data to improve clinical outcomes. “We’ve had access to standardized, high quality data for many years. But now we’re talking about big data. And there are a lot of unstructured data that we can also get value from. But now with the tools that we have, we believe that this data is ripe for extraction,” he explains.

For instance, the HA is building a collaborative data lab to support machine learning in Hong Kong. “What we’re going to do is that we will take this data and scrub it so it doesn’t have any identifiers, and then it can be offered to researchers who have machine learning projects who think that this data is workable. We hope to take advantage of all this data to drive machine learning projects in Hong Kong around healthcare,” Dr. Cheung says.

The data lab is still being set up, but it is due to launch this year and run for twelve months on a pilot basis, in collaboration with local researchers and universities.

Are you a startup founded in Hong Kong during these years: 2015, 2016, or this 2017?

Hong Kong Business is now welcoming all nominations for the country’s most prestigious list of startups and risk-takers. Tell us who should be on HKB’s 2017 list.

To qualify for the 2017 Hottest Startups, submit the following details until January 18, 2017 to Alpha Bierneza at [email protected]:

Name of the company:
Founder/Founders:
Website:
Major Investors:
Total funding at hand:
Target fund:
Source of funding:
Start of operation:

If you still have any questions, please contact Alpha at 3158-1386, or drop her an email at [email protected].  

Major IPOs to keep HK’s accounting firms busy in 2017.

Hong Kong was the world’s leading exchange by capital raised with 19% of the global total, ahead of Shanghai with 12% in 2016.

Hong Kong’s major accounting firms will be busy in the coming year as they work on more deals in the world’s largest market for new listings. Despite heightened global political and economic uncertainty, Hong Kong – HKEx’s main board and Growth Enterprise Market (GEM) – was the world’s leading exchange by capital raised with 19% of the global total, ahead of Shanghai (SSE) with 12%.

By volume, Shenzhen (SME board and ChiNext) ranked first with 121 IPOs (11.5% of the global total), slightly ahead of Hong Kong (main board and GEM), which ranked second with 117 IPOs (11.1%), ahead of Shanghai (SSE) in third place with 104 (9.9%). Greater China exchanges hosted four of the ten largest IPOs globally by proceeds in 2016, including the largest deal of the year of Postal Savings Bank of China Co. Ltd., which raised US$7.6b on HKEx in September. “After a period of uncertainty in the latter part of 2015, confidence and stability have returned to the Greater China IPO market, with the number of deals steadily increasing quarter-by-quarter throughout the year. In terms of stock exchange in Greater China, due to a slow-moving first six months, there were 360 IPOs in 2016 (2015:360) raising US$48.3b in capital, down 17% on 2015,” says Ringo Choi, EY Asia-Pacific IPO leader.

Market stability

EY adds that the capital markets in Greater China returned to stability this year with its stock exchanges topping the global exchanges leader board in terms of both IPO volume and capital raised. “The CSRC has started to accelerate the IPO approval process and we expect this trend to continue in the coming months. Moreover, the launch of the Shenzhen-Hong Kong Connect program would gradually draw greater participation by overseas institutional investors in the A-share market and further boost market sentiment in the long run. With a strong pipeline of companies ready to list and investor sentiment unaffected by political shockwaves elsewhere in the world, we expect Greater China exchanges to remain the world’s most active markets for IPOs in 2017,” he says.

Clearly, China is expecting a vibrant business sector for the coming year. To help understand how Chinese executives are adapting strategies to reposition for new growth, PwC polled more than 220 Chinese executives with operations in mainland China and Hong Kong, as part of its 2016 APEC CEO Survey and shared their views on doing business in China. According to PwC, even though China is still facing uncertainty in the macro-economic environment, some sectors are better poised for growth than others. Technology and financial services executives are especially optimistic about their business prospects in the coming year, drawing on the potentials of the fledgling fintech space. Around a third of executives in these sectors estimate annual average industry growth of at least 8% a year over the next three years.

Who made it to HKB’s list?

This year’s rankings saw the top 5 largest accounting firms maintain their spots from last year. All 5 firms also increased their total number of staff compared to 2015. PwC is still the largest accounting firm, with 3,900 staff in 2016, which reflects an 11% increase from last year. EY came second with a 2,900-strong staff, up 23% from 2015. Deloitte is ranked third with a 3% increase to 2,265, whilst KPMG’s staff numbers inched up 4% to 2,200. BDO is the fifth largest firm with 1,100 staff, up 10% from last year. Hong Kong Business compiled the firm-provided data from August to September 2016.