Asia seeks 2024 redemption for IPOs | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

After a relatively poor 2022, while some Asian stock markets performed well in 2023, such as India and Japan, others including China, Hong Kong, Singapore and Australia languished as geopolitical tensions, rising interest rates and poor performing domestic economies knocked investor confidence.

There was also a downturn in mergers and acquisitions (M&A) in Asia Pacific (Apac), with 155 deals completed in 2023 with volumes down 23% compared to 200 deals in 2022, according to WTW.

Broadly, investors were spooked by a combination of higher for longer interest rates from the US Federal Reserve, a lacklustre economic performance in China post-pandemic with the property sector dragging confidence, and wider geopolitical tensions.

Will Cai, partner and head of Asia capital markets practice and co-chair of China corporate practice at law firm Cooley, told FinanceAsia: “2023 was a very challenging year for all major capital markets in Asia, with Japan as the only exception. There were several contributing factors: the slower-than-expected post-Covid-19 economic recovery in China, the current regional and global geopolitical tensions, as well as the high interest rates.”

He added: “High interest rates have a significant negative impact on capital market deals. The logic is very simple: if treasury bonds can provide 5% annual return, risk free, investors will expect a much higher return on high-risk equity deals – which unfortunately is not what many companies can deliver in a tough market. We probably need to see a moderate reduction on interest rates before equity investors return to the market.”

Amid the gloom, other avenues in the equity space beyond IPOs, performed relatively well, with banks needing to respond to changing client needs.

Kenneth Chow, co-head of Asia equity capital markets, Citi, said: “These are challenging market conditions and as a bank you need to be nimble and flexible. However, there are always opportunities in Asia, such as convertible bonds and block trades.”

Japan and India rising

There were arguably two Asian ‘star’ performers in 2023: Japan and India.

Despite a weak yen, Japan saw a breakout from years of deflation, corporate governance reform and a solid domestic economy, while India saw strong GDP growth of around 7% and a continuation of reforms.

Udhay Furtado, co-head of Asia equity capital markets, Citi, told FA: “Japan and India have recently emerged as IPO hotspots, while Indonesia has also seen positive momentum. There is an increasing interest in the energy transition story, including the makers of electric vehicles and batteries.” 

Japan, with IPO proceeds up 82% compared with 2022, was the standout Asian market last year.

Peter Guenthardt, head of Asia Pacific investment banking at Bank of America, said: “There are many opportunities in Japan with the fee pool increasing 20% in 2023, while overall fees were down by the same figure across Apac. The fee pool was twice the size of China this year. Japan could remain the largest fee pool in Apac in 2024.”

Guenthardt added: “In Japan, there has been an increase of IPOs, block trades and convertible bonds, with that trend set to continue. There has also been a rise in activist investors – for which it is the second most active market in the world.”

He continued: “Japanese companies are also looking to expand abroad for M&A opportunities, with the US being the most popular market and where sectors such as technology are particularly attractive.”  

In India, the market saw a big improvement in the second half of the year. While many companies conducted IPOs outside of India, the local stock markets saw the number of issuers increase by over 50% to 239, according to data from the London Stock Exchange Group (LSEG). With the second half of the year doing particularly well, this bodes well for 2024, with some experts tipping the world’s fifth largest economy to lead the way in IPOs globally this year. 

Citi’s Furtado said in a media release: “We hope to see a turn in the IPO markets, as we have been seeing in India in late 2023 and we also expect to see [a] continued pick up in convertible bond activity (given refinancing efficiencies), alongside a robust follow-on/ block calendar.”

2024 Hong Kong bounceback?

One of the big questions for Asia in 2024 is can Hong Kong, one of the pre-eminent financing hubs, return to something resembling its former glory after years of protest and pandemic turmoil. Any turnaround in Hong Kong should also indicate improved confidence in Chinese equities given that the majority of companies listed on the Hong Kong Stock Exchange (HKEX) are Chinese.

PwC is predicting HK$100 billion ($12.8 billion) of deals in 2024 with around 80 deals in the pipeline, and KPMG is expecting Hong Kong to return to the top five of the IPO global rankings.

While the fundamentals are still strong in the Special Administrative Region (SAR), a recent reliance on Chinese companies, which have been buffeted by domestic headwinds and rising US interest rates, has damaged the market. In addition, the potential implications of the SAR’s new national security law have rattled global investor appetite.

However, in a sign of optimism, already in 2024, two Chinese bubble tea firms have applied for listings on the HKEX suggesting that market appetite could be rebounding in China – especially for companies supplying consumer staples.

Although stock markets in mainland China are providing stiff competition to Hong Kong, foreign investors and Chinese firms are still attracted to Hong Kong’s greater flexibility. In addition, geopolitical tensions mean that Chinese and Hong Kong firms are becoming more cautious about listing in the US.

Stephen Chan, Hong Kong-based partner at Dechert, told FA: “2023 was relatively challenging for the Hong Kong IPO market, with the number of deals and proceeds raised having declined year on year. We have seen a number of potential listing applicants choose to delay their listing timetable in view of the underperforming stock price of recent new listings.”

