IFLR Asia Capital Markets Forum 2014- Overview


December 4 2014 | JW Marriott Hong Kong


This year marks the 10th anniversary of the IFLR Asia Capital Markets Forum
. Market participants throughout Asia have felt the pressures of increased scrutiny from regional regulators and those from the EUand the US. Considering the flurry of new regulations and enforcement actions this year, the IFLR Asia Capital Markets Forum 2014 highlighted the latest initiatives, developments and market standards that are essential for both banks and corporates to improve transparency and integrity with clients and the investing public.

This one-day forum brought together 250+ leading industry representatives, policy makers, key regulators, institutional investors, law firms, bankers and corporate counsel for an enriching networking opportunity, and examined issues through a series of panel discussions.

Scroll down to check out the KEY TAKEAWAYS for this event:
 

What international developments mean for Asia’s financing market

  • Market participants remain concerned about extraterritorial regulation, with FATCA and Dodd-Frank being key concerns
  • Questions remain on retail participation in the contingent convertible market. The UK recently restricted retail investors from buying CoCos, and Asian jurisdictions may follow
  • It’s important to differentiate between regulatory choices and policy choices. Regulators must implement legislation handed down from legislative bodies
  • Extraterritoriality must be determined on a case-by-case basis. While cross-border markets require international initiatives, more local issues such as local bond or repo markets should be regulated locally
  • Shadow banking hasn’t necessarily grown because of bank regulations, but instead because of investor demand for market-based financing

HK – Shanghai Stock Connect: implications for investor strategy, equity market sand the financial sector

  • The trading on the Stock Connect has been satisfactory so far in that the trading, settlement and clearing have been stable over the past three weeks
  • Prices for A and H shares for companies listed in both Shanghai and Hong Kong have now converged
  • More trading is expected once investors have more information. At this point few brokers have significant research coverage of onshore stocks
  • Beneficial ownership and the pre-trading checks remain concerns for market participants
  • Improvements or expansions could include changing or removing constraints, such as quotas for investors looking southbound and adding more Hong Kong companies to the programme, as well as new products

Distressed bonds: enforcement options when a deal goes wrong

  • Bonds present a particular problem in a restructuring context because they’re structured to facilitate trading and increase liquidity, but that may mean that there’s no access to the underlying assets of the bonds
  • Asian legal markets are emerging, and it is difficult for local courts to work with complex financial instrument documentation
  • There are enormous opportunities in distressed debt investing in Asia. As the bond market grows, the restructuring market will grow as well
  • There may be opportunities in the commodities space, especially if the price of oil remains low
  • Forming bondholder committees is essential to have a collective voice in negotiations, but it can be difficult for real money investors and distressed investors to find common ground

Internationalisation of the RMB market: how you can benefit from China’s financial opening

  • The RMB is becoming an international currency quickly. Although Hong Kong remains the dominant renminbi centre, Singapore and Taiwan also have large renminbi deposits and countries from France to Canada are also boosting their use of the currency
  • Keepwell deeds and equity interest purchase undertakings (and the newer liquidity support facilities) are love letters between the holdco issuer and the onshore opco. They aren’t a guarantee but demonstrate onshore company’s commitment to the holdco
  • Chinese regulators released new regulations earlier this year, which permit issuers who intend to use bond proceeds offshore to provide onshore guarantees. Those offerings must be registered with the State Administration of Foreign Exchange after the bond is sold
  • To incentivise onshore issuers to register bonds with Safe, a registration put option is included in the bonds’ terms and conditions
  • SBLCs and keepwell deeds will remain popular with issuers as long as China’s capital account remains closed as many issuers intend to remit funds raised onshore

Rising to the challenge: corporate governance and control issues in listing companies

  • Hong Kong’s concept paper has prompted further discussion about weighted voting rights in the jurisdiction, where it’s been a divisive topic since Alibaba chose the NYSE as its IPO venue
  • CSRC has also announced that it may set up a new board so that Chinese technology companies are able to list onshore
  • If Hong Kong does implement weighted voting rights, it will likely have a more prescriptive process with more requirements than that of the US, which is disclosure-based
  • For VIE structures, it is important that interests are aligned between the person who owns the company and the one who owns a VIE. Other than smart investment banking and corporate structuring

Boosting investor confidence: professionalism, governance, culture and ethics

  • Boards are the representatives of shareholders, and they rely on them to make decisions in the interests of all shareholders. In particular, they should focus on creating a strong ethical culture and fostering innovation
  • Hong Kong listed companies’ processes for selecting independent directors must become more transparent
  • Companies which are open with disclosure tend to be better performing, and tend to make better decisions that move beyond the culture of compliance
  • Rather than having more disclosure for the sake of disclosing information, companies should instead aim to have more meaningful disclosure
  • Investors should open dialogue with regulators so that they know what investors are looking for and what needs to improve

Tapping the US market

  • Many issuers tap the US market under Rule 144A, and that is something that flows through most products internationally
  • The US markets have deep liquidity, and have a higher valuation at a relatively low cost based on the savings from future fundraisings
  • Companies looking to launch an IPO should follow their comps for both research coverage and for comparisons. They shouldn’t be singled out in a market by themselves
  • US litigation, especially in relation the class action regime and the active plaintiff’s bar, remains a real deterrent for companies considering tapping the US market
















 

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