From the perspective of anyone with an interest in the health of Hong Kong’s financial markets, we have to be very concerned with the recent events in the United Sates that raise questions over whether some of the private enterprise Chinese companies listed there are complete frauds.Charles Li, the Chief Executive of the Stock Exchange of Hong Kong, was right to point out to the press that many of the companies that are involved in the increasing number of scandals over there would not have remotely qualified for a listing in Hong Kong in the first place.
However, and his comments were broadly correct, this should not mean that we smugly go off into the distance thinking that the growing international mistrust of Chinese private sector companies, and their sponsor banks, is of no relevance to us.It is quite true that we may have listing rules and requirements in Hong Kong that would have stopped many of these particular, NASDAQ “backdoor” listing, companies coming to the local market, but the fact is that we have had more than our fair share of scandals anyway, despite our supposedly more onerous rules.Anyone with any involvement in the market here knows that in fact, we have a pretty strong stench coming from our own trail of corporate scandal here in our very own backyard. Companies with local and international management, focusing on overseas markets, have been racked by scandal, just as companies that are run on the Mainland by management from there, have also often been proven to be a minefield for investors. Moulin is a pretty good example of the former, and Sino-Forest looks to be turning out to be a pretty good example of a corporate fiasco from the mainland.Smug we should not be, especially as it can be argued that few, if any, of the backdoor listing Chinese companies in North America would have attracted long term institutional money and the goings on there, whilst embarrassing for the Exchange, do not impact the mainstream of key global investors.On the other hand, if Hong Kong holds itself out as being well regulated, it can be even more damaging when fraud and accounting irregularities hit the market as institutional investors have often been large holders in scandal hit companies here, because they are told that they operate under a “modern” regulatory regime.
As someone who sat on The Listing Committee for a recent four year period, that is the last organization that should be blamed for shortcomings in the system. It has a mandate to decide a number of things, but the one thing that it cannot decide is whether a company should be listed it or not. This approval is essentially a matter of fact. The rules and published precedents prescribe what criteria a company needs to meet before it can be listed, while sponsors, valuers and accountants have specified responsibilities, including the SFC-licensed sponsors of the issue having an overriding duty of care to carry out due diligence.If someone acting in a professional capacity in preparing a prospectus says that a certain fact is correct, and certifies that they have done the work to come to this conclusion, then neither the Listing Committee nor people at the Exchange can raise any objection.On a good number of occasions, draft prospectuses that were seeking approval were presented to be met with, let’s politely say, a degree of skepticism by members. However, the members’ raised eyebrows fell back to their normal positions when it became apparent that the sponsors had signed off on everything being dandy.The SFC does, however, also have a responsibility to vet prospectuses and they do indeed have powers that the Exchange does not have. So, it was good news this week when Martin Wheatley, on leaving his role at the SFC, raised the prospect of ensuring that professional advisers who knowingly, or unknowingly, are involved in preparing fraudulent new issue documents could face criminal charges in future.There is a dark underside to our financial markets, with a number of players who “play the game”, knowing that the current penalties, in the absence of investors being able to pursue class actions, are modest to non existent. As Chinese companies are undermining investors’ confidence in some overseas markets, Hong Kong needs to protect its reputation assiduously, which also means that local investors will also be better protected. Statutory backing to the Listing Rules, which is promised, and criminal sanctions against sponsors are both much overdue – let’s move ahead as quickly as possible.
Stephen Brown is a director of the Civic Exchange, a Hong Kong-based think tank.We are now on Facebook http://www.facebook.com/pages/Next2ndOpinion/464005150156
這個消息可能會讓范德施（Ronald Van der Vis）覺得自己過去3年的工作顯得毫無價值。他是Esprit的母公司思捷環球的執行董事兼集團行政總裁，這家公司擁有Esprit、Esprit Collection和edc三個品牌。
AT JUST 28, Mr. William Lo already has couple colorful feathers in his fedora – he has not only published his first novel but is also an influential portfolio manager with Ample Capital in Hong Kong. He told Asia Fund Space the Shanghai-Hong Kong Stock Connect share trading scheme comes not a moment too soon.
He must be doing something right as the portfolio he manages has risen 12% this year, compared to just a 2% rise for Hong Kong stocks overall.
Not yet thirty, Ample Capital Portfolio Manager Mr. William Lo is not shy on the lecture circuit.
Asia Fund Space: You just published your first book last month, 一個８０後告訴你他為什麽是有錢人 (A Twenty-Something’s Take on How the Rich Get Rich). What made a young busy professional like you decide to write the book and give us the lowdown on what’s inside?