A sluggish stock market performance, low valuations for newly listed companies and the macroeconomic environment contributed to potential listing applicants opting for the wait-and-see approach, with the SAR facing strong headwinds.

Chan added: “The US interest rates hikes saw investors opt for products with high interest rates and fixed income.” This dampened the demand for IPOs, and in turn affected the valuation of potential IPOs and hence weakened the urge for potential listing applicants, explained Chan. 

He said: “Increased borrowing costs and lower consumer spending in general – due to the high interest rate cycle – have also affected the operational and financial performance of the potential listing applicants. Improvements to both investor sentiment towards the equity market and companies’ operating and financial performance would be essential before companies could reconsider fundraising through IPO.”

Certain sectors have been performing better than others, including technology, media and telecom (TMT) and biotech and healthcare companies. These are likely to continue to lead the IPO market in terms of the deal count and deal size in Hong Kong, especially with January 1, 2024’s HKEX regulatory reform for the new Chapter 18C (known as the GEM reforms) for specialist technology companies, and an expanding market for biotech and healthcare under Chapter 18A which was launched in 2018.

Chan added: “The HKEX has taken the opportunity to introduce a number of modifications to improve the fundraising process including the new settlement platform, FINI, which will shorten the time gap between IPO pricing and trading and hence reduce the market risk and modernise and digitalise the entire IPO process.”

“The GEM listing reform aiming to enhance attractiveness for SMEs to seek listings. . . will also boost the number of deal counts for the Hong Kong IPO market and provide SMEs with development potential a viable pathway for pursuing listing in the main board in the future.”

A continuation of the return of visitors to around 65% of pre-pandemic levels to the SAR in 2023 should also help build momentum in the local economy. In addition, the SAR has been reaching out to the Middle East for investment and is increasing its trade cooperation with Asean countries.

Asia outlook

While China appears to still be struggling to turn its economy around, Asia will continue its overall growth trajectory as the middle class grows, technology evolves and connectivity improves. The relatively young populations of Asean countries such as Indonesia, Vietnam and Thailand will also continue to provide a boon for investors.

Cooley’s Cai said: “In terms of deal counts, there were still relatively more biotech deals in 2023. Part of the reason is that biotech companies must raise capital regardless of market conditions (and therefore, the price). We also see companies from the ‘new consumer’ sectors looking to IPO. We believe these two sectors likely can do well in 2024.”

He continued: “We hope 2024 will be better than 2023, but we may need to wait a bit longer for a booming market.”

There is certainly a long way to go before seeing the region’s previous robust IPO levels.

“2024 is going to be a volatile year with the upcoming elections in the likes of the US and India, but there is a strong pipeline of deals if risk appetite returns, which will partly depend on the pace of monetary loosening,” said Citi’s Furtado.

Alongside a host of elections, there are ongoing conflicts in the Middle East and Ukraine, meaning there is much uncertainty over global supply chains, oil prices and the inflation trajectory.

While investors will be hoping that inflation can be kept under control so the US Fed can start cutting rates sooner rather than later, solid economic fundamentals and growth in many large countries in the region should provide confidence in Asia’s equity markets moving forward.

This article first appeared in Volume One 2024 of the FinanceAsia print magazine which is available online here. 


¬ Haymarket Media Limited. All rights reserved.

Continue Reading

G7 could use Russian assets to ‘finance and lease’ Ukraine’s victory

By:
On:
In: Asia

The United States and its Group of Seven (G7) partners must transfer some $500 billion of Russian frozen assets – of which at least $300 billion is Russian Central Bank reserves and up to $200 billion of funds belonging to sanctioned oligarchs – so Ukraine can achieve its dual objective of liberating its country from Russian occupation and becoming a full member of the European Union.

YouTube video

[embedded content]

Ukrainian Prosecutor General Andrey Kostin speaks to Capitol Intelligence/CI Ukraine on oligarchs operating as organized crime at the Carnegie Endowment for International Peace in Washington on September 26, 2023.

President Joe Biden, as his wartime predecessor Franklin D Roosevelt did, could bypass isolationist opposition in Congress by instituting a “finance and lease” program where Ukraine can immediately access Russian assets to purchase war materiel, finance the country’s budget and reinforce the country’s private sector. 

And unlike FDR’s “Lend-Lease Act of 1941” to Great Britain, the Soviet Union, and the Republic of China, Ukraine would be merely accessing funds already earmarked for postwar reconstruction, a task that becomes every day more burdensome and costly as the war with Russia enters its third year.

It is also time for Biden to have US Treasury Secretary Janet Yellen openly campaign that Ukraine immediately be given full drawdown authority on the $300 billion of frozen Russian Central Bank assets and US Attorney General Merrick Garland aggressively use the long arm of US law to force the transfer up to $200 billion of oligarch wealth to refinance and regrow the country’s critical private-sector economy.

The White House has already been utilizing news-media leaks by high-ranking US Treasury officials (such as Deputy Treasury Secretary Wally Adeyamo) to put out the message that  Russian Central Bank assets must be transferred to Ukraine.

It is now time for Yellen to lead the call for the asset transfer as the former US Federal Reserve chairwoman did when she orchestrated the original freeze with former European Central Bank president and Italian prime minister Mario Draghi after the Russian invasion on February 24, 2022.

Former British prime minister and current UK Foreign Secretary David Cameron was the first G7 official to demand publicly the transfer of Russian state assets to Ukraine during his first Foreign Office visit to the United States on December 9 ahead of a contentious congressional vote to approve $61 billion in financial and military aid to Ukraine.

“Instead of just freezing that money, let’s take that money, spend it on rebuilding Ukraine and that is, if you like, a down payment on reparations that Russia will one day have to pay for the illegal invasion that they’ve undertaken,” Cameron said. “I’ve looked at all the arguments and so far, I haven’t seen anything that convinces me this is a bad idea.”

The vote on US aid to Ukraine is expected early in the new year after being hijacked by “America First” Republicans, while the EU package was delayed by a veto by Hungary’s Viktor Orban.

Former World Bank president Robert B Zoellick and former US treasury secretary Larry Summers both agree that seized Russian Central Bank assets could be transferred and reutilized by Ukraine under US and international law.

YouTube video

[embedded content]

Former World Bank president Robert B Zoellick and former US treasury secretary Lawrence Summers filmed by Capitol Intelligence/CI Ukraine debating the timing of private-sector investment and Ukraine reconstruction at the Atlantic Council on February 27, 2023.

Zoellick and Summers – highly influential figures in the Republican and Democratic administrations of George W Bush and Bill Clinton – made it abundantly clear earlier this year that the Biden administration and the G7 have no valid reasons not to transfer Russian state assets to Ukraine.

In fact, Biden’s closest foreign-policy adviser outside the executive branch, Senator Chris Coons, said in an interview just prior to the Christmas recess that the bipartisan Rebuilding Economic and Economic Prosperity for Ukrainians (REPO) Act will further empower Biden to shift Russian assets to Ukraine.

Harvard Law graduate Zoellick stated that while the transfer of Russian Central Bank state assets is legally straightforward but noted the transfer of confiscated assets of sanctioned Russian oligarchs such as Rusal aluminum tycoon Oleg Deripaska, Alfa Bank founder and oil asset raider Mikhail Fridman, and Severstal steel baron Alexei Mordashov have added legal complexities.

‘Mafia bosses’

Ukrainian Prosecutor General Andriy Kostin, speaking at the Carnegie think-tank in Washington in September, bluntly stated that oligarchs should be treated and seen by all as organized-crime bosses on the lines of Mexico’s El Chapo or the late Italian mafia capo Toto Riina and not robber barons of the John D Rockefeller and J P Morgan ilk.

Kostin said he does not differentiate between Russian and Ukrainian oligarchs as they all use the same mechanism and means as organized-crime outfits. In fact, Kostin oversaw the arrest of notorious Ukrainian oligarch Ihor Kolomoisky for corruption and money-laundering related to the bankruptcy of the oligarch’s PrivatBank.

Notwithstanding wide-ranging discussions with Attorney General Merrick Garland at the US Department of Justice, Kostin seemed surprised that neither Garland nor DOJ officials requested the extradition of Kolomoisky on US federal fraud charges.

Ukrainian fertilizer and metals oligarch Dmytro Firtash has been in Vienna since 2014 fighting US extradition orders on Boeing-related bribery charges and has admitted to business dealing with Ukrainian born Semion Mogilevich, the now Moscow-based godfather of the Russian mafia and on among the FBI’s Most Wanted.

Kostin’s attitude to oligarchs must be adopted by Garland and Western law enforcement as all their wealth was derived by ill-gotten gains from the mass theft of state-owned assets after the fall of the Soviet Union in 1991.

In fact, the reinvestment of Russian assets was the focus of Bearstone’s Asset Recovery CEE conference in Warsaw on April 18 featuring hedge-fund managers and international lawyers under the tutelage of Poland’s newly elected “rule of law” prime minister, Donald Tusk.

Ukraine defense sector

The $300 billion to $500 billion drawdown would allow Ukraine directly to manage its social spending and private-sector investment requirements but also make the country self-sufficient in its defense sector by co-producing its arms with major defense contractors such as F-16 and MGM-140 ATACMS manufacturer Lockheed Martin, RTX (Raytheon), and L3 Harris.

Ukraine already supplied up to 40% of the Russian defense industry prior to the annexation of Crimea in 2014 and such co-production would allow Ukraine to immediately join NATO after the end of hostilities.

YouTube video

[embedded content]

Andriy Yermak, chief of staff to Ukrainian President Volodymyr Zelensky, filmed by Capitol Intelligence/CI Ukraine answering questions on whether Ukraine has signed contracts to jointly produce arms ahead of the US-Ukraine Defense Industrial Base Conference on December 6-7 at the US Institute of Peace in Washington on December 5, 2023.