Mr. William Lo, Portfolio Manager, Ample Capital: I’ve been interested in finance since as long as I can remember. More recently, when I was 17, it was the year 2003. And anyone who was in Hong Kong – or Greater China at the time – remembers the atmosphere of dread we all felt, oftentimes afraid to leave our homes for fear of contracting SARS (Severe Acute Respiratory Syndrome).
But I found great peace, solace and a sense of security studying securities that year, mainly because not only were my peers wary of going to crowded places for much of that year, but they felt much safer locked up at home with their gadgets and games.
(A Twenty-Something’s Take on How
the Rich Get Rich), by Mr. William Lo
I soon found that I could virtually have libraries to myself, and I would sit in virtual solitude that year in Hong Kong’s nearly empty reading rooms poring over the vast financial and investing sector research materials they had on hand.
At the time, I was too young to put money in the market under my own name, but did have relatives willing to stand behind my hunches and allow me to buy and sell under their name, thus giving me my initial immersion into the business of share trading.
With this in mind, I wanted to write a book that would not only encapsulate my experiences as an analyst and investor, but also inspire other would-be, up-and-coming financial sector professionals to succeed by way of my career example.
The benchmark Hang Seng Index (above) is up just 2% YTD, whlle Hong Kong investor Mr. William Lo’s portfolio has risen 12%. Chart: Bloomberg
But it’s not just a tome about good and bad picks, or my history of bullish and dud choices.
I would say only about 20% of the book’s content is devoted to the nuts and bolts of investing while a good portion concerns what I have noticed and learned about good business management practices.
In short, it’s an advice book on how successful people make their money, whether via investing or developing their own businesses.
I also devote a chapter to how some of the world’s headline actors and entertainment sector celebrities have managed to make more money than the chairpersons of well-known blue chip enterprises.
So the book is not just about seasoned veterans in the commercial spaces and how they became rich, but is more about how a wide cross-section of the wealthy from various social strata and occupations, became well heeled over time.
Author of his Success: Ample Capital Portfolio Manager Mr. William Lo published his
first book last month, 一個８０後告訴你他為什麽是有錢人 (A Twenty-Something’s Take
on How the Rich Get Rich).
Asia Fund Space: The Year of the Horse has not been particularly kind to the region, either in terms of GDP performance or equity market prices.
How do you think the Hong Kong stock market will finish out the year?
Mr. William Lo: I expect sentiment to improve as the year draws to a close, and assuming there are no major shocks in the fourth quarter, I expect the benchmark Hang Seng Index to be rangebound around the 25,000 level.
I also anticipate sentiment further improving next, as I don’t expect the low China GDP growth figures to continue on much longer, thanks to what are likely to be a new raft of stimulus measures from Beijing should the economy maintain such stubbornly sluggish expansion rates into 2015.
Ample Capital Portfolio Manager Mr. William Lo keeps a close eye on market
trends in both Hong Kong and the PRC.
Asia Fund Space: The Hang Seng Index is currently hovering around 23,000 points. That’s 3.4% higher than year-earlier levels and up 2.2% from the beginning of the year.
However, it’s currently down sharply from the well-over 25,000 achievement seen early last month.
Given the recently sluggishness – and street protests in Hong Kong — investor chat these days is abuzz with talk of the Shanghai-Hong Kong Stock Connect — a market mechanism which could kick off as early as this month that enables international investors to buy shares in Shanghai while also allowingPRC investors the opportunity to buy stocks listed in Hong Kong.
But some are predicting significant growing pains for the scheme as given the quotas that keep a lid on the amount that can be traded, as well as a proscription on day trading, both regulations that have often been phased out in other more established capital markets overseas.
What is your take on this potentially game changing gambit?
Mr. William Lo: It may launch by end-October but I think it may be pushed back to November.
The delayed start can most clearly be blamed on differences in the two markets between regulatory issue, especially in terms of taxation.
That being said, it can’t be blamed on either side in particular and I think both sides are so far unprepared on the whole.
House Rules: Will Singapore and Hong Kong-listed China New Town Development get a big boost from Shanghai investors finding its easier to investor in Hong Kong listcos following the imminent launch of the Shanghai-Hong Kong Stock Connect plan?
Despite the delays, the plan cannot be launched a moment too soon as I think it is highly anticipated by both sides, and overseas investors as well.
The markets have become even more efficient, and the A/H share premium that was a wide gulf a few years ago has already become something much more resembling dual-listed parity.
And following the Shanghai-Hong Kong Stock Connect launch, premiums on either side of the de facto border will become a thing of history.
I think Shanghai will be the bigger beneficiary of the Connect, both in terms of more enhanced transparency and will open up A-shares to global investors, thus making terms like QFII and ETFs potentially relics of history someday.
Overall, the plan is very helpful in bringing about a true, freeflow of capital between markets and continents.