The goal of co-production with major Western defense firms is a top priority of Ukrainian President Volodymyr Zelensky, who mandated his chief of staff, Andriy Yermak, to ink as many deals as possible when he traveled to Washington on December 5-7.

Zelensky and Yermak are fully aware of the billions of dollars Lockheed and Boeing invested in Polish industry as part of mandatory offsets in exchange for the Polish government acquiring F-16s and 787-9 Dreamliners, but US defense contractors continue to stiff Ukraine on jobs and in-country investment.

The Ukraine delegation was visibly upset when not one of the chief executives of the major US defense companies such as Lockheed’s James Taiclet, RTX’s Gregory Hayes, Boeing’s David L Calhoun or L3 Harris’ Chris Kubasik met with Zelensky during his critical mission to Washington on December 11.

John Herbst, the US ambassador in Ukraine during the last years of president Leonid Kuchma, said the lack of US defense CEOs was due to US Secretary of State Antony Blinken and national security adviser Jake Sullivan warning off US defense companies from direct investment in the Ukrainian arms industry.

Biden has publicly stated in Oval Office meetings with Zelensky that he supports US defense investment in Ukraine’s defense sector.

The up to $200 billion in oligarch assets can already be used to re-energize the Ukrainian private sector either through project finance or equity investments managed by the US International Development Finance Corporation (US DFC), European Bank for Reconstruction and Development (EBRD) and or the World Bank’s International Finance Corporation.

A good part of the funds could be used to provide private-sector war risk insurance via the World Bank’s Multilateral Investment Guarantee Agency (MIGA) or fund the rebuilding of Sweden SKF’s ball-bearing plant in Lutsk after Russia obliterated the factory in northwestern Ukraine this year.

Sadly, much of the good financial news surrounding Ukraine, such as the $480 million in financing and investment by the US DFC, EBRD and IFC in Ukraine’s MHP SE poultry concern or M&A talks between one of the America’s top three US private equity firms (Blackstone/Carlyle/KKR) and Ukraine’s game-hosting giant Boosteroid is being left off the pages of the Financial Times and Wall Street Journal.

Blackstone, which acquired a 40% stake in the Benetton family–owned Atlantia infrastructure group, is being actively courted by the Ukrainian government to participate in future privatizations of airports and highways.

YouTube video

[embedded content]

US International Development Finance Corporation (US DFC) CEO Scott Nathan speaks to Capitol Intelligence/CI Ukraine on $250 million investment with European Bank for Reconstruction and Development (EBRD) and International Finance Corporation (IFC) in Kiev-based poultry concern MHP SE at the Meridian Global Summit in Washington on October 20, 2023.

The immediate transfer of Russian Central Bank and oligarch assets to Ukraine would kill any hope by President Vladimir Putin of a possible victory over Ukraine, especially ahead of presidential elections in March when he will be required to travel to restive Russian regions and occupied Ukraine.

However, the asset transfer would also create a privileged forum with the G7 for any future peace talks between a post-Putin Russian government and postwar, liberated Ukraine.

In the case of a permanent stalemate, Russian assets would be frozen for decades or more, and even longer in the case of Bolshevik Russia, where it took more than 70 years to repay Czarist Russian Railway bonds.

Biden’s and the G7 “finance and lease” program would finally allow Ukraine to focus on its dual mission of ending the Russian occupation and its stated goal to become a full member of the European Union by end-2025 after becoming an official EU ascension candidate with Moldova and Georgia on December 14.

Continue Reading

HSF eyes emerging energy and tech opportunities | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

This month, London-headquartered law firm, Herbert Smith Freehills (HSF) announced the expansion of its Singapore-based capability with three partners, in support of opportunities in emerging sectors such as technology and energy transition, as well as the “high priority growth area” of private capital.

At the start of September, the company shared the recruitment of energy transition specialist, Peiwen Chen from the Singapore office of competitor, White & Case; and the relocation of HSF M&A partner, Malika Chandrasegaran, from Sydney. This was followed by news on Thursday (September 21) of the recruitment of Anthony Patten as M&A and energy expert, from King & Spalding.

The three partners report to Jamie McLaren, Singapore-based partner and Andrew Blacoe, head of Corporates.

Discussing opportunity in the private capital space, McLaren told FinanceAsia, “There is a huge amount of dry powder available to deploy in Asia; and as private equity (PE) houses look to rebalance portfolios and benefit from the anticipated upside in a maturing Asian economy, there are an increasing number of PE houses moving into Asia and setting up Asia-focussed funds.”

He underlined that, while opportunities in the tech sector might have tailed off in recent months, they are likely to pick up on the back of consolidation yet to come, coupled with developments across artificial intelligence (AI) that are set to offer new potential.

Meanwhile, traditional PE sectors such as healthcare, financial services and the consumer segment are continuing to provide strong deal flow. “Markets such as Indonesia, India, Philippines, Thailand and Vietnam continue to offer huge promise.”

Although deal activity has been fairly subdued in recent months, McLaren added that there are signs of this turning around, “with a number of recent high profile deals, including KKR’s investment in Singtel’s data centre business” and a busy few months in the pipeline.

With regard to the new recruits, the HSF team pointed to Chen’s experience advising financial sponsors, strategic corporates and sovereign wealth funds (SWFs) on cross-border transactions, including Copenhagen Infrastructure Partners (CIP) on the NT$90 billion ($3 billion) development and subsequent sale of a strategic stake in the Taiwanese 589 MW Changfang and Xidao offshore wind projects; as well as Thailand-headquartered Ratch Group on its $605 million acquisition of Nexif Energy.

Patten brings to the firm three decades of track record working across the energy space – spanning sub-sectors comprising renewables, hydrogen, ammonia and carbon capture, as well as traditional oil and gas. In terms of other law firms, his LinkedIn profile highlights his experience at Ashurst, Allens and Shearman and Sterling, as well as six years spent as legal counsel at Shell, in London and Dubai.

The team drew attention to Chandrasegaran’s adeptness advising TPG on its A$16.5 billion ($10.6 billion) merger with Vodafone Hutchison Australia; and the A$18.7 billion acquisition of Origin Energy by a consortium involving Brookfield Asset Management, GIC, Temasek and EIG Global Energy Partners.

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

Hong Kong and China interest in AI and regtech ‘palpable’ despite soft fintech funding: report | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

Fintech companies in Asia Pacific received $5.1 billion of funding in the first half of 2023, a further drop from $6.7 billion during the same period last year, a recent KPMG report has revealed.

The figure points to a “very soft” fintech funding landscape in the region, in contrast with $36.1 billion of funding in the Americas, and $11.2 billion in Europe, Middle East and Africa (EMEA), the study showed.

In terms of number of fintech funding deals, 432 were completed in the Apac region, compared with 1,011 in the Americas, and 702 in EMEA.

“The global fintech market has seen challenges, with a decline in both funding and deals,” Barnaby Robson, deal advisory partner at KPMG China told FinanceAsia.

“Public companies have changed materially, with entire industries trading at fractions of previous valuations. But founder expectations have not moved as fast, meaning private valuations are adjusting slowly as companies seek new funding,” he explained.

The report, Pulse of Fintech H1’23, aggregated data from global venture capital (VC), private equity (PE) and mergers and acquisitions (M&A) deals in 2023’s first half, and looked into various segments including payments, insurtech, regtech, cyber security, wealthtech and blockchain.

The largest fintech deal H1 2023 in the region was $1.5 billion raised by Chongqing Ant Consumer Finance, the consumer finance unit of China’s Ant Group, which faced Beijing’s pressure to restructure in compliance with regulatory limits.

“Fintech funding in China is very dry” outside of Chongqing Ant Consumer Finance’s deal, the report noted. Businesses and investors in China tend to prioritise post-pandemic recovery, waiting for outcomes from prior investments, it explained.

Other significant deals in Asia include $304 million raised by India-based Vistaar Finance, and $270 million raised by Kredivo Holdings in Singapore.

Rebound potential

Despite slowing deal activity and slashed valuation, the intrinsic value and potential of the fintech sector in Hong Kong, mainland China, and Asia in general, remained robust, Robson told FA.

Fintech firms in the area are increasingly looking at leveraging artificial intelligence-generated content (AIGC), the report identified.

“In mainland China, the focus on AI in insurtech, creditech and wealthtech is evident. Hong Kong, with its global connectivity, needs to navigate the growing challenges of dealing two different AI regimes and mainland China data onshoring rules. The diverse financial landscape and low productivity in emerging Asia, offers a fertile ground for AI-driven fintech innovations,” Robson detailed.

“AI’s potential to revolutionise fintech segments is undeniable.”

Despite the US and Europe being leaders in regtech, or regulatory technology, interest from Hong Kong and China is palpable, according to Robson.

“With the People’s Bank of China’s (PBOC) recent announcements and Hong Kong’s agile regulatory framework, it’s clear that the region is gearing up for a more transparent and efficient financial ecosystem,” he said.

China’s central bank released a set of draft administrative measures on data security management last month for public consultation, signalling the watchdog’s enhanced emphasis on data processing securities amid geopolitical tensions.

Many financial institutions are embracing regtech to improve the efficiency and effectiveness of addressing compliance and regulatory requirements, Robson noted.

In his view, the confluence of AI advancements, regulatory shifts, and a growing middle class could very likely help catalyse fintech funding in Hong Kong, mainland China as well as the broader Asia region.

But that would be possible only after “a more complete reset in multiples to get to where valuations reflect fundamentals, and market clearing prices exist”.

He pointed to late 2024 or 2025 as a likely timing for such a rebound, citing fintech being properly valued on a realistic discounted cash flow (DCF) or free cash flow (FCF) basis as a contributing element.

“It’s a matter of when, not if,”

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

Sustainable Leaders series: Ayala’s path to an ESG driven business | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

With several ESG-backed initiatives in recent years, the Philippines-based conglomerate Ayala has solidified its commitment to sustainability. Operating across verticals including energy, finance, infrastructure, and real estate, Ayala has committed to net zero greenhouse emissions by 2050. The conglomerate’s energy wing ACEN recently created the world’s first energy transition mechanism (ETM) in November 2022, backed by BPI and RCBC.

On the social front, Ayala’s GCash app and BPI’s BanKo have  played pivotal roles in financial inclusion for unbanked Filipinos and small to medium size enterprises. BPI and Globe are currently reviewing their framework to consciously focus on these areas.

When it comes to governance, Ayala’s boards are working towards an appropriate level of diversity and independence. This involves maintaining high standards when it comes to transparency and disclosure.

The 190-year-old company’s social and sustainability initiatives have a long history. Albert de Larrazabal, CFO at Ayala Corporation said, “We have always aligned ourselves to national interest and had very high standards of governance and stewardship. As we must be mindful of the ecosystems we operate under, ESG in various forms has always been part of our value proposition.”

Ayala’s approach to ESG

Today, ESG-based financing is a priority for Ayala. Apart from ACEN’s implementation of the world’s first ETM, Ayala has issued a social bond with the IFC in support of its cancer hospital. Larrazabal said, “We are looking to do KPI-linked social and ESG financing, which incorporates targets into the commercial terms and conditions of the loan.”

Even during the M&A process, the conglomerate is mindful of integrating new acquisitions into its ESG framework. Ayala has also taken steps to ensure that ESG is a priority that is ingrained at the highest levels of the organisation, leveraging its membership with the World Business Council for Sustainable Development (WBCSD). The conglomerate’s board has received training which ensures they can play an active role in tracking and monitoring developments in the ESG space.

Corporates making public commitments to sustainability draw a lot of attention, not all of it positive. Asked how Ayala approaches concerns about greenwashing, Larrazabal said, “Sometimes it happens inadvertently because of incorrect measurements. That’s why we brought in South Pole. We have taken steps to ensure we are on the right track by committing to independent verification, to give people a degree of reassurance.”

Building a model for the APAC region

While the need for sustainable leaders is strongly felt across APAC, many countries in the region have a minimal contribution to emissions — the Philippines emits half the global average on a per capita basis. Larrazabal said, “Between 80% to 88% of our emissions — depending on individual businesses — are scope 3.” These emissions are defined as the result of activities from assets not owned or controlled by a reporting organisation, but which are a part of its value chain. Larrazabal said, “Our scope 3 is somebody else’s scope 1 and scope 2. We need an environment that enables, incentivises, and if that fails, penalises those who disregard scope 1 and 2.”

Many emerging markets grapple with issues similar to those facing the Philippines — adopting renewable energy, while meeting the demands of a growing population and economy. As a result, ETM-like arrangements may be embraced to a greater extent. Asked for his advice on managing such a transaction, Eric Francia, president and CEO at ACEN said, “It is important for investors to reconsider their position on coal, so long as the principles are well understood. One may be investing in a coal plant, but for a good purpose, which is enabling its early retirement.”

Offering a financial perspective on the ETM, TG Limcaoco, president and CEO Bank of Philippine Islands added, “We provided lending and brought in other institutions. We took reduced rates of returns for equity and debt exposure, which allowed us to shorten the life of the plant by 10 to 15 years. It is a big win for everyone involved.”

For more on Ayala’s adoption of ESG and a deeper insight into the world’s first ever ETM, please watch the accompanying video.

 

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

Ayala’s path to an ESG driven business | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

With several ESG-backed initiatives in recent years, the Philippines-based conglomerate Ayala has solidified its commitment to sustainability. Operating across verticals including energy, finance, infrastructure, and real estate, Ayala has committed to net zero greenhouse emissions by 2050. The conglomerate’s energy wing ACEN recently created the world’s first energy transition mechanism (ETM) in November 2022, backed by BPI and RCBC.

On the social front, Ayala’s GCash app and BPI’s BanKo have  played pivotal roles in financial inclusion for unbanked Filipinos and small to medium size enterprises. BPI and Globe are currently reviewing their framework to consciously focus on these areas.

When it comes to governance, Ayala’s boards are working towards an appropriate level of diversity and independence. This involves maintaining high standards when it comes to transparency and disclosure.

The 190-year-old company’s social and sustainability initiatives have a long history. Albert de Larrazabal, CFO at Ayala Corporation said, “We have always aligned ourselves to national interest and had very high standards of governance and stewardship. As we must be mindful of the ecosystems we operate under, ESG in various forms has always been part of our value proposition.”

Ayala’s approach to ESG

Today, ESG-based financing is a priority for Ayala. Apart from ACEN’s implementation of the world’s first ETM, Ayala has issued a social bond with the IFC in support of its cancer hospital. Larrazabal said, “We are looking to do KPI-linked social and ESG financing, which incorporates targets into the commercial terms and conditions of the loan.”

Even during the M&A process, the conglomerate is mindful of integrating new acquisitions into its ESG framework. Ayala has also taken steps to ensure that ESG is a priority that is ingrained at the highest levels of the organisation, leveraging its membership with the World Business Council for Sustainable Development (WBCSD). The conglomerate’s board has received training which ensures they can play an active role in tracking and monitoring developments in the ESG space.

Corporates making public commitments to sustainability draw a lot of attention, not all of it positive. Asked how Ayala approaches concerns about greenwashing, Larrazabal said, “Sometimes it happens inadvertently because of incorrect measurements. That’s why we brought in South Pole. We have taken steps to ensure we are on the right track by committing to independent verification, to give people a degree of reassurance.”

Building a model for the APAC region

While the need for sustainable leaders is strongly felt across APAC, many countries in the region have a minimal contribution to emissions — the Philippines emits half the global average on a per capita basis. Larrazabal said, “Between 80% to 88% of our emissions — depending on individual businesses — are scope 3.” These emissions are defined as the result of activities from assets not owned or controlled by a reporting organisation, but which are a part of its value chain. Larrazabal said, “Our scope 3 is somebody else’s scope 1 and scope 2. We need an environment that enables, incentivises, and if that fails, penalises those who disregard scope 1 and 2.”

Many emerging markets grapple with issues similar to those facing the Philippines — adopting renewable energy, while meeting the demands of a growing population and economy. As a result, ETM-like arrangements may be embraced to a greater extent. Asked for his advice on managing such a transaction, Eric Francia, president and CEO at ACEN said, “It is important for investors to reconsider their position on coal, so long as the principles are well understood. One may be investing in a coal plant, but for a good purpose, which is enabling its early retirement.”

Offering a financial perspective on the ETM, TG Limcaoco, president and CEO Bank of Philippine Islands added, “We provided lending and brought in other institutions. We took reduced rates of returns for equity and debt exposure, which allowed us to shorten the life of the plant by 10 to 15 years. It is a big win for everyone involved.”

For more on Ayala’s adoption of ESG and a deeper insight into the world’s first ever ETM, please watch the accompanying video.

 

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

Dear HNWIs, your next vehicle should be fully electric

By:
On:
In: Technology

Doubts about range, batteries and environmental cost are greatly exaggerated
Cheapest EVs come with a range of 380km, while battery prices keep falling

Range anxiety, charging infrastructure, battery replacement – these are the biggest fears people have when considering an electric vehicle. Let’s also add environmental costs to this list – specifically the issue around…Continue Reading

FinanceAsia Volume Two 2023 | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

By now, most of our subscribers will have received print editions of the latest FinanceAsia Magazine: Volume Two 2023. 

Over the course of the summer, we look forward to sharing online our in-depth magazine features, including the detailed rationale behind our jury’s selection of winners across our recent flagship FA Awards process.

You can access the full online edition here.

To whet your appetite, read on for our editor’s note.

Positive predictions

As a snake (according to the Chinese zodiac), I have so far fulfilled my Year of the Rabbit prophecy in securing opportunity for career growth within the Haymarket Asia business. A successor will soon have the good fortune to step up as editor in my place, as I become content and business director and oversee the editorial strategy of our finance publications: FinanceAsia, CorporateTreasurer and AsianInvestor.

It is said that those born in 2023 will be blessed with vigilance and quick-mindedness. Very useful personality traits, I would think, as artificial intelligence (AI) advances globally, at pace. We are witnessing great development in this field in Hong Kong – and across the wider Asian economy, as emerging tech becomes the next positive disruptor and the capital markets work to respond through evolving regulation and new listing regimes.

In this summer issue, Christopher Chu delves into the value disruption put forward by generative AI, with consultants estimating its worth to breach $16 trillion by 2030. He explores its sophistication and how its potential is interwoven with political factors, while questions are posed around data ownership.

Also intertwined within the realm of transformative technology, is this edition’s flagship interview with BNP Paribas’ CEO for Asia Pacific, Paul Yang. He shares his journey navigating a career path that has taken him from IT coding in Paris, to leadership of the bank’s Asia Pacific business. He offers insights around his accomplishments to date and details plans to progress the bank’s 2025 Growth, Technology and Sustainability (GTS) strategy.

Reviewing activity across Southeast Asia, Liza Tan inspects the market’s prominent position in the ongoing start-up story, through assessment of the current venture capital (VC) fundraising landscape. Her discussion with experts asserts that fintech is inherently fused with human approach and that quality conversations and connections are key to future success.

Indeed, as FinanceAsia’s recent in-person awards celebration underlined, we have much to look forward to in the second half of the year and it is the human elements involved in dealmaking that have capacity to shape the road ahead. I think we all agree that recognising and nurturing talent is vital and so I hope you enjoy reading our evaluation of market resourcefulness, ingenuity and skill that informed the jury’s selection of award winners, amongst truly outstanding competition.

Finally, Sara Velezmoro and I explore the outlook for Asia’s debt capital markets – investigating what opportunity is on offer alongside the changing environment; and whether the momentum surrounding Japanese equities can be sustained, if the government were to reverse yield curve control.

Amid uncertainty we must focus on potential, so please join me in acknowledging the positive strides being taken by Asia’s market movers.

Ella Arwyn Jones

(Please feel free to send feedback or suggestions to [email protected])

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

“Hong Kong to emerge as stock exchange of choice” – Dealmaking experts | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

Former Securities and Futures Commission (SFC) senior director, Roger Cheng, is set to join UK-headquartered law firm, Linklaters, at its Hong Kong base from August.

The move follows his nearly five years of experience at the special administrative region’s (SAR) financial regulator, where Cheng oversaw the operations of the Takeovers Team. The law firm’s announcement pointed to the instrumental role that he played during this time, developing Hong Kong’s takeovers and mergers policy, as well as driving forward other listing-related progress.

Prior to his tenure with the SFC, Cheng spent 13 years at Slaughter and May.

Offering some thoughts around trends affecting dealmaking in Hong Kong and China, Betty Yap, Linklaters partner and global co-head of the firm’s Financial Sponsor Group shared that there had been a noticeable rebound of M&A activity in the region post-pandemic, though activity has not yet returned to pre-pandemic levels.

“Inbound investment into mainland China is still somewhat marred by geo-politics and recent regulatory changes,” she told FinanceAsia, adding that her team is optimistic around sectors less affected by national security concerns, such as the consumer segment.

“Interest from Middle Eastern investors in M&A opportunities in China has increased as relations between [both] continue to strengthen.  We are also seeing a number of sales by private equity (PE) sponsors in the market, as investments made in prior years mature,” she continued.

Her colleague, Hong Kong-based partner, Xiaoxi Lin, noted that recent financial stress in the Chinese real estate market has presented interesting M&A opportunity in Hong Kong, through the sale of prime commercial and residential properties to generate cashflow and service restructuring debts.

“A cocktail of factors including the distress in the PRC real estate sector, rising interest rates, and regulatory restrictions have meant that commercial banks are reducing their exposure to the real estate sector, including loans secured by residential and commercial properties,” Yap said.

“Credit funds – who are not subject to the same regulatory restrictions – are stepping into this funding gap,” she added, highlighting that while the current elevated interest rate environment means that borrowing costs are higher, credit funds are able to provide financing on the back of higher loan-to-value (LTV) ratios and can offer swift deal execution.

IPO dynamics

In terms of the IPO landscape ahead, Lin told FA, “Market participants are cautiously expecting a stronger HK IPO market this year with more companies listed than in 2022”.

Corporate partner, Donnelly Chan, added that Hong Kong’s recent introduction of the Chapter 18C regime – which reduces the listing requirements threshold for firms operating in new economy industries – together with recent China Securities Regulatory Commission (CSRC) reforms, is likely to support the market’s advancement.

“The track record and proven success of the pre-revenue Biotech listing regime and the weighted voting rights (WVR) listing regime since their introduction in 2018, coupled with the concession route for Greater China companies to secondary list on the main board has demonstrated the Hong Kong market’s flexible approach and readiness to evolve and explore opportunities,” he told FA.

Chan added that, as a result, it is hoped Hong Kong’s bourse will become “the stock exchange of choice” compared to other regional fundraising hubs.

Opportunity elsewhere

However, Yap is bullish on opportunity across the full breadth of Asian markets.

“For the remainder of 2023, we believe there will be continued interest in M&A opportunities in Asia,” she told FA.

“As inbound investment interest in China remains mixed given geo-politics, other single jurisdiction markets in Asia that can provide scale will be of interest to financial sponsor investors looking for efficiency in the deployment of capital.”

She pointed to markets such as India and Japan as benefitting from investor appetite – with the latter offering attractive costs “because of the lower yen”.

Yap added that Southeast Asia will continue to draw capital: “in particular Indonesia, with its relatively young demographics and the consumption power of its growing middle class.”

In terms of sectors, she noted that energy transition will remain of utmost importance “with interest in targets from renewables to electric vehicles to batteries to de-carbonising assets,” while digital infrastructure and data centre investment will continue to support the rise of e-commerce.

In the Linklaters release, head of Corporate, Sophie Mathur shared, “We are delighted to welcome Roger to our corporate practice. We are confident that his insights into takeovers and mergers regulations and policy matters will be of immense value-add to our clients when navigating take-privates and other public market transactions.”

Unlike the typical structure of a corporation, Linklaters employs a limited liability partnership which enables the firm’s partner leadership-base to make long-term strategic decisions for the business together.

Cheng’s appointment follows other key hires in Asia in recent months, including the appointment of Yoshiyuki Asaoka as corporate partner in Japan. In June 2021, William Liu was appointed as regional managing partner for Asia Pacific.

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading