review 2016 • outlook 2017 · review 2016 • outlook 2017 what next for china ecm? • amtd’s...

Review 2016 • Outlook 2017What next for China ECM? • AMTD’s global plans •

LGFVs build on strong year • Indian summer for equities • Taiwanese banks venture overseas • Cartoons of the year

December 2016

Fixed income plauditsfor ANZ and UOB

HK and Taiwan win in Corporate Governance

CLSA and HSBC lead the Brokers Poll pack

From the publishers of

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GlobalCapital December 2016 1

CONTENTS

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Cover Story 54 GlobalCapital Asia Regional Capital Market Awards 2016 A�er weeks of pitch meetings with bankers and interviews with market participants, GlobalCapital Asia reveals the best transactions and advisers across loans, equity, bonds and investment banking in 2016.

Review of the Year and Outlook 34 Taiwanese banks venture overseas Faced with a tougher environment at home, Taiwanese banks are looking outward for growth.

37 Chinese LGFVs set to build on strong 2016

LGFVs have been one of the key drivers of bond volumes this year but the increased supply is bringing more scrutiny of the sector.

40 AMTD plots global expansion The HK-based �rm is one year into the launch of its capital markets business and has ambitions for international expansion.

43 Equity markets enjoy an Indian summer India’s equity markets are at the healthiest in half a decade a�er a period of lackluster activity. The outlook remains bright for 2017.

48 China ECM: a�er the storm Volatility was not in short supply this year thanks to Brexit and Donald Trump’s election but the outlook on China ECM is brightening.

Brokers Poll 2 HSBC and CLSA take the crown

as Asia’s best brokers Asia’s brokerages needed to stay nimble in the face of testing markets. Asiamoney is pleased to announce the banks and analysts that stood out this year.

Best Managed Company Awards67 Asia's best companies stand out In a year marked by turmoil, the region’s best �rms and executives impressed across a number of factors. Asiamoney reveals the winners.

Also in this report24 Fixed Income PollAsiamoney highlights the banks with the best �xed income performance in the region.

52 The whole pictureThe best of 2016’s cartoons from Olly Copplestone.

81 Corporate Governance PollAsia has taken its time in improving corporate governance standards but the best �rms are adopting the best international codes of conduct.

86 Best Banks in the Middle East 2016It has been another testing year for banks in the Middle East, but some banks have weathered the storm. Asiamoney recognizes these outstanding performances in our awards.

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2 GlobalCapital December 2016

Brokers Poll 2016

Chinese equities rank as one of the world’s great investment opportunities but can also be one of the biggest short-term risks. This

year o�ered plenty of evidence of both the huge risks and rewards.

The year began with a global sell-o� triggered by panic on the Shanghai and Shenzhen exchanges a�er the People’s Bank of China spooked markets with a sharp depreciation of the renminbi. China’s stock markets later settled down, but a dollar surge in the wake of Donald Trump’s victory in the US presidential election rattled the government in Beijing into imposing “strict

controls” on outbound investment in late November in a bid to stem capital �ight.

“I view this as a cleaning up, and them getting more realistic about outward �ows. There’s been a bit of a land grab, and they are pulling that back a bit,” Jonathan Slone, CEO and chairman of CLSA told Asiamoney.

“China’s got a very large capital account and they obviously want to control the unwind. Having a fairly young �nancial system they are doing the same as every other country. They experiment, con�rm some things and pull back on others.”

Opportunity shone again on December 5 with the opening of the Shenzhen equity pipeline, completing the linkage of the two Mainland bourses with the Hong Kong market through Stock Connect. International investors now have access to 881 Chinese A-shares listed in Shenzhen and 568 in Shanghai, while Mainlanders can buy 417 stock listed in Hong Kong. Essentially, a huge single China equity market is being created.

HSBC’s strategy is to tap pent-up demand among global investors for the Chinese A-share universe by setting up a Mainland securities joint venture in Qianhai, just over the border from Hong Kong, in which HSBC would hold 51% of the equity and thus wield control. The JV is still subject to regulatory approval.

“Where we would begin to have an advantage would be in our ability to provide

HSBC quality research and execution from an onshore entity,” Rakesh Patel, HSBC’s head of equity sales and sales trading for Asia Paci�c, said in an interview with Asiamoney.

In this year’s Asiamoney Brokers Poll, HSBC came top in overall regional research (Asia ex-Australia &Japan), rising from third place last year. The bank also displaced UBS from the top spot in overall combined regional research & sales (Asia ex-Australia, ex-China A&B, ex-Japan).

William Bratton, HSBC’s head of equity research Asia Paci�c, ascribes this in part due to the bank’s heavy investment in Hong Kong-China research.

“Hong Kong-China is our main research project. It is the product that we do best with clients. It is a product in which we invest relatively aggressively.”

The reward from this investment is apparent already in HSBC’s impressive clutch of analyst awards in this year’s Brokers Poll: nine altogether.

STRATEGIC PARTNER Building up A-share research, which HSBC plans to house in the Qianhai JV, is to meet expected foreign demand. When, as expected, Chinese A-shares are included in the MSCI Index, “there will need to be signi�cant institutional buying over the �ve to 10 years,” to reach the required weighting, Bratton told Asiamoney.

HSBC and CLSA take the crown as Asia’s best brokers Asia’s brokerages have needed to stay nimble in the face of volatile markets and changing regulation that has tested their industry. HSBC and CLSA are well placed to meet the challenge a�er coming out top in the Asiamoney Brokers Poll. Peter McGill reports.

JONATHAN SLONECEO and chairman of CLSA.

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Brokers Poll 2016

HSBC clients “have all spoken about the need for quality research of international standards which we abide by. They also want strategic partners to help them understand these Chinese A-shares and which ones to invest into,” Bratton explained. “If we deliver and do well, we will be able to help these clients, and partner with them, when they decide their China investments.”

Patel says the research build-out has also helped to strengthen HSBC’s position in ECM.

“We are a very large commercial bank, but up until a few years ago, we were not leveraging those commercial banking relationships into equity capital markets. That’s the history.

“The reality today is that by using the relationships that we have had for many, many years with corporates, and clearly the balance sheet that we have as well, and retooling a little around investment banking, we are now a very credible ECM house, especially in Hong Kong,” Patel pointed out.

“We have been very strong in DCM for a very, very long time, and we have really just taken the construct from DCM and applied a similar kind of model to ECM.”

For the 12 months to December 1 this year, HSBC ranked sixth in Dealogic’s ECM bookrunner ranking for Hong Kong issuers. The bank was not among the top 10 ECM Hong Kong bookrunners for the same 12 months of 2014-15 but was top in 2013-14, sixth in 2012-13, and top in 2011-2012.

HSBC was top DCM bookrunner for Hong Kong issuers throughout this period.

INDEPENDENCECLSA is a completely di�erent kind of institution to HSBC, and �nds itself in a contrary situation vis-à-vis mainland China.

Acquired by China’s state-owned goliath Citic Securities in 2013, CLSA has always been renowned for its excellence as a research house that treasures the independence and forthright opinions of its analysts.

In November, Citic said all of its international businesses would be merged with CLSA and bear the CLSA name. Tang Zhenyi, a Citic veteran, is to become chairman of CLSA while Slone will remain as CEO.

Slone told Asiamoney this was more than a tidying-up exercise. “Just putting our balance sheets together means we have a much larger balance sheet to work from. It means we can move into more businesses. It means that strategically we are aligned rather going in separate directions. It is quite signi�cant.”

True to form, CLSA retained its top position in the 2016 Brokers Poll for overall regional research (Asia ex-Australia & Japan) as voted by active traders.

Perhaps more surprising is that CLSA vaulted three places to come top in overall regional sales, and for both categories of voters.

“Anybody who understands the reforms that are taking place in the market, and changes in the regulatory structure, understands that aside from having top-level research, you have to have great sales and trading capabilities,” Slone o�ered by way of explanation. “I think we take a lot of pride in the value-added that we bring to execution, sales and research.”

Clearly, however, the Shanghai-Hong Kong Stock Connect that opened two years ago must have greatly bene�ted CLSA, as most of the �ow of equity orders was ‘southbound’ through the pipeline, from Mainland buyers of Hong Kong shares.

What of ‘northbound’ o�shore investment in Chinese A-shares? While Citic can easily manage execution in Shenzhen and Shanghai, CLSA research coverage of ‘A’ shares is a work in progress. At the moment, CLSA covers only one A-share company, although it plans to ramp-up A-shares coverage to over 60 companies in the next few months.

Citic Securities covers 1,200 A-shares but the quality of their research remains largely

untested by demanding global investors, many of whom have understandable concerns about general standards of governance, accounting and disclosure at listed Mainland companies.

Ful�lling the requirements of institutional investors has become even more important as a result of the global trend toward ‘unbundling’ of research payments from execution.

STRONG RESULTS Most HSBC clients are unbundled already, and the bank is very used to dealing with them, according to Patel. “We’ve always really had that model within the business. E�ectively what it means is that as a bank, when we face clients, the onus is on us to provide excellence in both execution and advisory.”

Bratton conceded there is “certainly a lot of ongoing pressure on the advisory business model, our cost structures and what we provide to clients, but what is also happening is a lot of banks are refocusing on their core domestic markets. Our core domestic market to a greater or lesser extent is Asia, and our commitment to doing well in Asia is high.”

Both CLSA and HSBC expressed pleasure at their standings in the Brokers Poll.

“Markets have been quite challenging for most banks and brokerages. What we have done at HSBC is to continue to provide excellence in both research/advisory and sales, and to grab wallet share from the client base away from other banks. That is re�ected obviously in the Asiamoney Brokers Poll where for the �rst time we come in at number one,” said Patel.

“We have all worked incredibly hard for the Brokers Poll result we have achieved, and that is a great combined e�ort between research and sales throughout the whole year.”

Slone paid tribute to the analysts who have made CLSA’s reputation, such as Christopher Wood, who this year was voted once again Best Strategist.

“We hire people who are opinionated, thoughtful, and we give them free rein to say what they want to say, to opine how they want opine. We are an organisation that is very driven by the marketplace and also very interested in what drives the markets, and we let people freely have their ideas. We don’t try to herd people into one world view,” said Slone. ◼

WILL BRATTONHSBC's head of equity research in Asia Paci�c.

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Brokers Poll 2016

BEST STRATEGISTChristopher Wood, CLSAThe word legend should be used spar-ingly, but it is fair to say that Christopher Wood has attained that status among market-watchers. His wide-ranging, meticulously argued and o�en hard-hitting weekly GREED & fear is avidly read with a loyal following around the world. (He wrote the latest issue during roadshows to India, Australia and New Zealand.).

He called the sub-prime mortgage debacle in the US before it morphed into the Lehman Brothers bankruptcy and the global �nancial crisis. He is witheringly critical of central banks’ resort to quan-titative easing, zero rates and negative rates. “They have had the precise opposite e�ect of what's intended, in the sense that they are de�ationary, not in�ationary, and boosted asset prices but haven’t helped the ordinary economy,” he tells Asiamoney. He

correctly forecast what would happen to the bond market in the event of a Donald Trump victory in the US presidential election.

Wood was born in the UK, and educated at Eton and Bristol University, where he graduated in 1979. Three years later, he became Hong Kong bureau chief of the Far Eastern Economic Review, and a�er 10 years at the Economist, working in London, New York and Tokyo, he le� journalism to become an emerging markets analyst with Deutsche-Morgen Grenfell. Two more jobs followed – at Santander’s Asian securities unit and ABN Amro – before joining CLSA in 2002.

His tall frame and distinctive shock of hair make him instantly recognisable at conferences. Brand-conscious, he astutely copyrighted the title, GREED & fear.

BEST ECONOMISTEric Fishwick, CLSA “One of the strengths our client base appreciates is breadth rather than segmentational silo-isation,” says CLSA’s head of economic research Eric Fishwick. “It’s problematic, for example, that most of the work on China is done by analysts who don’t look at any other countries. That means you miss regional trends.”

No one would ever accuse Fishwick of being siloed. In a lengthy interview with Asiamoney, he ranges from the revival of Keynesianism to how China “has le� Western economies completely back-footed”.

Readers of CLSA’s quarterly Eye on Asian Economics and the Infofax Daily will be familiar with the guiding intellect.

For the past couple of years, he thinks CLSA has been “ahead of the curve in

spotting links between the supply cycle in commodities and global trade.

“We have seen enough supply contrac-tion that you can actually make a bullish forecast for 2017 in terms of global trade growth. It’s not yet picked up in any aggre-gate numbers, but it is, I think, starting to be picked up in the most successful Asian exporters’ data.”

His biggest miss-call this year has been doubting China’s ability to manage its currency and capital account.

“At the start of this year I feared China would be forced to abandon its defence of the renminbi, and objectively they have been much more successful in controlling capital �ows than I anticipated.”

Within CLSA Fishwick is renowned as a tech geek. The converted barn where he lives has 48 Ethernet ports, and at a time when TiVo was unavailable in the UK, he built his own hard disc video recorder able

The right callAnalysts in Asia are used to dealing with dynamic and unpredictable markets but the events of this year provided a real test of mettle. Against a backdrop of global political upheaval and worsening economic outlook at home, the winners of Asiamoney’s 2016 Brokers Poll have proved they have what it takes to impress their clients.

ERIC FISHWICKCLSA

CHRISTOPHER WOODCLSA

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Brokers Poll 2016

to pause live TV. “I probably have 3,000 DVDs plus 1,500 Blu-Rays.”

BEST TECHNICAL ANALYSTLaurence Balanco, CLSAAs global technical analyst at CLSA, Laurence Balanco says he has to cover “pretty much” the whole world. “That’s the great thing. I don't just have one sector to look at, a few stocks. You are looking at what’s topical, or what’s trending, or where the momentum is at the end of the day; what clients are talking about; where the risks are.”

Investors value Balanco’s willingness to challenge received wisdom. For example, he found that equity prices do not always fall when bond yields rise. The negative correla-tion did not hold between 1999 to 2016.

As long as yields remained below 4% or so, he found “you can have a positive correlation between rising rates and rising equity markets, but once you get above 4% an increase in interest rates will be seen as negative for equities”.

CLSA’s best technical call in 2016 “was when we thought the yield on bond markets was making a low and you wanted to be selling bond proxies, so we recommended getting out of the Reits. That was our most commercial call,” Balanco says.

“Japan has been a market we have called well, the swings through the year. We started o� by suggesting you take pro�ts in Japan and there was a big sell-o� in January. We expected to retest those lows in June and it played out to plan. We have since been bullish on Japan and it has worked out well. For Japan and the yen, I would say we have been able to consistently call both the tops and the bottom ends.”

BEST BANKS ANALYSTMichael Chu, HSBCBack in steaming July, HSBC published a jumbo report on Asian banks called Winter is coming. The main thesis was that Asian banks are dogged by low interest rates, lack of macro growth and weak asset quality.

The section on China did not mince words. Deteriorating bank asset qual-ity “raised concern over a hard landing scenario, together with the lack of proper disclosure” and a growth in o�-balance sheet shadow banking.

Raising the red �ag was Michael Chu, who covers China banks and e-�nance at

HSBC. “China faces the problem of NPL [non-performing loans] recognition. We estimated it will likely take 2-3 more years to resolve,” he tells Asiamoney. “Growth of shadow banking is slowing but the existing scale is still large and lacks bu�ers in case of defaults.”

Chu is more upbeat about China’s e-�-nance market, calling it the most promising in Asia. He attributes this to infrastructure (74% smartphone penetration), culture and competition.

South Korea is a laggard by comparison. It has the right infrastructure but lacks the competitive space. “It is a highly developed market where banks and non-banks dom-inate, leaving limited room for e-�nance �rms to penetrate to their target customers – the mass retail and SMEs.”

Chu’s insights draw not only on his work at HSBC but his previous experience of working at a hedge fund and a Korean brokerage. He also speaks �ve languages – English, Cantonese, Mandarin, Shang-hainese and Japanese.

His best call was Credit China FinTech, which HSBC started covering three years ago. Its stock price has since risen nearly four times.

BEST CONSUMER DISCRETIONARY ANALYST Charlene Liu, HSBCCharlene Liu heads Asia Paci�c gaming research at HSBC, a job that mainly involves tracking casinos in the only place in China where they are permitted, Macau.

The once sleepy Portuguese colony, which reverted to China in 1999, now has 38 casinos and their combined revenue is estimated to be seven times that of the Las Vegas strip.

Liu follows industry practice in dividing customers into mass, mass premium and VIP. Mass revenue is called ‘grind’ and high-rollers are lured to the tables in all-ex-penses-paid junkets. President Xi Jinping’s crackdown on corruption dealt a blow to Macau but in her latest reports Liu �nds that VIP demand is returning, along with overnight visitors from the Mainland.

Her best call was a Reduce on Wynn Macau before their hotel and casino opened on the Macau waterfront. “We thought expectations were too high.” Wynn Macau’s �rst set of results, for the third quarter of 2016, were duly disappointing.

In hindsight, Liu wishes she had been “less sceptical on the VIP recovery and turned more constructive on the sector earlier”.

Her biggest challenge is time manage-ment, which is understandable, given that she now has a baby.

She told Asiamoney that she would like to help develop “a new business model for equities as commissions are coming o� and clients will have to pay for research. Quality of research will become a key emphasis”.

Asked whether she likes to gamble, Liu replied, “No. I am trained to check risk against reward so naked risk has no appeal to me.” Best keep that to a whisper in Macau.

MICHAEL CHUHSBC

CHARLENE LIUHSBC



Brokers Poll 2016

BEST CONSUMER STAPLES ANALYSTChristine Peng, UBSThe explosive growth of e-commerce in China has created new niches for analyst research.

Christine Peng at UBS has examined in depth changes in the Chinese market for infant milk formula (IMF) and instant noodles.

China accounts for about one third of the $33bn global market for IMF and Peng was assisted by the Evidence Lab at UBS which mined about 80,000 records to collect product prices in China from e-commerce websites.

Peng found that IMF ordered online and imported into China has gone from around zero to 15% of the market. “I think it’s because it's cheaper.”

Chinese authorities are not pleased by all of this online importing of IMF via personal parcels. One concern is food safety. “If anything happens, there’s going to be social problems, and it's very di³cult to track the source. It could be poison,” Peng points out. The other issue is loss of revenue, because such transactions are untaxed.

“A lot of other big companies like Procter & Gamble have also been stumbling in China. Probably their new products are not good enough to attract new customers, especially young people who shop on the internet,” Peng believes.

A�er a period of consolidation, China’s consumer products sector has been frag-

menting over the past two years. Several leaders have lost 50% of their market cap. The share price of Tingyi, one of the largest makers of food & beverage – including instant noodles – has fallen almost two-thirds from its peak in 2015.

“It’s simply because we now have the internet and more choice. Consumers now obtain information from many di�erent sources. Our Evidence Lab con�rms this trend.”

BEST INDUSTRIALS ANALYST Kelvin Lau, Daiwa Capital MarketsChina may have to fall back on infra-structure investment if the incoming US administration of Donald Trump damages trade, according to Kelvin Lau at Daiwa Capital Markets in Hong Kong.

“In the near term, trade-related stocks will be under pressure. People are avoiding marine-related stocks like shipping and ports,” Lau tells Asiamoney. “I think Trump will be more positive for China construc-tion-related names, because at the end of the day, if imports and exports are insu³-cient, China will need to do something on �xed asset investment in railways, roads, bridges, to compensate. This will be good for construction.”

Lau heads auto, transportation & industrial research in Hong Kong for Daiwa, focusing on Hong Kong-listed companies. “We’re somewhere in between the bulge-bracket investment banks and the Chinese houses here. Because we are not bulge-bracket we have to work harder to get people’s attention. You need to have consistent delivery of service, or reports, or ideas.”

Lau worked in planning and revenue management at Cathay Paci�c and Hong Kong Dragon Airlines from 1999 to 2007, when he joined Daiwa.

He credits his airline experience with his two best calls, on TravelSky Technology, a state-owned Chinese booking system provider, and SinoTrans, a Beijing-based air freight and logistics �rm.

TravelSky was one of Lau’s top �ve share picks at the start of 2016 and its shares have since risen 46%. “SinoTrans ran up quite well a�er we recommended the stock, and then when we decided it was too expensive and downgraded, it declined.”

BEST DIVERSIFIED FINANCIALS ANALYST York Pun, HSBCWith both Mainland exchanges now connected to Hong Kong through the Stock Connect, the need for rigorous analysis of China’s �nancial sector is increasingly to the fore.

York Pun brings the right skills to that formidable task. At HSBC he covers the Hong Kong, Shanghai, Shenzhen and Singa-pore exchanges as well as brokerages, some leasing companies and �ntech stocks.

In July, Pun and junior colleague Alice Li wrote a ground-breaking report on the linkage between brokers and banks in China’s mushrooming asset manage-ment industry. Chinese banks have been outsourcing investment on their propri-etary trading and wealth management products to Chinese brokers, whose assets under management had swollen to nearly Rmb14tr ($2tr).

Pun and Li predicted that China’s capital-rich brokers could look overseas for acquisitions, as well as consolidating at home and spinning o� their highly prof-itable asset management arm. CICC was their top pick of Chinese brokers for asset management.

Asked for his best call, Pun replies it was to suggest investors buy/overweight HKEX in 2012 when the market was concerned about its acquisition of the London Metal Exchange. “Our positive thesis was based on the view that turnover velocity in Hong Kong – or the frequency of stock trading – was close to the historical trough at that time and we also believe the LME transac-tion was misunderstood by many.”

Prior to joining HSBC in 2007, Pun worked as an audit consultant and buy-side analyst. He holds a master’s in interna-tional �nancial analysis from Newcastle University. His unusual English forename was chosen to resemble his Chinese �rst name, Ki Yuk.

BEST ENERGY ANALYSTThomas Hilboldt, HSBCOne of the ways China is shaking up the world is in its demand for energy, espe-cially from cleaner sources than coal. In October, HSBC focused on competition between OPEC and Russia to supply China with oil for the 200m automobiles forecast

CHRISTINE PENGUBS



Brokers Poll 2016

on Chinese roads by 2020, and natural gas for power generation.

Why no mention of Japan competing with China for Siberian oil and gas? Thomas Hilboldt, who heads HSBC’s Asia-Paci�c resources & energy team, gave a well-considered answer to Asiamoney.

Following the Fukushima disaster of 2011, “the shutdown of Japan’s nuclear capacity caused a jump in hydrocarbon demand. But now that nuclear power is coming back on, Japan has limited incre-mental demand for LNG and crude oil.

“They are not the growing market in the region. China is consuming more and more. The Japanese economy is de-indus-trialising and its population shrinking.

“From the standpoint of both invest-ment and import volume, the Japanese are not necessarily China’s competition for energy. Volume-wise, you could argue that India and ASEAN are competitors for both assets and resources over the longer term.”

Hilboldt has been managing regional teams and covering Chinese and ASEAN energy since the mid-nineties. “I have a lot of historical perspective.”

Asked for his best calls, Hilboldt cited an outlook piece for 2016, in which he “turned more constructive on a number of di�erent companies, even as the oil price was heading into the trough.

“And selectively we recommended investors reweight into both China and Thailand. That was a good time to put exposure back on, because we were quite negative over the course of 2015, well in advance of the market.”

Spare time is spent “with my wife Pum, my daughter Kiki, my son Tate and my friends. And I especially I like to hike the hills of Hong Kong. We holiday frequently in Thailand, my wife's home”.

BEST HEALTHCARE ANALYSTShaojing Tong, UBSChina’s pharmaceutical industry is undergoing drastic change. Competition is winnowing out the weak while the strong strive to develop their own patented drugs.

Most drugs in China are priced arti�-cially high, and government pricing “has been a key driver for many of the stocks we cover. Following the pricing policies of the central and provincial governments is a quite a critical part of our work,”

explains Shaojing Tong of UBS in Hong Kong.

UBS has been cautious on China pharma since the start of 2016. “That said, we will still be able to pick individual stocks by quantifying each company’s pricing pressure and to what extent it is already factored into their stock price. We can identify the best companies that will become innovation-driven in the future,” Tong adds.

The industry is very fragmented, with about 5,000 drug makers. “I foresee the majority either closing down or merging with the larger players as a consequence of this round of price cuts and other types of hawkish policies.” China’s 300 listed pharma companies are by de�nition the largest and most e³cient, but they too may be forced to consolidate, he believes.

In the next �ve years, Tong predicts “huge growth of innovative drugs from the R&D pipeline of Chinese pharma,” but says talk of a Chinese P�zer, Novartis or Glaxo emerging is premature.

“I would be happy to see Chinese pharma match the achievement of the Japanese. Thirty years ago, most Japanese pharma companies were also making generics. Then they invested in R&D, and several of the top Japanese pharma companies became globally competitive and joined the top 20. Some Chinese pharma companies have that potential and ambition.”

BEST INSURANCE ANALYSTJames Garner A�er being voted best insurance analyst for another year, Garner resigned from HSBC, where he had headed Asia Paci�c �nancial research.

Garner did not respond to written ques-tions from Asiamoney in time for publication.

BEST MATERIALS ANALYSTWei Sim, HSBCExcitement over Donald Trump’s plans to spend $1tr on rebuilding America mask the fact that China has been spending more than $1tr on infrastructure in each of the past two years, and $1.4tr in just the �rst 10 months of 2016.

Quite a lot of that spend goes on cement, one of the industries that Wei Sim keeps an eye on as Asia ex-Japan infrastructure

analyst for HSBC. It should surprise no one that cement prices in China have been going up.

Sim started o� his career in Hong Kong at Macquarie Bank. “I became an infra-structure analyst by accident but stayed in the sector on purpose. I believe it is a sector with long-term structural needs, and is currently experiencing a renaissance that started in China but is going global.”

Hong Kong-listed Yuexiu Transport, an operator of toll roads and expressways in Guangdong Province, is among his best calls. “A great company which is undercov-ered by the street. Great management and cheap valuations.”

His biggest challenge is “picking turning points and gauging sentiment on the street … but that’s what we get paid for”.

Sim was born and raised in Australia, and came to Hong Kong 10 years ago. He speaks Mandarin and English, and learnt Cantonese a�er marrying a Hong Konger.

“I love to eat healthily, experiment with food and keep �t. My wife as a part-time hobby runs her own private kitchen and I help out on the side. I love supporting her in her life passions.”

BEST REAL ESTATE ANALYSTCarol Wu, DBS Vickers Doomsayers will tell you China’s in�ated housing market is set to explode, with consequences as devastating as the col-lapse of Japan’s great bubble a quarter of a century ago.

CAROL WUDBS Vickers



Brokers Poll 2016

Nonsense, thinks Carol Wu. “I don’t see that China’s residential property market has a bubble.”

Jeremiahs would do well to pay heed. Before joining the Hong Kong o³ce of DBS Vickers in 2007 as a China property analyst, Wu worked for a property con-sultancy and the La Salle property fund. This year alone she has visited over 20 cities on the Mainland. For Chinese New Year, she eschewed the ski slopes of Japan, opting instead to explore one of China’s more obscure cities, Huangshan in Anhui Province.

“I don't just focus on �nancial num-bers,” she tells Asiamoney, although if pressed she can marshal plenty.

She concedes prices are frothy in tier one cities (Beijing, Shanghai, Guangzhou, Shenzhen) and a few in tier two, but for the whole of China the a�ordability ratio – monthly mortgage payments divided by disposable income – is only 39%.

Mortgage leverage to GDP was over 200% in Japan back in 1990 but is about 35% to 40% in China today, including all the shadow non-bank �nancing. China’s o�-cited home ownership ratio of 80% is not all it seems, either. “That is the right number, but more than half of the housing stock is very low quality, with no kitchens or toilets. Upgrading will create a lot of demand.”

She pioneered �eld trips to the Main-land to get “a complete picture of the local property market” by talking with everyone concerned, from Harbin in the north, to Urumqi in the west, and Haikou in the south. The strategy has proved so successful that competitors now attempt the same. Imitation is the sincerest form of �attery.

BEST SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT ANALYSTSteven Pelayo, HSBC“Better than feared” is how Steven Pelayo describes Asian tech sentiment among investors as the end of 2016 draws near.

Apple performed poorly in the �rst half, but China smartphones rebounded, “and when Apple turned back on their supply chain for the iPhone 7 build, we saw sup-plies tighten”.

Looking ahead, what concerns him is that “we are coming o� a smartphone revolution where 1.5bn smartphones shipped every year” and it is unclear what will �ll the void.

“Tech hardware has been sitting on a one-legged stool…As smartphone growth moderates, we are looking at a myriad of skinny legs,” Pelayo explains. “There is a lot of excitement about data centres, arti�cial intelligence, virtual reality, and automotive electronics…However, compared to the smartphone market, each of these markets from a semiconductor perspective is rela-tively small today.”

Tech perspective Pelayo has in abun-dance. He was born and raised in Silicon Valley. His father worked in Lockheed’s Solar Physics lab and his mother helped found a nuclear engineering consultancy. From 1996 to 2003 he was a semiconductor analyst at Morgan Stanley before joining HSBC and moving to Asia in 2006.

He says his team has had good calls on Taiwan Semiconductor Manufacturing, both as a Buy last year, and a�er the shares rose 35%, as a Hold. Another was on small cap King Yuan Electronics (“up roughly 50% this year before we downgraded it”). So far, there have been “no major blow-ups”.

For recreation, he prefers to be outside and to travel. “I play a lot of tennis and I hike or run the trails of Hong Kong.” This summer he led his son’s scout troop on a 110-mile backpacking trip.

BEST SOFTWARE & INTERNET SERVICES ANALYSTElinor Leung, CLSA Two years a�er Jack Ma’s Alibaba raised $25bn in the world’s biggest-ever IPO, CLSA forecast that China’s internet colossus still had more peaks to climb.

Gross merchandise value from e-com-merce would likely double to $900bn in four years as “the Chinese appetite for online shopping will only keep growing”. Revenue at AliCloud, the division which dominates China’s infant cloud comput-ing, would increase 11 times by 2020. Ant Financial, the e-�nance spin-o� that includes Alipay, China’s largest online payment operator with about half of the market, as well as a thriving wealth management and loan business, was worth $75bn – equivalent to Goldman Sachs – and could be valued at $100bn in two years.

The report, Jack’s Super Ecosystem, was written by Elinor Leung, head of telecom & internet research at CLSA, and four mem-bers of her team.

Leung sees huge e-�nance potential in China’s consumers, private sector and SMEs ignored by traditional banks. She also enthuses about e-commerce reaching rural China.

“By the end of the year, China Mobile will cover 98% of the population with 4G, and 4G handsets in China are as cheap as Rmb200, or $29, so a village can easily buy a smartphone and get connected.”

Keeping telecoms and internet under one roof gives CLSA an edge over competi-tors, she believes.

“They don’t see the big picture of telecom infrastructure that has made it possible for internet to be so successful in China. China has the world’s largest 4G network, the world’s cheapest 4G smart-phone and one of the lowest data tari�s. Thanks to China Mobile and Huawei, China is going to lead 5G rollout as well.”

Leung has two degrees in mechanical engineering plus an MBA. “I have always been interested in telecoms and the internet. It is the future of the world,” she says.

BEST TECHNOLOGY HARDWARE & EQUIPMENT ANALYSTNicolas Baratte, CLSA CLSA’s head of technology research admits to spending “a third to 40%” of his time

ELINOR LEUNGCLSA



Brokers Poll 2016

just following Apple and Samsung smart-phones and their supply chains.

The industry’s recent slowdown – “we will surely go to zero percent in a com-pletely saturated market two years from now” – has not made life quiter for Nicolas Baratte.

“There are still companies that have a big increase in their sales price or market share, or have new products. TSMC (Taiwan Semiconductor Manufacturing Company) has gone up maybe 35% this year, Aztech in Hong Kong probably 60%-70%, Largan in Taiwan by 70% or 80%.”

Baratte considers virtual reality “the most exciting” new tech on the horizon, with more potential applications in indus-trial training than entertainment. Another is extending Google’s “location-based services, with a lot of customisation”.

A third is automation, “robotics and things like self-driving cars,” which have become a big driver of semiconductor merg-ers, such as Qualcomm’s $36bn acquisition of NXP.

Over the last couple of years, his best calls have been downgrading Taiwan’s MediaTek before the stock price halved, and sticking with Largan when everyone else was rushing for the exit. His biggest regret was that a�er being “completely right on Lenovo for several years, I have been com-pletely wrong for one year”.

Asked how his approach di�ers, Baratte said it was “avoiding the density of things,

of data point information, opinion and rumours … I spend most of my time think-ing about why something would or would not happen in tech”.

Baratte’s background is unusual. A�er university in France he joined state-owned aerospace company Aérospatiale, now part of Airbus, which sent him to Taiwan in 1992. A�er Wharton Business School and stints in equity research at JP Morgan and Prudential Asset Management, he joined CLSA in 2011. He likes to practise aikido, the Japanese martial art.

BEST TELECOMMUNICATIONS SERVICES ANALYSTNeale Anderson, HSBCThe biggest issue in Asian telecom is “striking the right balance between encouraging investment and allowing telcos to earn a return,” Neale Anderson, head of Asian telecom research at HSBC, tells Asiamoney.

“Policymakers in China have prioritised network investment and cheap prices for wireless and �xed-line over near-term telco [telecom company] pro�ts. This has helped facilitate strong growth at the internet companies in China.”

Anderson sees at least “two Asias” in network roll-out. For the likes of Japan and South Korea, investment to support data is almost complete, while in the Philippines, India or Indonesia, more is needed just on low frequency. Substantial sums required to build wider spectrum data networks will drive industry consoli-dation in Indonesia and India.

Unusual for HSBC, Anderson covers Japan’s four main telcos, as well as Telstra in Australia. Japanese telcos “led the world in the late ‘90s” and a spell of teaching English in Japan a�er graduating from Oxford landed him a job with Ovum, a telecoms research �rm. He joined HSBC in Japan in 2007.

China Mobile, NTT and NTT DoCoMo have been his best calls. “I had the only Reduce rating on China Mobile during most of 2015 and remain cautious. Buys on NTT and DoCoMo for the past three years have also turned out well.” One of his worst calls was downgrading So�bank to Sell because of the Sprint acquisition. “I got the Sprint part right, but missed a small thing called Alibaba…”

His biggest challenge is “managing the information deluge”. He likes to escape to the hills, the Lake District and Japan Alps being two favourites. He is also learning kung fu.

BEST TRANSPORTATION ANALYSTEric Lin, UBS Heading Asia transport at UBS in Hong Kong is ideal for inveterate plane spotter Eric Lin.

“Many passengers enjoy spending time in a business class lounge, but to me that basically means you are surrounded by walls. I would rather sit back and look at the air�eld,” he tells Asiamoney.

A passion for airlines probably helped in making what he regards as his best calls, on Cathay Paci�c last year.

“More travellers are �ying direct from mainland China to Europe and the US, bypassing Hong Kong and the hub. This was my structural [negative] rating thesis, but more interesting is that I also made a number of short-term stock calls as to whether Cathay’s earnings would miss or beat expectations,” Lin says. “On top of just one directional call, I was quite proud of being able to help clients make money on event-driven or capital-driven perfor-mance.”

Not foreseeing the shock bankruptcy of South Korean shipping line Hanjin, as well as the commodity boom and a quick upturn in shipping count as regrets.

Demand and supply underpin his approach. Orders for new shipping are equal to over 10% of the global �eet, so he is sceptical of a strong recovery. “Assum-ing we are in a world of low growth it will take several years to digest the new capacity.”

He is more bearish on airlines, given that capacity growth outstrips travel demand. “Airlines throughout Asia Paci�c have been over-ordering planes.”

Monitoring e-commerce disruption and opportunities, and macro factors such as currency and oil price that enter the mix, keep the veteran on his toes.

BEST UTILITIES ANALYST Evan Li, HSBCEvan Li covers everything from power plants and solar energy to waste treatment.

NICOLAS BARATTECLSA



Brokers Poll 2016

Inside his research kitchen cabinet are several hot button issues for China.

One is power generation. China is the world’s top consumer of coal, mostly for power plants, and hence China is by far the world’s biggest emitter of greenhouse gases. In November 2015, president Xi Jinping promised to cap China’s carbon emissions by 2030 through a series of targets, includ-ing doubling nuclear, solar and wind power generation by 2020.

Then came Donald Trump, with his threat to pull the world’s largest economy out of the global accord.

China won't renege on its carbon com-mitments even if the US does, Li believes. However, it would hurt solar exports, as “about 20% to 30% of the volume across the solar supply chain in China goes to the US”.

To meet its targets, Beijing wants to cancel new builds of coal-burning plants. “We are operating way too many power plants and China doesn't need any more coal-�red plants that pollute the atmos-phere,” he says.

In recent years, moving polluting fac-tories away from Beijing and the eastern seaboard to western China has improved air quality in the capital and along the Pearl River Delta. A slowing economy has also reduced emissions, Li adds.

Another “really hot” area at the moment for Li is waste management. “Some waste, particularly hazardous waste from factories or hospitals, is not being properly treated,” he explains. Treatment technologies are

available. “The key is under-penetration. We are starting from a very low base, so the growth potential is huge.”

BEST REGIONAL SALESPERSON Tommy Tang, CLSAOur house awards show how CLSA has been sharpening its sales teeth, and Tommy Tang at that cutting edge, winning this award for the second year in a row.

Tang comes from Suzhou, renowned for its picturesque canals, bridges and classical gardens, and studied at Beijing’s Renmin University. He worked as an auditor with Deloitte in Hong Kong from 2006-2009 before spending one year as a consumer analyst at HSBC. He joined Citic Securities in 2011 as a salesman. When Citic acquired CLSA, he joined the Hong Kong-based brokerage that now houses all the o�shore business for the Mainland giant.

This year has been a rollercoaster for Chinese equities. “Right now, market sentiment has improved a lot compared January or February, which was the bottom,” Tang said. He was looking forward to the opening of the Shenzhen-Hong Kong Stock Connect in December and the expected boost in business.

His biggest challenge is responding to any unexpected share price falls following a CLSA recommendation. “Most of the time our calls are good, but most analysts give a one-year price target, and during one year a lot of things can happen.”

For recreation, he enjoys hiking, and a monthly weekend game of Texas hold’em poker with clients, many of them hedge fund managers.

Clients do not mind when Tang wins. “We are friends with each other, and it is not such a big amount of money.”

BEST REGIONAL SALES TRADER Michael Douglas Lee, Société GénéraleAsked for the biggest development in regional sales trading, Michael Douglas Lee replied: “the evolution of unbundling in the industry.” With European regulators pressing to unbundle research payments from execution, it is a subject on many brokers’ minds in Hong Kong, not least French house Société Générale.

“A lot of the buy side no longer have to pay for research with trading commissions,

but can pay for sales trading service with a speci�c focus on execution and market intelligence coming straight o� the sales trading desk,” Lee explains to Asiamoney. “This de�nitely works to the advantage of a trader with the right skills set, and to a brokerage like SocGen that is not so research and corporate access heavy.”

In other words, it perfectly suits SocGen’s star sales trader in Hong Kong. Some more of Lee’s well-considered and quotable responses:

On the China market: “Renminbi depreciation and dollar strength have de�nitely bene�ted the local market … The Shanghai-Hong Kong Stock Connect has brought signi�cant in�ows into Hong Kong … With the Shenzhen pipeline due to open soon, you can expect even more money will come into Hong Kong. Mainland funds see it as a hedge against renminbi depreciation.”

On the most challenging part of the job: “There is no one-o� biggest trade or biggest deal I would highlight. For sales trading, the challenge is just being consistent, day in, day out, and customisation of your service to each client.”

On personal interests: “I am a traveller. I am pretty passionate about it. Right before joining SocGen, I spent a year backpacking the world, including six months in South America. Travelling keeps me settled and down to earth. It makes me feel grateful for what I have.” Top destination? “De�nitely Patagonia.” ◼

EVAN LIHSBC

MICHAEL DOUGLAS LEE

Société Générale


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Brokers Poll 2016

BROKERS POLL 2016OVERALL COMBINED REGIONAL RESEARCH & SALES (ASIA EX AUSTRALIA, CHINA A&B, JAPAN)

Rank 2015 Bank %1 2 HSBC 17.402 3 CLSA 16.413 1 UBS 9.744 5 Credit Suisse 6.815 7 Citi 4.806 4 Bank of America Merrill Lynch 4.677 8 JP Morgan 4.148 6 Morgan Stanley 4.139 9 Deutsche Bank 3.3510 - Yuanta 3.29

OVERALL REGIONAL RESEARCH (ASIA EX AUSTRALIA & JAPAN)

Rank 2015 Bank %1 3 HSBC 19.322 2 CLSA 16.383 1 UBS 9.664 4 Credit Suisse 6.765 8 JP Morgan 4.726 7 Citi 4.437 6 Morgan Stanley 4.008 5 Bank of America Merrill Lynch 3.809 - Yuanta 3.75

10 - Deutsche Bank 3.27

OVERALL REGIONAL RESEARCH AS VOTED BY MOST ACTIVE TRADERS (ASIA EX AUSTRALIA & JAPAN)Rank 2015 Bank %

1 1 CLSA 23.632 3 HSBC 23.213 2 UBS 17.724 5 JP Morgan 10.445 - Daiwa 4.446 6 Macquarie 4.237 - DBS Vickers 2.328 - Nomura 1.969 - Maybank Kim Eng 1.9410 - Yuanta 1.89

OVERALL COMBINED RESEARCH & SALES – AUSTRALIARank 2015 Bank %

1 1 UBS 28.892 3 Macquarie 16.233 2 CLSA 14.534 4 Credit Suisse 10.165 5 Morgan Stanley 5.666 8 Bank of America Merrill Lynch 5.627 6 JP Morgan 4.898 9 Citi 3.999 7 Deutsche Bank 2.9410 - Goldman Sachs 1.55

OVERALL COMBINED RESEARCH & SALES – JAPANRank 2015 Bank %

1 1 Nomura 19.782 2 Daiwa 13.203 3 CLSA 8.67=4 6 UBS 8.05=4 4 SMBC Nikko 8.056 5 Mizuho 7.347 8 Bank of America Merrill Lynch 5.708 7 Morgan Stanley 5.199 - Haitong International 3.6910 9 Goldman Sachs 3.68

OVERALL REGIONAL SALES (ASIA EX AUSTRALIA & JAPAN)

Rank 2015 Bank %1 3 CLSA 16.432 2 HSBC 16.043 1 UBS 9.804 6 Credit Suisse 6.855 4 Bank of America Merrill Lynch 5.286 7 Citi 5.067 5 Morgan Stanley 4.218 8 JP Morgan 3.729 9 Deutsche Bank 3.4010 - Macquarie 3.29

OVERALL REGIONAL SALES AS VOTED BY MOST ACTIVE TRADERS (ASIA EX AUSTRALIA & JAPAN)Rank 2015 Bank %

1 3 CLSA 17.312 2 HSBC 13.493 1 UBS 11.994 8 Credit Suisse 7.255 4 Bank of America Merrill Lynch 6.836 5 Morgan Stanley 6.167 7 Citi 5.658 6 JP Morgan 4.349 9 Macquarie 3.8710 - Goldman Sachs 3.00

OVERALL COMBINED RESEARCH & SALES –CHINA (A & B SHARES)Rank 2015 Bank %

1 1 CICC 26.512 2 CITICS 21.743 3 UBS 5.654 4 HSBC 5.185 5 SWS Research 3.876 10 Haitong 3.537 9 Yuanta 2.708 - CCBI 2.639 - Guotai Junan 2.2910 6 Goldman Sachs 2.13

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Brokers Poll 2016

AUSTRALIABEST LOCAL BROKERAGERank Bank %

1 Macquarie 58.602 Bell Potter 12.803 Wilson HTM 9.78

BEST FOR OVERALL COUNTRY RESEARCHRank Bank %

1 UBS 30.182 Macquarie 16.533 CLSA 13.57

BEST RESEARCH COVERAGESector Analyst FirmStrategy David Cassidy UBS Macroeconomics Scott Haslem UBS Small Caps Jordan Rogers UBS Banks Brian Johnson CLSA Consumer Discretionary Eric Choi UBS Consumer Staples Ben Gilbert UBS Diversi�ed Financials Jonathan Mott UBS Energy Nik Burns UBS

Health Care David Stanton CLSA Industrials Simon Mitchell UBS Insurance Jan Van Der Schalk CLSA Materials Glyn Lawcock UBS Real Estate Kim Wright UBS So�ware, Internet & Services Eric Choi UBS Telecommunications Eric Choi UBS Transportation Simon Mitchell UBS Utilities Baden Moore CLSA

BEST OVERALL SALES SERVICESRank Bank %

1 UBS 27.572 Macquarie 15.933 CLSA 15.51

BEST SALESPERSONRank Name Firm %

1 Bryan Howitt CLSA 18.212 Adam Fairfax JP Morgan 10.163 Dan Hurren UBS 6.78

CHINA (H-SHARES, RED CHIPS, P-CHIPS)BEST LOCAL BROKERAGERank Bank %

1 CICC 33.052 CITICS 18.653 HSBC 17.22


1 CICC 19.602 HSBC 15.213 CLSA 7.77

BEST RESEARCH COVERAGESector Analyst FirmStrategy Hanfeng Wang CICC Macroeconomics Hong Liang CICC Small Caps Vincent Yu SWS Research Banks Jie Anson Huang CICC Consumer Discretionary Haiyan Guo CICC Consumer Staples Haiyan Guo CICC Diversi�ed Financials Jie Anson Huang CICC Energy Vincent Yu SWS Research Health Care Jing Qiang CICC Industrials Huimin Wu CICC

Insurance Bolun Tang CICC Materials Vincent Yu SWS Research Real Estate Yu Eric Zhang CICC Semiconductors & Rung Yan Andrew Lin CICC semiconductor equipment So�ware, Internet & Services Yue Natalie Wu CICC Technology Hardware Kai Qian CICC & Equipment Telecommunications Haofei Chen CICC Transportation Xiaofeng Shen CICC Utilities Vincent Yu SWS Research


1 CICC 19.182 HSBC 14.443 CLSA 9.44


1 Tommy Tang CLSA 8.632 Joyce Li HSBC 2.37=3 Danxia Gu SWS Research 1.89=3 Jimmy He CICC 1.89

CHINA (A & B SHARES)BEST LOCAL BROKERAGERank Bank %

1 CICC 36.992 CITICS 32.133 SWS Research 4.93


1 CICC 26.822 CITICS 21.223 UBS 5.60

BEST RESEARCH COVERAGESector Analyst Firm Strategy Hanfeng Wang CICC Macroeconomics Hong Liang CICC Small Caps Min Li CICC Banks Jie Anson Huang CICC Consumer Discretionary Haiyan Guo CICC Consumer Staples Haiyan Guo CICC Diversi�ed Financials Jie Anson Huang CICC Energy Bin Guan CICC Health Care Jing Qiang CICC Industrials Huimin Wu CICC

Insurance Bolun Tang CICC Materials Wei Chai CICC Real Estate Jingbian Ning CICC Semiconductors & Chinyi Erica Chen CICC semiconductor equipment So�ware, Internet & Services Jiajia Yang CITICS Technology Hardware Chinyi Erica Chen CICC & Equipment Telecommunications Haofei Chen CICC Transportation Xiaofeng Shen CICC Utilities Min Li CICC


1 CICC 26.212 CITICS 22.233 UBS 5.69


1 Tommy Tang CLSA 8.862 Yiming Zhang CICC 1.983 Ziyue Bai CITICS 1.97



Brokers Poll 2016

INDIABEST LOCAL BROKERAGERank Bank %

1 Kotak Securities 21.622 Ambit Capital 16.313 Edelweiss 12.31


1 Kotak Securities 15.772 CLSA 13.173 Ambit Capital 10.99

BEST RESEARCH COVERAGESector Analyst FirmStrategy Saurabh Mukherjea Ambit Capital Macroeconomics Rajeev Malik CLSA Small Caps Gautam Chhaochharia UBS Banks Aashish Agarwal CLSA Consumer Discretionary Abhijeet Naik CLSA Consumer Staples Vivek Maheshwari CLSA Diversi�ed Financials Nischint Chawathe Kotak Securities Energy Vikash Jain CLSA Health Care Girish Bakhru HSBC Industrials Harish Bihani Kotak Securities Insurance Santosh Singh Haitong Securities

Materials Vivek Maheshwari CLSA Real Estate Samar Sarda Kotak Securities Semiconductors & semiconductor equipment Kawaljeet Saluja Kotak Securities So�ware, Internet & Services Ankur Rudra CLSA Technology Hardware & Equipment Rumit Dugar Religare Telecommunications Rohit Chordia Kotak Securities Transportation Bhavin Gandhi B&K Securities Utilities Bharat Parekh CLSA


1 CLSA 10.772 Ambit Capital 9.273 HSBC 7.30


1 Sujay Kamath CLSA 4.872 Melrick D'Souza CLSA 3.063 Siddharth Dikshit CLSA 2.70

HONG KONG (NON H-SHARES, OTHERS)BEST LOCAL BROKERAGERank Bank %

1 HSBC 36.842 CICC 16.613 BOCI 7.12


1 HSBC 23.752 CICC 9.463 CLSA 8.05

BEST RESEARCH COVERAGESector Analyst FirmStrategy Hanfeng Wang CICC Macroeconomics Hong Liang CICC Small Caps Vincent Yu SWS Research Banks Jie Anson Huang CICC Consumer Discretionary Wai Chris Kwai CICC Consumer Staples Dawei Feng CLSA Diversi�ed Financials Lijuan Du CICC Energy Vincent Yu SWS Research Health Care Jing Qiang CICC Industrials Rong Li CCBI

Insurance Bolun Tang CICC Materials Vincent Yu SWS Research Real Estate Carol Wu DBS Vickers Semiconductors & Ronnie Ho CCBI semiconductor equipment So�ware, Internet & Services Haofei Chen CICC Technology Hardware Ronnie Ho CCBI & Equipment Telecommunications Elinor Leung CLSA Transportation Jack Xu HSBC Utilities Vincent Yu SWS Research


1 HSBC 21.192 CICC 10.093 CLSA 8.75


1 Tommy Tang CLSA 11.162 Kenric Singhakowin Maybank Kim Eng 3.683 Joyce Li HSBC 3.49

For full results of the Brokers Poll, including the Hedge Fund

Services and Prime Broking results and methodology, log on to www.globalcapital.com/asia



Brokers Poll 2016

KOREABEST LOCAL BROKERAGERank Bank %

1 Korea Investment & Securities (KIS) 41.512 Samsung Securities 19.203 KDB Daewoo Securities 11.75


1 Korea Investment & Securities (KIS) 26.342 HSBC 18.323 CLSA 10.09

BEST RESEARCH COVERAGESector Analyst FirmStrategy So Yeon Park KISMacroeconomics Jungwoo Park KIS Small Caps Wonjoon Choi KIS Banks Chulho Lee KIS Consumer Discretionary Minha Choi KIS Consumer Staples Kyoung Ju Lee KIS Diversi�ed Financials Chulho Lee KIS Energy Daniel Lee KIS Health Care Bora Chung KIS Industrials Kyungja Lee KIS

Insurance Taeho Yoon KIS Materials Moon Sun Choi KIS Real Estate Kyungja Lee KIS Semiconductors & Jay (Jongwoo) Yoo KIS semiconductor equipment So�ware, Internet & Services Andy Kim KIS Technology Hardware Kevin (Seung Hyuk) Lee KIS & Equipment Telecommunications Jong In Yang KIS Transportation Hee Do Yun KIS Utilities Hee Do Yun KIS


1 Korea Investment & Securities (KIS) 26.752 HSBC 13.213 CLSA 8.85


1 John Lee HSBC 5.872 Sung Namgoong Korea Investment & Securities (KIS) 4.283 Josh Shin CLSA 3.89

INDONESIABEST LOCAL BROKERAGERank Bank %

1 Mandiri Sekuritas 41.072 Bahana Securities 27.203 RHB 9.28


1 CLSA 18.362 Deutsche Bank 10.183 Credit Suisse 9.96

BEST RESEARCH COVERAGE Sector Analyst Firm

Strategy Sarina Lesmina CLSA Macroeconomics Leo Putra Rinaldy Mandiri Sekuritas Small Caps Sarina Lesmina CLSA Banks Joshua Tanja UBS Consumer Discretionary Linda Lauwira CIMB Consumer Staples Merlissa Trisno CLSA Diversi�ed Financials Sarina Lesmina CLSA Energy Abdullah Hashim CLSA

Health Care Merlissa Trisno CLSA Industrials Erindra Krisnawan CIMB Insurance Angga Aditya Trimegah Securities Materials Jovent Giovanny CIMB Real Estate Felicia Tandiyono JP Morgan Telecommunications Abdullah Hashim CLSA Transportation Sarina Lesmina CLSA Utilities Abdullah Hashim CLSA


1 CLSA 20.882 Deutsche Bank 12.283 UBS 9.30


1 Tim Huang CLSA 18.062 Daniel Oen CLSA 12.643 Asi De Silva UBS 11.57

JAPANBEST LOCAL BROKERAGERank Bank %

1 Nomura 36.912 Daiwa 22.583 Mizuho 17.55


1 Nomura 22.652 Daiwa 10.783 UBS 8.95

BEST RESEARCH COVERAGESector Analyst FirmStrategy Nicholas Smith CLSA Macroeconomics Daiju Aoki UBS Banks Brian Waterhouse CLSA Consumer Discretionary Oliver Matthew CLSA Consumer Staples Oliver Matthew CLSA Diversi�ed Financials Shinichi Ina UBS Energy Shigeki Matsumoto Nomura Health Care Naomi Kumagai JP MorganIndustrials Morten Paulsen CLSA

Insurance Natsumu Tsujino JP MorganMaterials Shogo Umeda JP MorganReal Estate Toshihiko Okino UBS Semiconductors & Claudio Aritomi CLSA semiconductor equipment So�ware, Internet & Services Oliver Matthew CLSA Technology Hardware Amit Garg CLSA & Equipment Telecommunications Oliver Matthew CLSA Transportation Masaharu Hirokane Nomura Utilities Stephen Old�eld UBS


1 Nomura 17.692 Daiwa 14.973 CLSA 9.25


1 Jonathan Pool UBS 9.642 Sean Yeo Nomura 8.853 Takashi Kojima Nomura 6.33



Brokers Poll 2016

THE PHILIPPINESBEST LOCAL BROKERAGERank Bank %

1 CLSA 27.532 Deutsche Regis 20.543 UBS 12.29



BEST RESEARCH COVERAGESector Analyst FirmStrategy Alëd Dy CLSA Macroeconomics Anthony Na�e CLSA Small Caps Alëd Dy CLSA Banks Alëd Dy CLSA Consumer Discretionary Hazel Tanedo CLSA Consumer Staples Hazel Tanedo CLSA Diversi�ed Financials Alëd Dy CLSA

Energy Michael Bengson Maybank Kim Eng Health Care Alëd Dy CLSA Industrials Jacqui Evangelista CLSA Insurance Alëd Dy CLSA Materials Jacqui Evangelista CLSA Real Estate Micaela Abaquita CLSA Telecommunications Hazel Tanedo CLSA Transportation Jacqui Evangelista CLSA Utilities Karen Hizon UBS




1 Alex Dauz CLSA 30.812 Robrina Go UBS 13.403 David Del Rosario CLSA 12.53

MALAYSIABEST LOCAL BROKERAGERank Bank %

1 Maybank 34.332 CIMB 33.183 RHB 15.91


1 Maybank 21.612 CIMB 18.493 Credit Suisse 10.91

BEST RESEARCH COVERAGESector Analyst FirmStrategy Chew Hann Wong MaybankMacroeconomics Chee Sing Lim RHB Small Caps Nigel Foo CIMB Banks Desmond Ch'Ng Lye Hoe MaybankConsumer Discretionary Ivan Yap Boon Tiong MaybankConsumer Staples Wei Han Liew MaybankDiversi�ed Financials Desmond Ch'Ng Lye Hoe MaybankEnergy Thong Jung Liaw MaybankHealth Care Yen Ling Lee MaybankIndustrials Ivy Ng CIMB

Insurance Desmond Ch'Ng Lye Hoe MaybankMaterials Sharizan Rosely CIMB Real Estate Wei Sum Wong MaybankSemiconductors & Ivan Boon Tiong Yap semiconductor equipment MaybankSo�ware, Internet & Services Nigel Foo CIMB Technology Hardware Ivan Boon Tiong Yap & Equipment MaybankTelecommunications Choong Chen Foong CIMB Transportation Raymond Yap CIMB Utilities Chi Wei Tan Maybank


1 Maybank 20.622 CIMB 18.303 RHB 12.44


1 Lucy Chong Maybank 7.322 Kit Lim CLSA 7.043 Grace Yau Maybank 7.01

PAKISTANBEST LOCAL BROKERAGERank Bank %

1 Topline 52.922 Intermarket Securities Limited 9.523 BMA Capital 8.82


1 Topline 34.722 Credit Suisse 14.363 Intermarket Securities Limited 11.15

BEST RESEARCH COVERAGESector Analyst FirmStrategy Saad Hashmey Topline Macroeconomics Saad Hashmey Topline Small Caps Tahir Abbas Arif Habib Limited Banks Umair Naseer Topline Consumer Discretionary Tahir Saeed Topline Consumer Staples Nabeel Khursheed Topline

Energy Saad Ali Intermarket Securities Limited Industrials Tahir Abbas Arif Habib Limited Insurance Umair Naseer Topline Materials Nabeel Khursheed Topline


1 Topline 25.762 Credit Suisse 17.323 Exotix Partners 6.19


1 Mohammed Sohail Topline 48.582 Noor Hameed Intermarket Securities 16.72 Limited 3 Shahid Ali Habib Arif Habib Limited 12.42


Brokers Poll 2016

SINGAPOREBEST LOCAL BROKERAGERank Bank %

1 DBS Vickers 35.382 CIMB 20.553 Maybank Kim Eng 19.85


1 DBS Vickers 13.122 HSBC 12.233 CLSA 11.73

BEST RESEARCH COVERAGESector Analyst FirmStrategy Cheryl Lee UBS Macroeconomics Edward Teather UBS Small Caps Jarick Seet RHB Banks Harsh Modi JP MorganConsumer Discretionary Andy Sim DBS Vickers Consumer Staples Juliana Cai RHB Diversi�ed Financials Asheefa Sarangi CLSA Energy Horng Han Low CLSA Health Care Horng Han Low CLSA Industrials Siew Khee Lim CIMB

Insurance Suelin Lim DBS Vickers Materials Chuanyao Lu CLSA Real Estate Yew Kiang Wong CLSA Semiconductors & Jarick Seet RHB semiconductor equipment So�ware, Internet & Services Jarick Seet RHB Technology Hardware Jarick Seet RHB & Equipment Telecommunications Choong Chen Foong CIMB Transportation Corrine Png JP MorganUtilities Juliana Cai RHB


1 DBS Vickers 13.982 CLSA 12.463 HSBC 8.79


1 Keng Hock Lim UBS 7.192 Doris Chan CLSA 6.823 Jason Saw CIMB 5.15



Brokers Poll 2016

VIETNAMBEST LOCAL BROKERAGERank Bank %

1 Saigon Securities Inc (SSI) 36.202 Viet Capital Securities (VCSC) 22.173 Ho Chi Minh City Securities (HSC) 20.48



BEST RESEARCH COVERAGESector Analyst FirmStrategy Phuong Hoang SSI Macroeconomics Hung Pham SSI Small Caps Tung Do BIDV Securities Banks Phat Cao SSI Consumer Discretionary Thu Le SSI Consumer Staples Trang Pham SSI Diversi�ed Financials Phat Cao SSI Energy Trang Pham SSI Health Care Thu Le SSI

Industrials Nguyen Nhat Maybank Chuyen Le Kim Eng Insurance Giang Nguyen SSI Materials Minh Dinh SSI Real Estate Mai Anh Dinh SSI So�ware, Internet & Services Kien Trung Nguyen SSI Technology Hardware Kien Trung Nguyen SSI & Equipment Telecommunications Kien Trung Nguyen SSI Transportation Giang Nguyen Hoang SSI Utilities Kien Trung Nguyen SSI




1 Huy Nguyen Saigon Securities Inc (SSI) 15.652 Johan Kruimer Ho Chi Minh City Securities (HSC) 11.923 Michel Tosto Viet Capital Securities (VCSC) 9.97

THAILANDBEST LOCAL BROKERAGERank Bank %

1 Phatra 34.742 Thanachart 18.003 TISCO Securities 11.89


1 CLSA 16.892 UBS 10.353 CIMB 9.79

BEST RESEARCH COVERAGESector Analyst FirmStrategy Suchart Techaposai CLSA Macroeconomics Anthony Na�e CLSA Small Caps Maria Lapiz Maybank Kim Eng Banks Vilailuck "Peach" Deutsche Patharavanakul TISCOConsumer Discretionary Pamika Likitittiraks CLSA Consumer Staples Suchart Techaposai CLSA Diversi�ed Financials Weerapat Wonk Urai CIMB Energy Suwat Sinsadok CIMB Health Care Kasem Prunratanamala CIMB

Industrials Kasem Prunratanamala CIMB Insurance Weerapat Wonk Urai CIMB Materials Suwat Sinsadok CIMB Real Estate Soraphob Panpiemras CLSA Semiconductors & Chanpen DBS Vickers semiconductor equipment SirithanarattanakulSo�ware, Internet Thapana "Joe" Phanich Deutsche & Services TISCOTechnology Hardware Kitichan Sirisukarcha CIMB & Equipment Telecommunications Pisut Ngamvijitvong CIMB Transportation Narongpand Lisahapanya CLSA Utilities Suwat Sinsadok CIMB


1 CLSA 21.732 CIMB 8.893 UBS 8.33


1 Munmun Taveeratanasilp CLSA 12.402 Kenric Singhakowin Maybank Kim Eng 10.233 Suthinee Withayaruksun CIMB 7.17

TAIWANBEST LOCAL BROKERAGERank Bank %

1 Yuanta 41.622 KGI 19.033 Cathay Securities 15.59


1 Yuanta 20.332 KGI 10.513 CLSA 10.27

BEST RESEARCH COVERAGESector Analyst FirmStrategy Vincent Chen Yuanta Macroeconomics Woods Chen Yuanta Small Caps Leonne Chen CLSA Banks Peggy Shih Yuanta Consumer Discretionary Leonne Chen CLSA Consumer Staples Juliette Liu Yuanta Diversi�ed Financials Peggy Shih Yuanta Energy Chuanchuan Chen Yuanta Health Care Peggy Lee Yuanta Industrials Steve Huang Yuanta

Insurance Peggy Shih Yuanta Materials Leo Lee Yuanta Real Estate Lily Hsiao Yuanta Semiconductors & George Chang Yuanta semiconductor equipment So�ware, Internet & Services George Chang Yuanta Technology Hardware & Equipment Je« Pu Yuanta Telecommunications Livia Wu Yuanta Transportation Lily Hsiao Yuanta Utilities Calvin Wei Yuanta


1 Yuanta 17.972 CLSA 9.513 Cathay Securities 8.80


1 Bryant Yang Cathay Securities 6.692 Ming Kai Cheng CLSA 4.913 Julie Tsai UBS 4.19


Yuanta Financial Holdings is a comprehensive financial services firm built on its strengths in the securities and banking sectors. With roots going back more than 50 years in Taiwan, and an ever-growing network of operations in

the Asia Pacific Region, including recent moves into the Korea, Thailand, Myanmar, Indonesia, and Philippines markets, Yuanta provides one-stop financial services to its clients, bringing together people and opportunities. To find out more about who we are and what we can do for you, visit us at . Yuanta.com/en

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Fixed Income Poll 2016

REGIONAL OVERALLOVERALL BEST REGIONAL CREDITRank 2015 Bank Score

1 1 ANZ 161.5232 5 CIMB 109.2633 3 Citi 96.4734 - OCBC 87.0705 2 HSBC 86.544

OVERALL BEST REGIONAL INTEREST RATESRank 2015 Bank Score

1 1 ANZ 148.6892 2 HSBC 91.3493 6 CIMB 68.4364 3 Citi 67.1835 7 OCBC 66.496

OVERALL BEST REGIONAL COMMODITIESRank 2015 Bank Score

1 - UOB 19.4812 2 ANZ 18.9043 9 HSBC 18.7854 - UBS 18.5185 1 CIMB 16.951

CREDITCREDIT RESEARCH & MARKET COVERAGE

G3 Bank Bonds Rank 2015 Bank Score

1 4 Nomura 5.9092 1 ANZ 5.8423 2 UOB 5.762

G3 Corporate Bonds Rank 2015 Bank Score

1 3 Nomura 6.2002 1 ANZ 5.8283 - Morgan Stanley 5.722

G3 Sovereign Bonds Rank 2015 Bank Score

1 - CIMB 5.7362 - Nomura 5.7313 1 ANZ 5.684

G3 Investment Grade Bonds Rank 2015 Bank Score

1 3 Nomura 5.8422 1 ANZ 5.7603 - Morgan Stanley 5.611

G3 High Yield Bonds Rank 2015 Bank Score

1 - UBS 5.6332 5 Nomura 5.6183 - ANZ 5.545

REGIONAL BEST SALES SERVICESIN CREDIT DERIVATIVES

G10 Products Rank 2015 Bank Score

1 4 CIMB 6.1542 1 ANZ 5.2903 5 J.P. Morgan 4.864

BEST CREDIT AGENCY Rank 2015 Agency

1 1 Moody's2 2 Standard & Poor's3 3 Fitch Ratings

INTEREST RATESREGIONAL BEST TEAMS FOR ASIANMACROECONOMIC RESEARCH

Rank 2015 Bank Score1 - J.P. Morgan 6.0732 4 ANZ 5.8183 - Standard Chartered 5.686

REGIONAL BEST SALES SERVICESIN INTEREST RATE DERIVATIVES

Rank 2015 Bank Score1 - Standard Chartered 5.6472 4 ANZ 5.5773 2 CIMB 5.521

COMMODITIESBEST FOR COMMODITIES RESEARCH

Rank 2015 Bank Score1 - UOB 6.4862 2 ANZ 6.4073 - OCBC 6.321

BEST FOR COMMODITIES SALES Rank 2015 Bank Score

1 - UOB 6.5662 - HSBC 6.4403 2 ANZ 6.274

BEST FOR COMMODITIES DERIVATIVES Rank 2015 Bank Score

1 - UOB 6.4292 - HSBC 6.2763 2 ANZ 6.223

ANZ and UOB on top in 2016 Fixed Income PollAsiamoney received 1,204 valid responses from 940 di�erent institutions for the 2016 Fixed Income Poll. We are pleased to present the results below in interest rates, credit and commodities across the region.

FI Poll mag-r2.indd 24 15/12/16 2:39 pm

Another Standout Year - Thank you!For the fifth year running, you have voted Moody’s Best Credit Rating Agency in the 2016 Asiamoney Fixed Income Poll. This honor reflects our commitment to excellent customer service, impactful research and topical outreach, and is only possible because of your support. We look forward to continuing our delivery of the independent ratings and research that gives you the confidence you want in your investment decisions.

For more information, visit moodys.com or call +852.3551.3077.

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DOMESTIC COVERAGECREDITBEST SALES SERVICE IN CREDIT DERIVATIVES

Local Currency Bonds Currency Bank

AUD ANZCNH HSBCIDR CIMBMYR CIMBPHP BPISGD OCBCTHB KasikornbankVND BIDV

INTEREST RATESBEST INTEREST RATESRESEARCH & MARKET COVERAGE

Local Currency Interest Rates Currency Bank

AUD ANZCNH Bank of ChinaCNY Bank of ChinaHKD Standard CharteredIDR Bank Central AsiaMYR Hong Leong Bank NZD ANZPHP RCBCSGD OCBCTHB Krungthai Bank

COMMODITIESBEST SALES SERVICE INCOMMODITIES DERIVATIVES

Local Currency Commodities Currency Bank

AUD ANZCNH HSBCCNY China Merchants BankHKD CITICIDR Bank Central AsiaINR State Bank of IndiaMYR CIMBPHP BPISGD OCBCTHB Siam Commercial BankVND BIDV

BEST PRICING FOR COMMODITIES DERIVATIVESLocal Currency Commodities Currency Bank

AUD ANZCNH HSBCCNY China Construction BankIDR Bank Central AsiaINR State Bank of IndiaMYR CIMBSGD OCBCTHB Siam Commercial BankVND BIDV

For full results of the Fixed Income Poll 2016, log on to

www.globalcapital.com/asia




AUSTRALIACREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 ANZ 25.3002 3 CBA 20.8553 2 Westpac 20.827

BEST FOR CREDIT SERVICESRank 2015 Bank Score

=1 3 CBA 7.000=1 4 Westpac 7.0003 1 ANZ 6.403

BEST FOR CREDIT RESEARCH & MARKET COVERAGERank 2015 Bank Score

=1 3 CBA 6.885=1 2 Westpac 6.8853 1 ANZ 6.208

BEST FOR CREDIT SALESRank 2015 Bank Score

1 3 CBA 7.0002 5 Westpac 6.9423 1 ANZ 6.478

BEST FOR CREDIT DERIVATIVESRank 2015 Bank Score

1 1 ANZ 6.211

INTEREST RATESOVERALL BEST FOR INTEREST RATES

Rank 2015 Bank Score1 2 ANZ 18.9252 5 Citi 16.550

CHINACREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 5 Citi 24.8962 - OCBC 24.6953 3 HSBC 23.019


1 - OCBC 5.9452 2 Citi 5.8653 4 HSBC 5.852


1 2 Citi 6.3422 4 HSBC 6.3333 - OCBC 5.625


1 - OCBC 6.5002 - Nomura 5.9173 2 Citi 5.895


1 - Citi 6.7942 - OCBC 6.6253 4 Bank of China 5.667


Rank 2015 Bank Score1 3 Citi 19.2872 5 Bank of China 17.9003 4 HSBC 17.415

BEST FOR INTEREST RATE RESEARCHRank 2015 Bank Score

1 2 ANZ 6.3722 5 Citi 5.283

BEST FOR INTEREST RATE PRODUCTS & SALESRank 2015 Bank Score

1 3 ANZ 6.1202 5 Citi 5.867

BEST FOR INTEREST RATE DERIVATIVESRank 2015 Bank Score

1 3 ANZ 6.4332 5 Citi 5.400


1 4 Citi 6.5372 3 Bank of China 6.1453 5 HSBC 6.083


1 3 Citi 6.6002 - OCBC 6.0603 5 Bank of China 5.834


1 3 Citi 6.1502 5 Bank of China 5.9213 - Standard Chartered 5.640

HONG KONGCREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 - Nomura 20.5522 1 ANZ 19.7793 - Mizuho 19.387


1 1 ANZ 5.4692 - UBS 5.0953 - Nomura 5.083


1 - UBS 5.2142 1 ANZ 5.1283 - Nomura 4.219


1 - UBS 6.0002 - CIMB 5.7503 - Mizuho 5.694


1 - Nomura 5.6252 - Mizuho 5.5003 1 ANZ 4.500


Rank 2015 Bank Score1 1 ANZ 15.502


1 1 ANZ 5.357


1 1 ANZ 5.831


1 2 ANZ 4.314




INDONESIACREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 CIMB 26.3872 - OCBC 24.5263 2 Bank Permata 18.303


1 1 CIMB 6.6722 - OCBC 5.9263 - Bank Permata 5.570


1 2 Bank Permata 6.4002 1 CIMB 6.0603 - OCBC 5.933


1 1 CIMB 6.8852 - OCBC 6.6673 3 Bank Permata 6.333


1 1 CIMB 6.7702 - OCBC 6.000


Rank 2015 Bank Score1 1 OCBC 19.8512 5 CIMB 17.9713 - Bank Mandiri 12.974


1 1 OCBC 6.6352 - CIMB 5.7353 - Bank Central Asia 5.333


1 1 OCBC 6.6262 4 CIMB 6.3653 - Bank Central Asia 5.333


1 1 OCBC 6.5902 5 CIMB 5.8713 - Bank Mandiri 4.333

MALAYSIACREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 CIMB 21.7512 3 Maybank 20.3803 4 RHB Bank 18.804


1 1 CIMB 5.4702 4 Maybank 4.9473 3 RHB Bank 4.739


1 4 CIMB 5.4142 5 Maybank 5.2173 - RHB Bank 4.700


1 2 CIMB 5.8362 3 RHB Bank 5.4153 - Maybank 5.004


1 3 Maybank 5.2122 2 CIMB 5.0313 - OCBC 4.529


Rank 2015 Bank Score1 5 Hong Leong Bank 16.6902 1 CIMB 15.8373 4 OCBC 15.522


1 5 Hong Leong Bank 5.6302 - Citi 5.6073 3 OCBC 5.386


1 1 CIMB 5.7382 - Citi 5.5543 - Hong Leong Bank 5.445


1 5 Hong Leong Bank 5.6152 - Ambank 5.3673 - Bank of America-Merrill Lynch 5.238

KOREACREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 ANZ 23.7452 3 Citi 20.8863 - J.P. Morgan 18.034


1 1 ANZ 5.9742 - Mizuho 5.6193 2 Citi 5.311


1 1 ANZ 6.0832 - Mizuho 5.4463 - Citi 5.050


1 1 ANZ 6.3182 - Mizuho 6.0363 2 Citi 5.550


1 1 ANZ 5.3702 3 Citi 4.9753 - J.P. Morgan 4.271


Rank 2015 Bank Score1 2 ANZ 17.1092 3 HSBC 16.3183 - Goldman Sachs 10.510


1 - Morgan Stanley 5.7122 4 ANZ 5.6433 2 HSBC 5.467


1 2 ANZ 5.7692 3 HSBC 5.2003 - Goldman Sachs 5.055


1 2 ANZ 5.6972 3 HSBC 5.651




SINGAPORECREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 - CIMB 25.0872 5 Standard Chartered 22.7873 3 ANZ 22.038


1 - CIMB 6.3702 3 Standard Chartered 5.6983 - ANZ 5.504


1 - CIMB 6.5002 5 Nomura 5.9593 - DBS Bank 5.596


1 - CIMB 6.5002 - Standard Chartered 5.9373 4 Nomura 5.926


1 - CIMB 5.7172 - Standard Chartered 5.6493 2 DBS Bank 5.199


Rank 2015 Bank Score1 - CIMB 18.7662 1 ANZ 18.3263 - UOB 16.773


1 4 Citi 6.5712 - Maybank 5.9863 - CIMB 5.918


1 - CIMB 6.4052 3 ANZ 5.9043 - UOB 5.813


1 1 ANZ 6.6532 - CIMB 6.4433 - Maybank 5.817

TAIWANCREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 ANZ 24.7132 - J.P. Morgan 20.4613 - Mitsubishi UFJ 16.917


1 1 ANZ 6.0912 - Mizuho 5.3333 - Citi 5.097


1 1 ANZ 5.9522 - Mizuho 5.2003 - J.P. Morgan 5.000


1 1 ANZ 6.2702 - Mizuho 5.6503 - Citi 5.625


1 1 ANZ 6.4002 - J.P. Morgan 5.2863 - Mitsubishi UFJ 4.450


Rank 2015 Bank Score1 2 Standard Chartered 20.1002 1 ANZ 19.3913 4 HSBC 12.292


1 2 Standard Chartered 6.7502 1 ANZ 6.3903 - J.P. Morgan 5.843


1 1 ANZ 6.6802 2 Standard Chartered 6.6003 4 BNP Paribas 5.600


1 2 Standard Chartered 6.7502 1 ANZ 6.3213 4 HSBC 4.178

PHILIPPINESCREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 - RCBC 20.934


1 - RCBC 5.077


1 - RCBC 5.857


1 - RCBC 5.500


1 - RCBC 4.500


Rank 2015 Bank Score1 - RCBC 20.0802 - ING Group 17.881


1 - RCBC 6.4812 - ANZ 6.4003 - ING Group 5.750


1 - RCBC 6.7732 - ING Group 6.4893 - ANZ 6.320


1 - RCBC 6.8262 - ING Group 5.642




VIETNAMCREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 BIDV 27.4682 - Vietinbank 24.7353 2 ANZ 24.646


1 1 BIDV 6.8452 3 ANZ 5.8083 - Vietcombank 5.605


1 1 BIDV 6.8442 5 Vietinbank 6.6673 - Vietcombank 6.175


1 1 BIDV 6.8972 - Vietinbank 6.7083 2 ANZ 6.375


1 1 BIDV 6.8822 - Vietinbank 6.7083 2 ANZ 6.389


Rank 2015 Bank Score1 1 BIDV 19.7772 2 ANZ 15.5763 - Vietcombank 14.612







THAILANDCREDITOVERALL BEST FOR CREDIT

Rank 2015 Bank Score1 1 CIMB 25.3762 2 Kasikornbank 21.6043 - Krungthai Bank 20.340


1 1 CIMB 6.2182 2 Kasikornbank 5.5513 - Krungthai Bank 5.219


1 1 CIMB 6.1792 - Kasikornbank 5.0663 - Krungthai Bank 4.528


1 1 CIMB 6.1082 2 Kasikornbank 5.4383 - Krungthai Bank 5.343


1 1 CIMB 6.8712 - Siam Commercial Bank 6.0003 2 Kasikornbank 5.549


Rank 2015 Bank Score1 2 HSBC 17.0832 - Kasikornbank 15.9863 1 CIMB 15.862


1 3 HSBC 6.0712 - Kasikornbank 5.2403 - Siam Commercial Bank 4.942


1 2 Thai Military Bank 6.1792 1 CIMB 5.9153 - Bank of America-Merrill Lynch 5.583


1 2 HSBC 5.4982 - Kasikornbank 5.4563 - Krungthai Bank 5.116

For full results of the Fixed Income Poll 2016, log on to

www.globalcapital.com/asia



2016 Fixed Income Poll – MethodologyIn the 6th Fixed Income Poll, Asiamoney invited both issuers and investors (namely hedge funds, private banks, central banks, asset management houses, securities houses and so on), those who invest their portfolio in the Asia-Paci�c market to participate. A total of 1,369 responses were received, however 165 were made void due to their failure to ful�ll the auditing re-quirements. The 1,204 valid responses came from 940 di�erent institutions. The geographical breakdown is as below:

The questionnaire was divided into 3 sections, each focusing on a di�erent product area: Credit, Interest rates and Commodities. The 2,925 nominations from 1,204 responses split across as below:

In the questionnaire, respondents were asked to rate their top �ve �xed income service providers in Asia-Paci�c (where �xed income trading transac-tions were mainly held) for the following categories:

CREDIT• Understanding your credit �nancing needs• Competitive execution and distribution• Capital support for primary issues• Fixed income origination• Liquidity and market support in Asian bond market• Fixed income solutions/ debt liability management• Desk analysis• Comprehensive �xed income capabilities• Electronic bond trading platform

Credit Research and Market Coverage• G3 bonds issued by Asian bank• G3 bonds issued by Asian corporate• G3 bonds issued by Asian sovereign• G3 Asian investment-grade bonds• G3 Asian high-yield bonds• Local currency credit• Perpetual bonds• Corporate hybrids

Credit Sales• Credit sales services• Credit trading• Innovative trading ideas• Pricing and execution capabilities

Credit Derivatives• Product range in credit derivatives• Market liquidity and support in credit derivatives• Pricing for �ow credit derivatives• Sales service in credit derivatives (G10 products)• Sales service in credit derivatives (Asian currency products)

INTEREST RATESInterest Rates Research• Asian macroeconomic research• Asian local rates strategy• Asian hard currency sovereign strategy• Quantitative research• Australian & New Zealand interest rates

• Individual Asian local rates markets – CNY – KRW – CNH – MYR – HKD – SGD – IDR – PHP – INR – THB – JPY – TWD

Interest Rate Sales• Sales services• Sales trading• Bespoke structure• Innovative trading ideas• Pricing and execution capabilities

Interest Rate Derivatives• Product range in interest-rate derivatives• Market liquidity and support in interest-rate derivatives• Sales service in interest-rate derivatives

- G10 Products- Asian local currency products

• Pricing for interest-rate derivatives- Vanilla options- Swaps- Exotic rates

COMMODITIESCommodities Research• Commodities research and market coverage

Commodities Sales• Commodities sales services• Commodities trading• Commodity brokering and clearing service• Innovative trading ideas• Pricing and execution capabilities

Commodities Derivatives• Product range in commodities derivatives• Commodity structure hedge and innovation• Market liquidity and support in commodities derivatives• Pricing for commodities derivatives• Sales service in commodities derivatives

- G10 products- Local currency products

A “one �rm-one vote” policy was implemented. To avoid any one respondent company having more in�uence than others of equal size, multiple votes from a company were fractioned according to the number of votes received from that company.

For each bank, a weighted average score is calculated across each of the categories. The weightings applied correspond to the annual �xed income trading volume/ asset size in Asia-Paci�c of the voting corporate or �nancial institution – as disclosed by the respondent.

Each vote was then weighted according to the annual trading volume of their institutions in Asia-Paci�c – as disclosed by the respondents.

The rankings for Regional and Domestic Overall were calculated from all responses. Banks are considered regional and eligible for regional awards if they received votes from three or more markets; Domestic Overall results show the best performers in domestic, market –speci�c, products and services. The Country results were tabulated based on where the respondents are located.

More detailed rankings will be available online, at www.asiamoney.com

For further information regarding the poll, please contact Tessa Wilkie ([email protected] +44 20 7779 7310) and Harris Fan ([email protected] +852 2912 8037).

Total annual trading volume in Asia-Paci�c Weighting

<US$50m 1 US$50.01m-100m 2 US$100.01m-250m 4 US$250.01m-500m 6 US$500.01m-1bn 8 US$1.01bn-5bn 12 US$5.01bn-10bn 16 US$10.01bn-25bn 20 US$25.01bn-50bn 25 >US$50bn 30

Others: 2.23%

China: 4.79%Hong Kong: 2.98%

India: 2.45%

Indonesia: 6.91%

Vietnam: 30.53%

Thailand: 10.74%

Taiwan: 2.98%

Singapore: 19.68%

The Philippines: 2.23%

Malaysia: 12.13%

Korea: 1.28%

Australia: 1.06%

Credit: 1,167

Interest Rates: 1,230

Commodities: 528


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Syndicated Loans

Low credit growth amid global mac-roeconomic uncertainty has marred the past year for lenders in Asia.

For Taiwanese banks, already battling the twin problems of a low return on assets and a highly fragmented banking market at home, seeking and seizing growth opportunities overseas has become even more critical.

“The vision we have as a bank and as an organisation is to be a meaningful regional player and continue to grow,” said Frank Shih, chief strategy o�cer at CTBC Bank, the third largest in Taiwan by assets.

“The home market is our stable, a cash cow but it does not provide the fuel needed for growth. The [Taiwan] economy has been �at.”

The Taiwanese economy grew 2.03% year-on-year accord-ing to preliminary Q3 �gures from the coun-try’s National Bureau of Statistics and the agency estimates GDP will grow 1.87% during 2017.

REGULATORY MANDATEThat slower growth at home has long encouraged Taiwanese banks to look o�shore. And until recently, borrowings by Chinese companies were the main source of overseas loan growth. However, in 2014, Taiwanese regulator Financial Supervisory Commission (FSC) sounded caution on

lending to China as the economic slow-down there intensi�ed. It instead pushed banks to diversify their loan exposures by bulking up elsewhere in the region, especially in southeast Asia.

One way Taiwanese banks have increased their exposure is by acquiring minority stakes in franchises in Asean countries to gain a foothold and access local deposits, which allows them to scale up.

The regulator acted as an enabler on this front by permitting the insurance arms of major �nancial institutions to use their funds for overseas investments. These insurance companies have plenty of cash at their disposal, making them well posi-tioned to acquire prized assets overseas.

One bank that has made an aggressive push into southeast Asia is E.Sun Commer-cial Bank in Taiwan. It has assets totalling NT$1.9tr ($57bn), making it roughly one-third the size of Bank of Taiwan, which is state owned and the country’s largest lender.

In 2016, the bank became the �rst Taiwanese lender to be granted a branch licence by the Central Bank of Myanmar, opening its �rst branch on October 3. The bank views Asean as its primary target market ex-China.

“Many Taiwanese corporates have operations in China and Asean to leverage growth opportunities in those countries. E.Sun wants to follow those clients and provide them with quality cross-border

Taiwanese banks venture overseas Faced with a low margin environment and intense competition at home, Taiwanese banks have been looking outward for growth. But as they diversify away from China due to regulatory and political pressure, lenders from the island nation face new challenges on due diligence. Shruti Chaturvedi reports.

FRANK SHIHCTBC Bank

Syndicated Loans-r2.indd 34 15/12/16 2:40 pm


Syndicated Loans

�nancial services. This is why E.Sun chose to enter Cambodia, Vietnam and Myanmar,” said a spokesman for E.Sun in an emailed response.

“Secondly, E.Sun has also set up branches in �nancial hubs of Asia Paci�c, such as Hong Kong, Singapore, Sydney, and Tokyo (in progress). In these �nancial centres E.Sun can �nd more banking opportu-nities, such as international syndicated loans, bond investments and FX interbank borrowings.”

FURTHER AFIELDAlthough Asean is the lynchpin of Taiwan-ese banks’ growth plans abroad, they have also successfully arranged syndications for borrowers that are culturally and physically remote, such as those from India and the Middle East.

CTBC Bank, for example, secured its �rst sole mandate for an Indian syndicated loan with a well-received $130m transaction for Yes Bank in July. It was later joined by Taiwan Co-operative bank as a fellow man-dated lead arranger and bookrunner.

The bank is focused on originating and arranging borrowings for non-state owned banks in India and is working to bring one more from that set to the Taiwanese syndi-cated loan market in the next six months, said a banker close to the matter.

Unlike most compatriots, CTBC Bank has a long history in India, having set up its �rst branch in New Delhi in 1996 and following this up with a second, in Chennai, which opened in 2012.

“In the past, India was quite remote for us,” said Shih.

“Not many sizeable Taiwanese businesses have a manufacturing base there. But activity is speeding up under the new pre-mier [Narendra Modi]. There will be more, foreign direct investment including from Taiwan and we feel we are better positioned to capture that [compared to Taiwan banks without a presence in India].”

“In India because our size is still rela-tively small compared to the market, we should be able to achieve 30% growth [in balance sheet] on annual basis. In south-east Asia we are targeting growth of about 15%,” he said.

Competitor Mega International Commer-cial Bank, meanwhile, was chosen by Doha

Bank to bookrun its latest borrowing that ended up at $180m from the launch size of $100m.

The Taiwanese lender is planning to boost its presence in the Gulf region with a forthcoming branch in Abu Dhabi.

“The Middle East market is important for Mega,” a banker at the �rm told Asiamon-ey’s sister publication GlobalCapital Asia in May, shortly aªer the Doha loan was launched. “The economic situation of countries in the UAE and their GDP is still stable,” he said, explaining the reason behind Mega’s interest in the region.

Another factor was the buoyancy of the crude oil market, which has since subsided. Taiwanese banks �rst started applying for a branch licences in the Middle East a few years ago, when oil money was still hot, said Andy Chang, director, �nancial ser-vices ratings at Taiwan Ratings Corp.

Although that has changed, the region continues to o�er business opportunities in corporate banking, he said.

LIQUIDITY FOR LATAMThe willingness of Taiwanese banks to explore cross-border opportunities is also attracting borrowers from outside the region to target Asia for their syndications. Latin American names have proved particu-larly keen this year.

Among them are Panamanian lender Global Bank, which sealed a bigger $135.5m loan in June and Banco CorpBanca Colom-bia, which launched a $200m transaction in September and is syndicating a slice in Taiwan.

In the case of both loans, the bookrun-ner group was composed of international banks. Global Bank was well supported by Taiwanese lenders during syndication and

the early signs for Banco CorpBanca were also positive, despite several lenders having no existing lines to Colombia.

The rigorous credit work that goes behind establishing a new country has not dissuaded even smaller, retail players from trying, according to a banker on that trade.

“Taiwan banks have abundant US dollar liquidity,” he said. “They do not have sig-ni�cant exposure to Latin America so there is room for growth and these [Global Bank and Banco CorpBanca Colombia] are well recognised in their home markets so they [Taiwanese] are more comfortable with the credit.”

Such loans are generally originated by the New York or US branches of the bookrun-ners and then distributed in Taiwan, he added.

TEETHING TROUBLENot that it’s been all plain sailing for Taiwanese banks as they go o�shore. With global ambition but relative inexperience in operating in overseas jurisdictions, lenders have faced some setbacks.

On August 19, the Department of Finan-cial Services of New York (DFS) slapped

ANDY CHANGTaiwan Ratings Corp



Syndicated Loans

a $180m �ne on the New York branch of Mega International Commercial Bank Co (Mega ICBC) for violating local anti-money laundering regulations.

“The compliance failures that DFS found at the New York branch of Mega Bank are serious, persistent and a�ected the entire Mega banking enterprise and they indicate a fundamental lack of understanding of the need for a vigorous compliance infrastruc-ture,” the New York regulator stated on August 19.

“DFS's recent examination uncovered that Mega Bank's compliance programme was a hollow shell, and this consent order [signed by the bank] is necessary to ensure future compliance.”

Many high pro�le names have been caught in the fallout. Mega ICBC’s parent, Mega Financial Holding, has sacked several senior executives, including chairman McKinney Tsai. The chairman of the FSC too, tendered his resignation in October, amid questions around the regulator’s e�ectiveness.

"This was de�nitely credit negative with regards to the bank's compliance function,” said Sonny Hsu, a vice president in the �nancial institutions group at Moody’s.

“They didn’t have dedicated compliance sta� in the bank's New York branch and

those working in compliance also had business operation responsibility, which presented a con�ict of interest. If you’re in business operation, you drive business growth. The compliance function has to ensure frontline sta� adhere to all regulation.”

But improving compliance in a marketplace where banks globally are tightening up their internal procedures means it won’t be easy. A shortage of quali�ed compliance per-sonnel has meant the cost of hiring them has been increas-ing, he said. This will push up Taiwanese banks’ cost of doing business.

“Compliance costs are rising, but the key for proper compliance is not just increas-ing sta�. It’s about culture also. If business lines do not

respect or are not familiar with compliance policies and procedures, then simply beef-ing up compliance sta� headcount would not be of much help."

Some Taiwanese banks have prioritised business expansion and not considered compliance as important a part of the overseas drive. But the Mega a�air has prompted a rethink, said market observers.

It’s not just compliance. Breaking into well banked markets in major �nancial centres requires a large and long-term investment. As a result, banks including Cathay United Bank and Taipei Fubon Com-mercial Bank, have closed their US branch operations for strategic reasons, said Chang.

“There has been limited expansion in US and EMEA markets not only because the compliance costs are signi�cant compared to southeast Asia but also because those countries have a higher standard of living and HR costs are quite high,” he said. “I think the reason for Cathay United Bank [to shut the US branch] was not about compli-ance but a strategic business decision,” he said.

RAISING THE BARBut the issue of compliance and due dili-gence is not limited to the US. Even closer

to home, Taiwanese banks sometimes struggle.

In part this is because some do not have a deep enough infrastructure or on ground presence in the countries of companies to which they lend.

As a result, Taiwanese banks have tended to rely heavily on the mandated lead arrangers and bookrunners for infor-mation on the borrowers. But this means when things go wrong, Taiwanese banks can �nd themselves heavily exposed.

This problem peaked in 2014, when a spate of restructurings, defaults and corporate governance missteps by Chinese companies spooked these banks. The o�enders included Chinese shoemaker Ultrasonic that raised $60m from Tai-wanese banks in 2014. Aªer that deal went sour, a consortium of six Taiwanese lenders launched legal proceedings against lead Nomura in June, alleging misconduct and fraud.

More recently, Indonesian trader Royal Industries failed to repay the �rst instal-ment of its $405m loan in August this year. It has since asked lenders to defer the date of the �rst instalment and asked for additional funds to help it get back on its feet.

Such experiences have made Taiwan-ese banks wary and encouraged them to strengthen due diligence, said a ratings agency source.

“According to our conversations with those banks, they are gradually trying to establish due diligence by themselves in addition to reference provided by foreign lead banks. They will catch up quite soon,” he believes.

The Mega incident has led to a system wide rethink. Bankers at the branches of Taiwanese banks in Hong Kong and Singa-pore reported that their head o�ces were demanding extra credit work on potential and existing clients in the aªermath.

Getting this right will be key if Taiwan-ese banks are able to continue with their overseas expansion. Taiwan’s banking market remains an important source of retail liquidity for loans from across the globe. But only by convincing the syndi-cation market that they are able to assess risk accurately, will they be able to gain a real foothold overseas. ◼

SONNY HSUMoody's



Bonds

Asia ex-Japan corporate bonds had a spectacular year with issuance volume totalling $739.71bn by early December, a rise of 28%

over 2015, according to Dealogic data. One sector shone in particular with deals from Chinese local government �nancing vehicles reaching a new high.

The asset class is still fairly new. The �rst LGFV bond was printed by Beijing Infrastructure Investment in June 2014. Since then, close to 40 names have ven-tured out to the o�shore bond market, mostly issuing in sizes of between $200m and $500m.

And it was 2016 that really saw the asset class take o�. LGFVs accounted for approximately $10.82bn worth of bonds this year, Nomura estimates. By contrast, issuance volume reached $3.10bn in 2015 and $1.52bn in 2014.

The surge in issuance was driven by number of developments that demon-strate a maturing of the asset class. First of all, deals were no longer limited to investment grade names.

Jiangsu NewHeadLine’s double-B rated $200m 6.2% three year from January was the �rst high yield transaction from a Chinese LGFV. Since then a parade of high yield names have ventured out including Xuzhou Economic and Technol-ogy Development Zone State-Owned Assets Management (BB+), Jiangsu Hanrui Investment Holdings (BB+) and Jiangsu Fang Yang Group (BB).

One reason for the emergence of high yield names and the uptick in LGFV debt

is the strong support it receives from onshore China. Thanks to their famili-arity with local governments and their LGFVs, banks and asset managers with a Chinese background feel more comfort-able purchasing those notes. High yield names in particular leverage o� such onshore support.

GEOGRAPHIC SHIFTAlso for the �rst time, issuers from provinces and municipal cities in the central to western part of the country also started tapping the bond market. Borrow-ers from Chongqing, Gansu, Shanxi and Yunnan made debuts this year. Previously, the pipeline was mainly concentrated in higher tier local governments in the coastal areas China likes Jiangsu, as well

as the political and �nancial hubs of Bei-jing and Shanghai.

Terry Gao, director of international public �nance at Fitch Ratings, believes one reason behind the geographic shi¥ of issuers to “the so-called economic development zones” is because lower-tier cities are facing higher onshore funding costs than higher-tier ones like Beijing and Shanghai.

The attractive pricing level achieved by some LGFVs also encourages others to look at raising funds via this channel, according to David Yim, head of Greater China DCM at Standard Chartered.

“In some cases, some of these LGFVs are actually encouraged by the local government to tap the o�shore market. It’s a kind of publicity, to promote that particular city or province. There are cases where one from a particular city or province issues and others follow because they don’t want to be le¥ behind,” Yim said.

Such encouragement was re¨ected by the fact that LGFVs from the same prov-inces or municipal cities o¥en tapped the market within months of each other in 2016. For example, Yunnan Provin-cial Investment Holdings Group and Yunnan Provincial Energy Investment Group printed their respective dollar bonds at the end of March and in late April, followed by Yunnan Metropolitan Construction Investment Co which sold its $500m 3.125% 2019s on July 5.

Chongqing Nan’an Urban Construc-tion and Development and Chongqing

Chinese LGFVs set to build on strong 2016 Chinese local government �nancing vehicles (LGFVs) have been one of the key drivers of bond volumes this year as they hit the international market in large numbers. The increasing supply means there is more scrutiny of the underlying risk but the sector looks set for another bumper year in 2017. Addison Gong reports.

TERRY GAOFitch Ratings

Bonds-r3.indd 37 15/12/16 2:41 pm


Bonds

Western Modern Logistics Industry Zone Development Construction sealed their respective transactions only 1.5 months apart.

PICK AND CHOOSEWhat keeps investors interested in the sector is the government linkage and the attractive yield that comes with it.

“China is such a big country, and besides investing in SOEs, before looking at purely privately-owned enterprises, a natural next level of credits to consider would be LFGV deals which still retain a linkage to the government on a provin-cial or city level and yet provide a higher yield,” said Cli�ord Lee, head of �xed income at DBS.

However, as supply boomed, investors became choosier over which credits they were willing to buy into. More than the industry in which the LGFV operates, key is the level of government backing, as well as the strategic importance of the LGFV.

Peng Jie, credit analyst at Western Asset Management Company, admitted that her �rm is open to this type of credit, given

its growing presence in the Asian market, “but we have been very selective”.

“For example, in general, we would prefer LGFVs carrying high policy roles such as those involved in public transpor-tation and utility services provision, and less prefer LGFVs in vanilla infrastructure construction such as primary land devel-opment.”

For example, Metro operators Beijing Infrastructure investment, Tianjin Rail Transit Group and Guangzhou Metro Group appealed to Peng’s �rm, and also a more recent o�ering from Xi'an Municipal Infrastructure Construction Investment Group Corp.

Not only is it from Xi’an, the capital city of the Shaanxi province, said Peng, this entity also plays a very critical role in the local economy and the public welfare, because it’s the primary platform to conduct gas and heat supply, and public transportation for the local government.

The growing selectiveness is re¨ected in this year’s smaller order books. Books have been around 2x covered for invest-ment grade names, while for high yield they have been even smaller on occasion, noted Frank Kwong, head of primary mar-kets, Asia Paci�c global markets at BNP Paribas. To him, this is a clear sign that investors are a lot more selective, given the amount of supply.

Although the demand from China is still the main driving force behind LGFV debt, the investor base for these deals is devel-oping and diversifying at the same time.

CLIFFORD LEEDBS

LGFVs are companies set up, fully owned, and operated by local governments that borrow money from the banking and �nancial system to engage in businesses that are �scal in nature, like infrastructure investment and public a�airs.

WHY AND HOW DO LOCAL GOVERNMENTS BORROW VIA LFGVs?Chinese laws forbid most local government agencies from directly issuing bonds in the capital market or borrowing from banks. Those who are eligible for issuing bonds must go through the strict approval procedure of the Ministry of Finance and the size of the quota is small. Therefore, circum-venting those restrictions is one important reason why local governments borrow through LGFVs and SOEs.

Technically, LGFVs are supposed to be independent compa-nies. However, uno®cially, it is generally accepted that the debt is municipal and there is recourse to government reve-nue in case of default. The debt issued by LGFVs is backed by the sponsoring local government, either directly or indirectly. Many local government agencies shi¥ land resources to LGFVs to serve as collateral, or pledge future government �scal reve-nues when LGFVs borrow from capital markets.

Source: An Introduction to Chinese Local Government Debt, Xun Wu, October 2015.

TYPICAL LGFV STRUCTURE

Note: In addition to bank loans, funds are also o�en raised via the bond market or the shadow banking market.

Source: Local Government Financing Platforms in China: A Fortune or Misfortune? Yinqiu Lu and Tao Sun; IMF; October 2013.] ◼

WHAT ARE LGFVs?

Local government Public in�astructure projects

Local governmentnancing platform

Banks

Cash, land,shares of state

enterprises as capital

Collateral Bank loans

Cash

Bonds-r3.indd 38 15/12/16 2:41 pm


Bonds

“We are seeing more international fund managers going into the transactions. On the IG side, we’ve also seen participa-tion from sovereign wealth funds,” said BNPP’s Kwong.

“Foreign investors are highly concerned over the jurisdiction where the local government is, how strong its linkage with the central government is, and the importance of that jurisdiction to the cen-tral government,” Kwong said, adding that certain types of infrastructure projects that are being re�nanced – like rail and sub metros – will see stronger demand from investors than some others.

OFFSHORE APPEALSWhile dynamics between onshore and o�shore funding cost is certainly one main reason behind LGFVs’ growing presence in the o�shore bond market, StanChart’s Yim says the debt raised o�shore is also about �nding new sources of capital.

“Sometimes it’s not about compar-ing costs – it’s about exploring another funding channel, which in this case is the o�shore market,” he said, adding that moving proceeds from o�shore to onshore China is easier than before. “One to two years ago, the central government is more concerned about funds coming into China, whereas now they are more concerned about funds ¨owing out, and might actu-ally encourage o�shore funding.”

To DBS’s Lee, however, issuing o�shore is a response to their natural dollar fund-ing needs. “The gap between onshore and o�shore USD funding costs, on an a¥er-swap basis, is narrowing and onshore liquidity has become less accessible to LGFVs, so issuing o�shore USD bonds will make sense for them.”

An alternative for these companies is to issue renminbi debt onshore, and swap the proceeds into foreign currency, but that would add further selling pressure to the renminbi. “Raising the required funding directly in the foreign currency needed is easier and cheaper o�shore,” said Lee. “Achieving a broader investor base is an added bene�t.”

UNDERLYING RISKSHowever, as the number of LGFV issu-ers increases, so do concerns about the

associated risks including China’s political uncertainty and the rising level of defaults in the country.

The world's second-largest economy has been su�ering from deceleration, with its economic growth rate falling to 6.7% in second half this year from 6.9% in full-year 2015, hitting a new 25-year low.

Meanwhile, the country’s debt level has climbed. Moody’s estimated that China’s government debt to increase to 43% of its GDP by 2017, up from 32.5% in 2012.

However, Fitch estimates that the total amount of o�shore issuance from LGFVs is less than 5% of their onshore debt. Given that, general market view is that LGFVs going o�shore do not yet pose a sig-ni�cant systematic risk.

“Default may not be a critical concern in the near term, given the relatively better visibility of policy support from the government. But it would be one on the back of my mind three to �ve years down the road as policy evolves,” admitted Western Asset’s Peng, who added that it is one of the reasons why in general her �rm tends to stick to short-dated bonds.

One pressing concern is the lack of transparency, according to Peng. This relates not only in the companies in terms of their operational data and �nancial ratios, but also at the local government level in relation economic and �scal data.

“We can still get hold of some mac-ro-level data if it’s at a provincial or

municipal city level, but for a lower-tier local government it’s quite di®cult to get data to assess the credit pro�le of the local government,” Peng said.

LOOKING FORWARDDespite the headwinds, observers agree that the supply from LGFVs shows no signs of slowing in 2017 given the number of potential issuers and continued inves-tor demand.

“The interest the market has in China, coupled with a desire for higher yield, will result in the rise of interest in LGFVs,” DBS’s Lee said.

Lower tier provinces and cities are expected to be the more eager to go o�shore and the structure of most deals are likely to be direct issuance, or come with a direct guarantee – a trend that is already started taking place this year, said bankers.

From the issuer’s point of view, DBS’s Lee argues there are three factors that are crucial for the sustainability of LGFV issuance in the coming year.

Firstly LGFVs’ ability to tap o�shore markets depends on getting approval. The Shanghai Stock Exchange has stipulated that LGFVs that generate more than half their revenue from local governments will no longer be allowed to issue corporate bonds. While there’s no sign of the NDRC slowing down approvals for the vehicles to go o�shore, it will be tricky to predict the regulators’ next move.

“The social and political situation in China is so hard to predict that you never know what’ll happen tomorrow. That worries me,” said a US based research analyst.

Supply also depends on the availability of onshore funding, according to Lee, who added that in the middle of 2015, onshore funding became cheaper, and it took away supply from the o�shore RMB and dollar bond markets. “And that trend continued into the �rst half of 2016. If access to onshore funding becomes tougher, o�-shore supply will increase,” said Lee.

Last but not least, since most LGFV issuers’ credit is enhanced by clear gov-ernment support, any adverse change in this support which may lead to resulting credit stress will a�ect market demand. ◼

FRANK KWONGBNP Paribas

Bonds-r3.indd 39 15/12/16 2:41 pm


Bank Strategy

AMTD is one of the Asia’s newer nancial rms, having started operations back in 2003. The non-banking nancial institution

was founded by CK Hutchison Holdings — controlled by billionaire Li Ka-shing —and Commonwealth Bank of Australia.

Since then, its ownership structure has seen big changes with the introduction of Morgan Stanley Private Equity as a stra-tegic investor in 2014. That was followed

by China Minsheng Investment (CMI) and Canadian private equity rm LR Capital, both of which took majority stakes last year, with AMTD also launching its capital markets business in mid-2015.

Running the show is Choi, who was appointed AMTD’s chairman in February this year, before which he had stints at UBS and Citi a�er rst cutting his teeth as an accountant.

“The most important thing for a nancial institution is to have credibil-ity — in terms of shareholder background and your network of resources,” Choi said at the end of September. “So when you have a Chinese sovereign-like player like CMI, the richest Chinese tycoon in the world, and a global nancial institution like Morgan Stanley as shareholders, it’s the best you can have and provides comfort [to the market] that AMTD is solidly backed and supported.”

The rm’s backing has helped it build a roster of clients across both ECM and DCM. The rst $100m-plus IPO featuring AMTD as one of the bookrunners hit the market in November 2015 when Chinese city commercial lender Bank of Qingdao raised $640m from an H-share ¡oat.

Since then, AMTD has bagged leading roles on deals such as

Xinte Energy’s $190m IPO in December 2015, Bank of Tianjin’s $990m Hong Kong IPO in March 2016, followed by China Logis-tics Property Holdings Co’s $433m listing and a $1.1bn transaction for Everbright Securities in August.

It has also boosted its DCM presence, run-ning dollar deals for the likes of shareholder CMI as well as Jiayuan International, Regal Hotels, Sun Hung Kai & Co, Sirius Interna-tional, as well as its own debut international bond. Dealogic has given it league table credit of $519.56m from 13 deals, putting it within the top 50 bookrunners in Asia ex-Japan as of November 15.

In ECM, AMTD ranks among the top 60 bookrunners in Asia ex-Japan ex-onshore China.

Choi says the rapid progress is thanks to AMTD’s approach to building long-term partnerships with its clients. “In all these relationships, if you keep on leveraging on the relationships to get an investment banking mandate, it is not enough,” said Choi. “Ultimately, you need to become their partners because they have so many needs that you can no longer give them just one investment banking service — you need to give them total solutions.”

“The e§ectiveness and eagerness to go and show others in the market, be it your clients or your business partners, that you can help them in the most e§ective way by knowing their needs, and where you don’t count every dime or dollar that you can get

AMTD plots global expansion Hong Kong-based AMTD has found its way into the league table for Asia’s top 50 DCM bookrunners just one year a�er kicking o� its capital markets and advisory business. For Calvin Choi, chairman, this is only the beginning. In an interview with Asiamoney’s Rashmi Kumar, Choi shares his plans for the �rm including international expansion and a potential listing.

CALVIN CHOIAMTD

Bank Strategy-r2.indd 40 15/12/16 2:42 pm


Bank Strategy

from them but instead count on the longer term win-win relationship, that helps our business,” he said.

SPECIAL PLACE Admittedly, the Asia ECM and DCM markets are more competitive now than ever. Many international banks, including the likes of Standard Chartered and Barclays, have exited the equities business altogether in the region. Meanwhile, houses like Goldman Sachs and Bank of America Merrill Lynch are slimming down their Asia investment banking opera-tions.

Chinese banks and brokerages, on the other hand, have increased their market share, using their strong China links to win capital market mandates.

Against that backdrop, AMTD’s target is to bridge the gap between Chinese and interna-tional capital markets.

“Hong Kong has signicant opportunities,” he reckoned. “There are Chinese players coming out to operate here, but they are not entirely connected with the international market. They have their own network of circles and work independently, so their eco system is not wide open and connected.

“But if you are someone that knows a lot about China, but you also know so much about the international markets, then you are not entirely China and you’re not entirely international. You become a special set-up in the middle to serve well as a bridge between China and international capital and opportu-nities and that’s our target.”

Market participants away from AMTD, however, are more sceptical. One Hong Kong-based headhunter said that while he does not directly track AMTD, he wonders whether the smaller boutique-style model can rival the services and credentials of conventional investment banks.

“Everyone is tightening their belts at the moment and getting mandates on deals that actually make you money is hard,” he said. “While there are advantages to being small in the sense that you can be more nimble, I’d take any new investment banking service with a pinch of salt — why would you start that business now when everyone is scaling back?”

A second headhunter pointed out to other boutique rms like Get Nice Securities, Sun Hung Kai Financial and Hong Kong-

based Kingsway Financial Services Group, which he thinks have not managed to make much headway since being set up.

Kingsway, for example, ranked within the top 150 ECM bookrunners in the region as of November 15, down from being within the top 90 during the same period last year. Kingsway was set up in 1990 and its corporate website says it specialises in IPOs, M&A and rights issues among other advisory services. Get Nice, meanwhile, had ECM league table credits for $163.5m via 10 deals as of November 15.

There are opportunities, however. Hong Kong’s market has been overwhelmed by listings from Mainland companies, but Choi thinks that is because the “bigger banks with international networks and client bases are not working hard enough to bring interna-tional deal ¡ows into Hong Kong”.

“We rarely see deals now that are solely taken up by a bulge bracket rm,” he said. “Banks have deal ¡ow, but in this market it’s di«cult to sell to investors. And if you are trying to sell to Chinese investors and the most buying power in the markets are Chi-nese, the Chinese banks — most of the time — can do it better. So ultimately, there is lack of momentum and appetite to bring unique deals into the local market.”

BIG HIRES With a team of 23 within the capital markets and advisory unit, AMTD is now hoping to identify more of these “unique deals”. Financial technology is one area of focus with AMTD partnering with LendIt to host the global ntech investment summit in Hong Kong in July this year.

The event welcomed more than 80 Asian investors as well as about 40 international companies such as US P2P platform Prosper, personal lending and wealth management

rm SoFi and start-up nancing platform FundersClub.

In addition, AMTD has provided nan-cial advisory services to a series B+ round of fundraising for online chau§eured car service provider UCar Technology and online second-hand cars platform Youche.com.

The southeast Asian market is also one that AMTD is keen to break into, but given the dominance of local players in the region, they are watching the market carefully.

Nevertheless, in a bid to ramp up its oper-ations, AMTD, which is short for At Minus Times Divide, has been on a hiring spree. The rm hired William Fung, formerly an executive director on UBS’s DCM syndicate team for Asia, in the middle of 2016 and added Michelle Li as a research analyst. Li was also previously at UBS and worked across xed income and equity research for Asian nancials as well as equity research for China banks, according to her LinkedIn prole.

A big coup this year was hiring Bob Leung as vice-president, who until recently was heading up Asia Pacic non-bank nancial institutions for UBS. The Swiss bank rst nabbed Leung from Deutsche Bank in 2011 to head its insurance research unit for the region. Leung was then relatively well-known, having been voted as the top analyst for insurance coverage in Asiamoney’s 2010 Brokers Poll.

AMTD is looking to boost its head count in the capital markets and advisory business to

STRONG START: AMTD'S DCM ACTIVITY IN HK/CHINA

Pricing Deal value DealDate Issuer $ (m) nationality17-Jul-15 Boom Up Investments 300.00 China07-Mar-16 Emperor International Holdings 38.60 Hong Kong15-Mar-16 Carnival Group International Holdings 180.00 China16-Mar-16 AMTD Group 110.00 Hong Kong23-Mar-16 Yunnan Provincial Investment Holdings 300.00 China23-May-16 Sun Hung Kai & Co (BVI) 240.00 Hong Kong16-Jun-16 Zhongrong International Bond 2016 500.00 China13-Jul-16 RH International Finance 350.00 Hong Kong26-Jul-16 Boom Up Investments 500.00 China03-Aug-16 Silver Sparkle 150.00 China11-Aug-16 HNA Group (International) 300.00 China31-Aug-16 Far East Consortium International 300.00 Hong Kong09-Sep-16 Jiayuan International Group 100.00 China28-Sep-16 HNA Group (International) 200.00 China27-Oct-16 Sirius International Group 400.00 China 15-Nov-16 Huarong Finance II 3000.00 China SOURCE: DEALOGIC



Bank Strategy

as much as 30 bankers by next year, and over a three-year horizon to more than 60. In the future, it also wants to roll out a system of allowing employees to become stakeholders through either an employee stock option programme (ESOP) or other share incentive schemes.

Having an entrepreneurship approach to AMTD, where employees can be shareholders and rise up the rank to partner, is the ulti-mate aim. And this strategy could benet in the long run as compliance becomes tougher, argued Choi.

“When I built this company, I gave lots of importance to compliance and code of conduct,” he said. “The shareholder base and credibility of the company are important. In every town hall meeting when I talk to the employees I emphasise that even if you work hard, you may not deliver the outcome because the market isn’t there or you just couldn’t deliver at the end of the day. And that’s OK. But I can’t tolerate if you violate rules or don’t comply with regulations — that I have zero tolerance for.”

It is this emphasis that drove the appoint-ment of two vice-chairmen. Marcellus Wong, vice-chairman of the board of directors, is also a senior adviser on the advisory commit-tee of LR Capital and in the past worked as a partner at PricewaterhouseCoopers where he was the head of risk and quality for the tax practice in Asia Pacic until his retirement in July 2012.

The vice-chairman of the global advisory committee is Raymond Yung, who has previously also worked at PwC and served as an adviser to the Hong Kong Monetary Authority.

But a third Hong Kong-based headhunter said that while AMTD’s standards are very high, he is concerned about the fact that

some of its sta§ work across the buy and sell side, making it an unsustainable model.

Choi, however, says the Chinese walls to separate the buy and sell side and other con-¡icted functions are well structured

within AMTD. On the investment front, every decision goes via a committee in the CIO o«ce. AMTD looks at all deals that t with its positioning, but doesn’t hesitate to pass up opportunities that do not make sense or with parameters that do not match the invest-ment committee’s criteria — no matter how rich the investment returns could be.

GLOBAL FOOTING With business in Hong Kong gaining trac-tion, AMTD is now keen to go global. By the end of 2016 or early next year, the bank is planning to set up o«ces in New York and London, with services spanning investment banking, asset management and insurance brokerage — similar to the structure in Hong Kong.

“I’ll have my team locally engaged in major cities globally. And this is impor-tant because when I do all these global deals, despite [their global nature], most of the sales and distribution takes place in Asia. But ultimately we want to play the institutional angle not just for selling and distributing deals. It’s for connecting di§erent markets in terms of intelligent relationships and local resources because you do need a global connectivity to bring everything together.”

Once the international units have been set up, it will help Chinese issuers list in those jurisdictions, while also assisting interna-tional companies to raise capital from Asia, says Choi.

Of course, the investment banking model has changed dramatically recently, making it harder to woo potential issuers. Choi remem-bers churning out deals in the past “like a machine” where executing a transaction was a step-by-step process, from origination to execution, then talking to the ECM desk, and

on to syndicate and equity sales team to the end investor.

Now, it is no longer about the process by which banks sell deals but rather the strategy they deploy.

“You need to recognise that every deal [in Hong Kong] is pretty much like a private placement nowadays, so you need to under-stand the issuer well. No matter how well you write the prospectus, it’s not like in the [old] days because institutional appetite has changed and investors won't just buy solely on how well you cra� the investment story.

“It’s about nding the uniqueness within the investor circle — what are the pockets that will be interested in this type of industry and the synergies you can create for both sides.”

PB ARM, INSURANCE IPO UP NEXT Away from capital markets, AMTD also houses asset management and insurance brokerage arms. The former is expected to surpass $2bn in assets under management by the end of the year, while AMTD is focus-ing on corporate clients at the latter.

Given the Hong Kong insurance market is very fragmented, it provides plenty of opportunities for acquisitions, says Choi. International players in the sector typically service just international or multinational companies, while some of the more local service providers focus on Asian blue-chips.

To give a llip to its business, AMTD is looking to list the insurance brokerage arm in Hong Kong by the rst quarter of 2016.

And there is more on the cards, with the rm looking to expand its services to include private banking next year.

“When you are too big, you can lose your focus. But when you are small and grad-ually building up the pie, you can cherry pick only the best [sectors]. The market is frustrating and there’s a bit of a downturn. But it is one with lots of opportunities to pick up and add on to your business. To gradually build into a special, unique and boutique type of set up with comprehensive nancial services and solutions is very interesting.

“So the core areas of business that will form my eco system will be investment bank-ing, insurance brokerage, asset management and private banking. Next year will be an important year for us,” added Choi. ◼

AMTD WINS HIGH PROFILE ECM DEALS

Pricing Deal value No. ofDate Issuer $ (m) bookrunners12-Aug-16 Everbright Securities 1,151.03 1920-Mar-16 Bank of Tianjin 990.04 825-Nov-15 Bank of Qingdao 638.57 1108-Jul-16 China Logistics Property Holdings 458.44 1022-Dec-15 Xinte Energy 189.88 713-Jun-16 Carnival Group International Holdings 88.73 328-Oct-15 Rentian Technology Holdings 37.16 208-Oct-15 Lanzhou Zhuangyuan Pasture 24.02 4 SOURCE: DEALOGIC



Equities

India’s equity capital markets are on track for their best year since 2011 and they owe it to the booming IPO market. Other types of capital raising

have punctuated the year – a block trade here and a quali�ed institutional place-ment there – but listings are what drove the year’s strong performance.

IPO volumes and the number of deals were at a six year high by mid-November. There were $3.8bn worth of share listings and 81 deals, compared to just $2.15bn and 60 throughout the whole of 2015, according to Dealogic data.

A number of key factors drove the jump this year. On the domestic front, there has been a shi� away from hard assets such as real estate and a preference for higher returns. As a result, in�ows into domestic mutual funds have been grow-ing, which has bolstered demand for equities. And while funds snapped up shares in the second-ary market, demand ultimately over�owed and became a driving force in primary activity, say bankers.

“Mutual fund plans are attracting in�ows, as much as $300m-$400m every month, so there is pent up demand for paper,” said Samarth Jagnani, executive director and head of capital markets India at Morgan Stanley. “And there is only so much to buy in the secondary market, so

the demand has �own into the primary market.”

The shi� came as real estate and other assets, such as gold, lost their shine. Oversupply in the real estate market pushed buy and hold investors or those buying as a capital asset or investment opportunity to move their money else-where.

Meanwhile, gold has been in a trough. A�er a boom in the value of gold follow-ing the �nancial crisis, it has su�ered since then. There was an upswing in the returns of gold funds in 2016’s third and fourth quarters, but the con�dence in the stock markets and desire for greater returns means equities have become more sought a�er.

And, India’s equity markets have o�ered a compelling investment story.

“India is not considered the same as other emerging markets, where you might make 20% returns but take on a large amount of risk,” said a senior equity mar-kets banker in India. “India is more stable now, returns might be around 10% or less but it is a safer investment.”

MACRO SHIFTIndia’s booming equity market is also a re�ection of the country’s positive macro picture. The economy as a whole is on the up, with the World Bank forecasting GDP growth of 7.68% for 2017 – the fast-est growth of any country in Asia. And a�er two years in charge, prime minister Narendra Modi has delivered an impres-sive turnaround from the paralysis le� by the previous leader Manmohan Singh. And this year businesses started to tap

the markets to realise their growth aspirations.

“Companies are showing more interest in capital, in growth, so they are investing in capital expenditure,” says Manan Lahoty, a partner at Indian law �rm Luthra & Luthra. “Sentiment has been like this since [Modi] was elected in 2014, but it has taken a couple of years for people to utilise capacity and to look to expand. Now we are in the expan-sion phase.”

The Modi government made a handful of moves that got

Equity markets enjoy an Indian summer India’s equity capital markets are at their healthiest in half a decade, having emerged from an extended period of lacklustre activity. The country’s positive macro story combined with the diversity of companies on o�er means the outlook remains bright for 2017. Jonathan Breen reports.

INDIA'S TOP 10 BIGGEST IPOS SINCE 2010

Pricing Deal valueDate Issuer $ (m)25-Oct-10 Coal India Ltd 3,40722-Sep-16 ICICI Prudential Life Insurance Co Ltd 90317-Dec-12 Bharti In�atel Ltd 76606-May-10 Jaypee In�atech Ltd 51030-Oct-15 InterGlobe Aviation Ltd 46302-Nov-16 PNB Housing Finance Ltd 45003-Aug-10 SKS Micro�nance Ltd 35811-Apr-16 Equitas Holdings Ltd 32602-Feb-10 D B Realty Ltd 32301-Aug-11 L&T Finance Holdings Ltd 278 SOURCE: DEALOGIC

Equities 1-r2.indd 43 15/12/16 2:42 pm


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markets excited, the most headline grab-bing of which was a surprise decision in November to replace the Rp500 and Rp2000 ($29) notes in a bid to combat corruption.

And in August, Modi enacted the Goods and Services Tax (GST), which will create a common market across the country, which until now has been weighed down by a complex array of different tax sys-tems for every state.

The announcement of the GST boosted sentiment because it showed the gov-ernment means business, say observers – particularly as Modi has declared he will keep to a deadline of April 1, 2017 for implementing the tax. Foreign inves-tors certainly took notice.

“Flows into India from foreign institu-tional investors have been growing but in the secondary market there is only so much to buy leading to demand for new paper,” said Jagnani. “If new stocks perform well then that demand increases and in the climate at this moment new paper is doing well.

“As a result, the primary issuance pipeline and FII inflows will continue to exhibit a positive trend.”

RICH WITH DIVERSITYThe positive backdrop invigorated India’s IPO market, bringing with it a breadth of opportunities from rarely seen sec-tors. For example, in August RBL Bank brought the first IPO from a bank in over 10 years while cancer and fertility care provider, HealthCare Global Enterprises, raised Rp6.5bn in March. Arguably the most headline grabbing deal came from ICICI Prudential Life Insurance Co – the country’s first ever listing from the insurance sector and the largest IPO in six years.

ICICI Prudential floated in Septem-ber for Rp60.6bn, the largest IPO since Coal India listed for $3.4bn in October 2010, according to Dealogic data. The success of the life insurance sector’s outing in the market has participants excited about seeing more from the industry. Potential candidates include SBI Life Insurance Co. And more activity is needed for the sector to gain some real momentum, says Luthra & Luthra’s Lahoty.

“Once a couple of transactions go through then there will be more IPOs which will help encourage even more,” he says. “I’m not entirely sure how quickly insurance companies will tap the markets. But we will see them in the headlines because they offer a new product, a new sector.”

ICICI Pru was not initially flagged as the sector’s trailblazer, that was HDFC Standard Life Insurance Co which had approval from its board of directors and had hired a team to run an IPO. But it decided to opt for a backdoor listing by merging with Max Life Insurance Co which in turn had merged with its listed parent Max Financial Services.

INDIAN IPO VOLUMES

Pricing Deal value Date $ (m) No. % share2010 8,287.40 63 47.652011 1,358.88 39 7.812012 1,298.49 25 7.472013 294.88 38 1.702014 245.33 46 1.412015 2,142.91 60 12.322016 3,763.50 81 21.64Subtotal 17,391.39 352 100.00Total 17,391.39 352 100.00 SOURCE: DEALOGIC. 2016 IS YEAR TO NOVEMBER 15.

The quali�ed institutional placement (QIP), one of India’s less common capital raising tools, had a tough year, but started to regain momentum at the end of the 2016.

QIPs are used by listed companies to raise capital, typically through the issue of fresh equity. The format does not require any pre-deal �lings to the market regulator.

QIP business had almost entirely dropped o� by September, driving the Securities and Exchange Board of India (Sebi) to call on local and international banks for advice on how to keep the market alive.

Sebi met with banks in August, when there had been just Rp5.6bn ($82.2m) worth of QIPs from four deals in the 2016/17 �nancial year,

compared to 20 QIPs worth a combined Rp193.6bn in 2015/16.

The action from the regulator was a positive sign to the market, but there was nothing it could do about the low number of QIPs, which was just a re�ection of the market and economic situation.

The answer from the bankers was simple: “It is because people and com-panies don’t need the money. There is not much capital expenditure at the moment and so companies don’t have the need to raise capital,” one banker told Asiamoney.

Then in early September, Yes Bank attempted a Rp66bn QIP. The deal was highly anticipated, but a�er it opened the bank’s stock price plunged and the issuer had to pull out for various

reasons not made public. Sources close to the situation say the QIP was hamstrung by a lack of demand and double-counting of orders.

Despite the fear of potential trauma following Yes Bank’s �op, a handful of QIPs were successfully completed soon a�er. The deals that came a�er Yes Bank, such as Motherson Sumi Systems’ Rp20bn QIP, were a positive sign for the asset class says Manan Lahoty, a partner at Indian law �rm Luthra & Luthra. And he expects more as companies head into a period of expansion.

“It seems QIPs have returned. There is sustained interest and lots of issuers are looking for this window to open. The QIP market is back it is just a bit late,” he said. ◼

QIPS: DOWN BUT NOT OUT



Equities

INVESTMENT TRUST DEBUTAnd in 2017, India’s equity market will get a further boost with the introduction of investment trusts. Infra-structure investment trusts (InvITs) are most likely to be �rst and real estate investment trusts (Reits) close behind.

Over the past few years there has been a lot of noise in India about InvITs, mostly from the government as it tried to kick-start the asset class. Securities and Exchange Board of India (Sebi) �rst �nalised the reg-ulations in September 2014. It published a consultation paper on the regulations in August 2015, which it followed up with a second in December that year.

“Reits and InvITs have taken a while to develop, but they are good because they o�er a fresh avenue to invest,” said Pranjal Srivastava, head of equity capital markets at ICICI Securities, adding that “the �rst few will need to be attractive to build that market”.

The government has been pushing the product and is working to clear up any issues with the rules and regulations.

“India has bene�ted with the proactive action from government and other regu-latory agencies,” said Srivastava. “Sebi heard us out – they are being proactive on InvITs and Reits. They are doing what they can do on this.”

IRB InvIT Fund, sponsored by IRB Infrastructure Developers, is on track to christen the asset class, having �led its dra� IPO prospectus in early Sep-tember. The listing will include an issue of primary shares worth up to Rp43bn, according to the document. It will also have an o�er-for-sale of secondary units, the size of which is undisclosed.

SECONDARY SELL-DOWNSO�er-for-sales (OFS) – which o�er a shorter and less complex way for

promotors to dilute their stake – were particularly common this year. ICICI Prudential for example was made up entirely of shares provided by its parent ICICI Bank. One reason for their popular-ity in 2016 is that India is at the peak of an investment cycle, says Sumit Jalan, co-head of investment banking & capital markets in India for Credit Suisse.

“The investment cycle [of private equity] is around �ve years,” he said “In 2011, private equity �rms made invest-ments in new companies, and many of these companies have now reached the point where they are ready to go public.”

“As private equity �rms cash out from these investments, the investment cycle will start again. I see the cycle starting again around the end of next year.”

As OFS deals create no new capital, some media coverage has put them in a negative light. But really it can be a way to avoid bloating companies with some-thing they don’t need, says Srivastava.

“In the majority of IPOs the company’s private equity investors are exiting either partially or fully,” he says. “But these are very healthy companies so they still

attract investors. And it is good for them not to raise capital they don’t need.”

Regardless, secondary share sales are a mainstay of a market like India’s, says Anand Gupta, portfo-lio manager at Eastspring Investments.

“In such a vibrant market you will have issuance where private equity �rms are just looking to take pro�t.”

But there is still huge potential for more deals through both OFS and primary deals given that so much of the market is still in the hands of families.

“Family promoters still own more than 47% of the market in India,” says Gupta. “The market capitalisation to GDP ratio in India still has long way to go, it is very low. So it is prime to pick up and

will only pick up further.”Over the next 12 months, �nancial

�rms and companies from a broad selection of industries will be busy going public, such as insurance, telecommuni-cations, consumer products and services, and healthcare, according to research from Baker & McKenzie. It reckons there are a further 16 companies in the pipeline to list with the potential to raise as much as $5.86bn

Highly anticipated IPOs include those from Vodafone India, which is expected to be around $3bn in size, and SBI Life Insurance Co, meaning there will be plenty to attract investors in 2017.

“India is the most diversi�ed emerg-ing market,” said Gupta. “No one sector has disproportionate weighting in the MSCI India Index. China has SOEs or tech stocks, but India has 16% IT, 21% banks, 10% pharmaceuticals for example. It is a unique universe to play in.

“Investors that want pro-growth stocks, pharma or health stocks or many others then they can get them in India. You can’t get that diversity in most other emerging markets.” ◼

ANAND GUPTAEastspring Investments



Co-published Statement

The year 2016 was a year of IPOs in India, led by the $903m ICICI Prudential Life Insurance mega deal. Do you think India is ready for more large primary equity placements? ICICI Prudential Life’s IPO had a fantas-tic outcome. It proved that size is not a constraint for good assets and investors — across categories — have an appetite for quality issuances. Given the size of our economy, I think India is ready for larger issuances.

ICICI Securities has become the investment bank of choice for Indian companies looking to access the equity markets. What has been the key to this success?We adopted a sector-focused approach, tracking industry developments, picking up important trends early enough and identifying players who would be looking to tap the capital market over the next few years. ICICI Securities was the bank with the highest number of IPOs in calendar year 2016, as well as leading the largest IPO in six years. We have completed 12 IPOs since January 2016 and we have also done the some of the largest qualified institutional placements (QIPs), including transactions for Motherson Sumi and block deals for Castrol.

What factors are most important for Indian firms when selecting banks for an IPO? The IPO of a company is a once-in-a-lifetime event. The client looks at several parameters while selecting a banker. Competitive pricing is important, but deep sectoral knowledge, institutional and retail capabilities, a previous track record and

the team’s strength to deliver the IPO on time are also critical factors. ICICI Secu-rities has a track record of successfully marketing issues to its investors.

With the current volatility in the market, how is the IPO pipeline for next year looking for ICICI Securities? For us, calendar year 2017 looks even more promising than calendar year 2016. Even though there is volatility, there is enough liquidity in the market. Emerg-ing markets tend to be impacted by US interest rate increases but India will likely be among the least a�ected. Also, if the process of demonetisation is completed successfully, it should play out well next year for the economy. We should see some positive impact. Capital-raising requirements from corporates, private equity exits, broadly positive IPO returns for investors and strong demand from domestic investors will be the main driv-ers of IPO activity next year.

Why will India be less vulnerable to US rate rises than other emerging markets?We expect India to remain well-placed among emerging markets on the back of a continued decline of the twin deficits, adequate forex reserves, an improving debt-to-GDP ratio and an inflation trajec-tory below the RBI benchmark. Further, the government’s pro-reform agenda remains a positive in the medium to long term.

How has the investor base for Indian equity o�erings developed in recent years? Over the past two years, cumulative domestic institutional investor (DII) inflows have reached $16bn versus foreign

portfolio investor (FPI) inflows of $7.3bn. The preceding two years saw cumulative FPI inflows of $36bn and DII outflows of $18bn.

The emergence of DIIs in recent times has been driven by liquidity arising from strong retail flows into mutual fund schemes. From the perspective of IPOs, foreign institutional investors have contributed $1.1bn to anchor investments over the past five years while domestic institutional investors have contributed $870m. Typically, we have seen DIIs play a larger role in issuances of size up to $75m while foreign investors play a predomi-nant role in issuances greater than $150m. Both international and domestic institu-tional investors are vital for healthy capital markets.

Will secondary o�erings likely be a major component of ECM activity next year? Yes, we expect secondary market o�erings to be major component of ECM activity next year. This will be led by large sell-downs planned by the government via the block/o�er-for-sale route. Cal-endar year 2016 has been dominated by IPOs, with 25 o�erings totalling $3.8bn, and just 14 QIPs aggregating $670m. However, this year has also witnessed several large block deals such as Castrol India, L&T, Eicher Motors, Kotak Mahindra Bank, Infosys and others, as well as OFS transactions such as NTPC, Concor, NHPC, NBCC, and Engineers India.

How is secondary market liquidity a�ecting the environment for primary equity o�erings?DII flows have been robust over the past three months driven by strong retail

IPOs set the stage for Indian investment banking surgeStrong interest from domestic and foreign investors helped a clutch of Indian companies complete over-subscribed equity capital markets transactions in 2016, led by a ground-breaking IPO from local insurer ICICI Prudential Life. Ajay Saraf, head of investment banking at ICICI Securities, discusses the drivers of India’s resurgent ECM market and the outlook for capital-raising and deal-making in 2017.

ICICI statement-r4.indd 46 15/12/16 2:43 pm


Co-published Statement

inflows into mutual fund equity schemes. October alone saw $1.3bn of retail inflows into mutual fund schemes and the number went up even further in Novem-ber. On the flip side, corporate equity capital-raising activity dipped significantly in November to $198m — down from an average monthly run rate of $600m in calendar year 2016. This is mainly due to volatility in the markets – and particularly emerging markets – a§er the US election results and demonetisation announce-ment.

How do you see M&A activity in India in the coming year? M&A activity in India has been stable and is expected to accelerate in 2017. Despite global growth concerns, India contin-ues to remain positive on the back of its strengthened macroeconomic fundamen-tals. Besides, recent Reserve Bank of India monetary policy easing has encouraged private investments in the country and helped corporates to strategically plan acquisition tactics.

How strong is your M&A franchise in India?If you look at the current M&A league tables, we are among the leading top five bankers. In 2016, we were involved in some of the largest deals — namely the UltraTech-Jaiprakash cement deal and

Vodafone-You Broadband trans-action — besides many others. I am confident that we will continue to be in the lead in the coming year.

The infrastructure industry has been quite active in the deal space. What factors are behind this?The government has been pursuing initiatives to boost the growth of the infrastructure sector, which is seen as the major driving factor for the Indian econ-omy. The RBI has allowed infrastruc-ture companies

to raise external commercial borrowings and the Securities and Exchange Board of India (SEBI) has allowed foreign portfolio investors (FPIs) to invest in real estate investment trusts (REITs), infrastructure investment trusts (InvITs), and category III alternative investments funds (AIFs), and has also permitted them to acquire bonds under default.

This has led to significant interest from international buyers to invest in Indian rail, energy and smart cities projects. There has been a lot of supply created in this industry. Also, a lot of sovereign wealth funds have been interested in investing. Going forward, deal volume is only likely to increase.

Of late, M&A deals have seen a lot of investor involvement. What is your take?Investor involvement is a welcome change as it has created a more transparent environment. Companies are being more compli-ant and transparent in presenting the facts and figures of the deal to their investors, as they take decisions considering the wider macro perspective including the post-deal sce-nario, business philosophy, management credibility, transparency, etc.

The Indian healthcare industry has attracted considerable interest recently. What is your forecast for sector?Based on our discussion with indus-try experts and financial sponsors, we forecast that the Indian healthcare sector will continue to receive strong investor interest in the coming years, given the paucity of hospital beds in the country and demand for quality healthcare ser-vices. Moreover, doctors are realising the need to be associated with larger formats and brands, and hence are more receptive to partnering with financial sponsors, as well as leading domestic and international strategic investors.

Is e-commerce a priority for investors in India?Increasing internet adoption in India, driven by higher mobile penetration and availability of cheaper smartphones, is promoting the development of e-com-merce and other internet-enabled business models.

Along with so§ware products, inter-net/e-commerce has also seen intense activity in terms of new start-ups. However, investment activity in inter-net/e-commerce companies in value terms moderated in 2016 with year-to-date investment of $2bn as against more than $5bn in 2015. Investors are eval-uating business models with a greater emphasis on unit economics with focus on a path to profitability. Additionally, there is greater emphasis on vertical-focused plays in areas including health-tech, ad-tech, edu-tech and food-tech.

In which sectors do you expect to see the most M&A activity in 2017? We expect M&A activity in 2017 will be in sectors such as pharmaceuticals, tech-nology, industrials and financial services. Cross-border activity in 2017 is also likely to see an increase at the back of improved interest in India from overseas strategic buyers. ◼

Contact details:Pranjal SrivastavaHead - Equity Capital MarketsPhone: +91-22-2288-2460/70Email: [email protected]: www.icicisecurities.com

AJAY SARAF head of investment banking, ICICI Securities

ICICI statement-r4.indd 47 15/12/16 2:43 pm


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Any illusion of calm was shat-tered just days into 2016 when China, just like it did in the summer of 2015, became the

epicentre of another global rout in �nan-cial markets. On trading �oors around the world, market participants looked on in horror as stocks dove headlong into a downward spiral.

If the turmoil of 2015 was caused by China’s devaluation of the renminbi, then in January it was the disastrous introduction of a circuit breaker that sent markets into a tailspin.

The instrument halted trading on the Shanghai and Shenzhen exchanges twice just four trading days into 2016 before being scrapped. But that would not be the last time markets went into panic mode this year, as global macro events such as the UK’s deci-sion to leave the European Union, or Brexit, and Trump’s win triggered similar instances of terror.

“January was a period that we would not only like to forget, but remove from history

altogether,” said a senior equity capital markets banker at a US �rm.

“We had to reset expectations for 2016 right o� the bat. But even a�er January, there were a handful of surprises that the market was either not set up for or had responded to in the extreme. All those events put investors on the defensive, and we had to dig ourselves out of that hole and get their con�dence back.”

Those early months saw ECM bankers couching their head in their hands. Some feared the worst as investors complained of ever-dwindling returns, banking jobs were cut and share sales were pulled. Many of the deals that made it across the line in the �rst half did so only with extraordinary support from Chinese investors.

“We had thought that a�er 2015, this year would be quiet, but we didn’t expect it to be this quiet, especially in the �rst half,” said Citic CLSA Securities’ head of Greater China corporate �nance and capital markets Wang Changhong.

“Despite China’s expected growth of more than 6%, investors were concerned about the quality of growth and whether it was too reliant on government stimulus. On top of that, rising bad debt ratios in the banking sector and the drop in private sector invest-ment made investors hesitant.”

ALL IN THE FAMILYThat hesitance among global funds led to cornerstone investors, especially Mainland corporates, soaking up a record amount of stock in Hong Kong IPOs. As at November 11, they had bought 55% of all share debuts in the city versus 41% for all of 2015, according to Dealogic.

This prompted a head of ECM at a bulge bracket in Hong Kong to call 2016 the year

of friends and family. “It had to be this way due to valuation issues,” he said, referring to China’s ban on sales of state-owned assets for less than book value.

Ada Wat, a member of UBS’s ECM syndi-cate in Hong Kong, said that banks have had to double down on e�orts to de-risk trades. In addition to courting investors during bookbuilding, this year syndicate desks have put just as much emphasis on the pre-launch stages of an IPO securing orders from cornerstone and anchor accounts, Wat said.

The cautious sentiment that prevailed for much of the year made it essential for deals to launch with a covered book. And nowhere was Mainland investors’ strength in num-bers more evident than in the behemoth HK$57.6bn ($7.4bn) Hong Kong IPO of Postal Savings Bank of China, the largest listing globally since Alibaba Group raised $25bn in 2014.

Postal Savings Bank tucked away some 76% of its shares with cornerstone investors, mostly Chinese state-owned �rms, allowing it to rank second only to China Development Bank Financial Leasing Co in terms of Hong Kong listings of above $500m with the highest cornerstone tranche.

“Cornerstone investors provide certainty in a tough environment,” said Citic CLSA’s Wang. “But it’s important to pick the right investors. If they can establish a strategic relationship with the issuer and are willing to be locked up for six months to show long-term commitment, then this sends a message of con�dence to other investors.”

The turmoil at the beginning of the year led to share sales being shelved for the second and third quarters. Despite their waiting, issuers still had to navigate fundraising windows that snapped shut whenever investors decided to capitulate.

China ECM: a�er the storm From China’s circuit breaker mayhem to a shock Brexit result and victory for Donald Trump, volatility was not on short supply this year. But a�er months of ducking for cover, equity bankers are emerging, if tentatively, from under their desks. For equity capital markets, the outlook on China is brightening, writes John Loh.

WANG CHANGHONGCitic CLSA Securities



Equities

Just as calm was starting to return, mar-kets were again jolted by Trump’s triumph in the US presidential elections on November 8. Market watchers say there is no way to predict what comes next, although several things became certain in the weeks following the vote: US monetary tightening, a stronger dollar and weaker emerging market curren-cies.

The surge in the dollar at the end of November prompted out�ows from Asia, forc-ing central banks to defend their currencies as the rupee, rupiah, ringgit and peso all took a beating.

Yet for all of Trump’s anti-China rhetoric, market observers do not believe he will act to the detriment of US-China relations. Issuers, at least, seemed not to care – deals in Asia started printing the day a�er the election result.

RAYS OF HOPEBankers too expressed hope that ECM would return to form. In the H-share IPO pipeline for 2017 are o�erings from the FIG space and healthcare, but the most anticipated of them will be �ntech.

“A�er some large deals priced this year, we’re expecting momentum to pick up,” said UBS’s Wat. “This is a cyclical industry and we are past the trough. It remains to be seen if the path will be smooth, but the worst is behind us.”

“We have a healthy pipeline of high quality issuers going into 2017 for a number of large IPOs. To some degree, things seem to have turned a corner and we could see volumes begin to normalise next year,” said Jason Cox, co-head of Asia Paci�c ECM at Deutsche Bank.

Kefei Li, who is co-head with Cox, said FIG would continue to drive volumes in 2017, as selected Chinese banks, insurers, asset man-agement companies and leasing companies head down the IPO route.

“FIG was a big theme this year because a lot of Mainland brokerages were racing to build up their capital bases and expand overseas, giving them the impetus to list in Hong Kong,” said Li.

With better stability coming through in the fourth quarter, Citi’s co-head of Greater China ECM and vice chairman of Japan capital markets origination, Bruce Wu, said there could be more execution-friendly windows for issuers and less acute price sensitivity from investors.

“When investors are less preoccupied by macro-driven market movements, they have more bandwidth to focus on company and industry fundamentals,” he said.

Credit Suisse’s head of ECM for Asia Paci�c Johnson Chui also points to the tailwinds li�ing the market into the year-end and 2017.

“We expect to see new concept plays and other traditional sector companies tapping into disruptive technologies next year, such as in the �ntech space,” he said. “Investors are seeking out deals and have the risk appetite for them. The issue this year has not so much been a lack of demand, but a lack of supply.”

Even as names like Ant Financial, Lufax and Zhong An Online P&C Insurance are

expected to add plenty of excitement to the market next year, questions are being asked about whether the regulatory landscape is ready to receive them.

Market watchers say there have been serious discussions on how Hong Kong can continue to be attractive for listings. Many believe the regime is in need of a shake-up if the city’s exchange wants to be relevant to technology issuers.

“There’s a disconnect between what the regulations allow and natural business cycles,” said, Allan Yee, a partner at law �rm Norton Rose Fulbright.

“Unlike the US, the Hong Kong main board doesn’t allow smaller sized companies with no pro�t track record to list, but private

HONG KONG-LISTED ACTIVITY PLUMBS MULTI-YEAR LOWS

Source: Dealogic. Year-to-date as at November 11.

$ (m)



Equities

equity or venture capital investors have a �nite investment horizon and many won’t wait until their investee companies turn a pro�t before exiting.”

The big picture in China, however, remains one of improving fundamentals. Key to this has been the stability of the renminbi, which has helped draw a line under the A-share panic in January, reckon equity analysts and strategists.

Erwin San�, head of China strategy at Macquarie Securities Group, calls 2016 a year of recovery for China, attributing this partly to the government’s infrastructure spending initiatives.

DBS equity strategist Joanne Goh agrees, saying that the renminbi has been one of the biggest surprises this year, defying expecta-tions that it would fall up to 7%. “Pressure on the currency has decreased because of its inclusion in the special drawing right basket,” she added.

San� thinks the People’s Bank of China will take the necessary steps to dampen depreciation expectations, with Macquarie forecasting a mild appreciation in the ren-minbi.

BOTTOMING OUT But even in a year when volumes have plunged more than 40% in Asia ex-Japan ex-onshore China, uncon�rmed reports in September that said Goldman Sachs was retrenching up to 30% of its sta� in the region still had the ability to surprise.

The exact number of cuts was not dis-closed, although people familiar with the matter say the �nal �gure was closer to 15% of its 300-strong investment banking head-count in Asia ex-Japan. The bank declined to comment.

The move follows layo�s earlier in the year by mid-tier �rms such as Barclays, CIMB and Nomura, which saw the axe falling mostly on equities divisions. Observers blamed the cuts on slowing revenue growth, competition from Chinese banks and higher operating costs.

That Goldman had contemplated reducing up to a third of its workforce has dramatic implications for global investment banks in Asia, according to a Hong Kong-based headhunter.

“This is the time to ask if you stared long enough at your navel this morning,” he said. “The news sent chills down the spines of many bankers, and it would be naive to think there will be no more cuts elsewhere. Costs

and return on equity are still massively out of whack at global banks.”

Some, like Citic CLSA, have sought other ways to reduce costs, with the �rm allowing sta� to take voluntary unpaid leave of �ve or ten days to weather the market downturn.

But while the competition for fees in Hong Kong looks like a race to the bottom, the second head of ECM said Mainland banks should not shoulder all the blame.

“The international banks are their own worst enemy,” he said. “A decade ago, under-writers on Industrial and Commercial Bank of China’s IPO made $60m each. On Postal Savings Bank, a joint global co-ordinator pocketed $15m-$20m, and the junior banks far less. The reality is that investment bank-ing in Asia is no longer a blue sky.”

Postal Savings Bank topped the list of the most number of bookrunners on an IPO globally, with its 26-bank syndicate split-ting $118m in fees between them.

At the heart of the issue is also the question of whether IPOs have become a commodity business, and whether global banks still bring value to the table.

“Chinese issuers are seeing less and less value in hiring global banks,” said a corporate lawyer. “State-owned enterprises have an untouchable mentality and only care about obtaining the highest possible valuation from friends and family. They just need a sponsor to tick all the boxes for a Hong Kong listing.”

The �rst ECM banker disagrees. “It’s true that A-share issuance has made up 70% of Asia ex-Japan volumes, compared to the 30% we’re used to, and that Mainland banks are rising up the global league tables,” he said. “But 12-18 months don’t make a trend.

“To say that China is shutting out global banks or investors would only be true if China intends to fund itself forever. But looking at all the e�orts at reform, like giving foreign investors access to the onshore bond market or the Stock Connect, that’s clearly not the case.”

Colin Law, China managing partner at law �rm Shearman & Sterling, said that while Mainland lenders have raised the competitive landscape in Hong Kong, this is part and parcel of a maturing market.

“Even though the Chinese banks are more established now, that doesn’t mean global banks don’t have a role to play,” he said.

If nothing else, the international banks can take credit for bringing in Postal Sav-ings Bank’s largest cornerstone investor. And one of the JGCs whose private bank client is Li Ka Shing is understood to have sold structured notes to the Hong Kong billionaire’s charity arm, giving it a 2.8% stake in the state-owned lender.

“China is in extreme headwinds at the moment because of a lack of trust from global investors,” said the �rst banker. “But the buy-side needs exposure to the world’s second largest economy.”

One thing senior ECM o«cials can agree on is that things are moving in the right direction.

“Right now it feels like we’ve hit bottom,” the �rst banker added. “A lot of the uncertainties have been baked in, and the recovery so far is a leading indicator of more a favourable market for issuance in 2017.” ◼

JOHNSON CHUICredit Suisse

BRUCE WUCiti



Cartoons

The whole pictureThe best of 2016's cartoons from Olly Copplestone.

Indonesia loan market, JanuaryBank of China $3bn green bond, July

Noble Group credit ratings, August

Hong Kong IPO performance, NovemberBond market reacts to Brexit, June

Cartoons-r2.indd 52 15/12/16 2:44 pm

Cartoons

GlobalCapital December 2016 53GlobalCapital December 2016

Panda bonds �rst anniversary, October

Chinese circuit breakers, January

Doosan Bobcat IPO, October

MTR Corp's debut green bond, October

World Bank SDR bond, August

Panda bonds �rst anniversary, October

SGX gets green light for dual class listings, October

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Regional Capital Markets Awards 2016

Over a period of two months, the GlobalCapital Asia team conducted pitch meetings with banks and interviews with market participants to decide the most impressive capital market transactions and advisers in 2016. A summary of the results is below and detailed write-ups of each award are in the following pages. Our thanks to all those teams that took the time to discuss their business with us.

LOANSBEST LEVERAGED/ACQUISITION FINANCETencent $3.5bn term loan and revolver due 2021

BEST INVESTMENT GRADE SYNDICATED LOANBaidu $2bn term loan and revolver due 2021

BEST HIGH YIELD SYNDICATED LOAN Birla Carbon Group $925m term loan and revolver due 2020

BEST LOANS HOUSEANZ

EQUITYBEST EQUITY-LINKED DEALSo�Bank Group Corp $6.6bn mandatory exchangeable trust securities due 2019

BEST IPOSamsung BioLogics Co W2.25tr ($1.9bn) IPO

BEST FOLLOW-ON/ACCELERATED BOOKBUILDMapletree Commercial Trust S$1.04bn ($732.16m) placement and preferential o�ering

BEST EQUITY HOUSECiti

BONDSBEST LOCAL CURRENCY BONDNirchem Cement Rp40bn ($600m) four tranche bond

BEST STRUCTURED FINANCE TRANSACTIONAstrea III $510m private equity collateralized ¡nd obligation

BEST HIGH YIELD BONDHT Global IT Solutions $300m senior bond due 2021

BEST INVESTMENT GRADE CORPORATE BONDCitic $1.25bn dual tranche bond

BEST FINANCIAL BOND DBS Group Holdings $750m Basel III AT1

BEST SOVEREIGN BONDRepublic of Indonesia €3bn dual tranche bond

BEST LOCAL CURRENCY BOND HOUSEHSBC

BEST G3 BOND HOUSEBank of America Merrill Lynch

INVESTMENT BANKBEST ASIAN INVESTMENT BANKDBS

BEST INVESTMENT BANKHSBC

Capital Markets Awards-r4.indd 54 15/12/16 2:47 pm



LOANSBEST LEVERAGED/ ACQUISITION FINANCE

Tencent $3.5bn term loan and revolver due 2021 MLABs: ANZ, Bank of America Merrill Lynch, Bank of China, China Merchants Bank, Deutsche Bank, HSBC and Shanghai Pudong Development BankThe quest by Chinese companies for quality overseas assets led to several acquisition �nancing opportunities this year. And the $3.5bn two tranche loan that backed the acquisition of Helsinki-based mobile gaming company Supercell by Tencent and a consortium of undisclosed investors was a standout example.

At an enterprise value of $9.5bn, repre-senting 6.7 times 2016 estimated Ebitda, the Supercell purchase was the biggest investment by a Chinese privately owned company into EMEA. But readying and syndicating the loan to support the acqui-sition was no simple feat.

For starters, the smartphone gaming business was pretty much uncharted territory for banks in Asia. In addition, as Tencent wanted to include other investors in the Supercell buyout, their presence meant the trade had to be remote or non-recourse, adding another level of uncertainty. As a result, borrower Inari Sàrl was set up by Tencent and the consor-tium to acquire the Supercell shares.

Given the challenges, the MLABs decided to study the target business rigorously rather than relying on Tencent’s reputa-tion for a successful syndication. One of the outcomes of this assessment was the decision to give the loan a �ve year tenor, given that the average lifespan of success-ful mobile games tends to be between �ve and seven years.

Other supporting arguments included the potential bene�ts to Supercell, which by tying up with Tencent would gain access to the world’s biggest smartphone market. Moreover, the tech giant was put-ting in a sizeable amount of equity into the Finnish company, indicating its belief in Supercell’s ability to deliver.

A detailed dossier was shared with Chinese lenders that later came on board

as MLABs, with the loan structured and launched just six weeks from the announcement of the acquisition.

In the end, the investor education and six-year-old Supercell’s consistent track record of successful releases was so convincing that the loan proved a hit in syndication, attracting a 2.4x oversub-scription from a diverse group of lenders. A well-deserved winner of this year’s Best Leveraged/Acquisition Finance.

BEST INVESTMENT GRADE SYNDICATED LOAN

Baidu $2bn term loan and revolver due 2021 MLABs: ANZ, BNP Paribas, Bank of America Merrill Lynch, Bank of China, Bank of Communications, China Cinda Asset Management, China Construction Bank, China Merchants Bank, Citi, Deutsche Bank, HSBC, Industrial and Commercial Bank of China, JP Morgan, Mizuho and Standard CharteredChinese technology companies keep a close eye on their peers and their fundraising activity. Sitting on huge piles of cash, these �rms are acquisitive and constantly on the lookout for suitable overseas targets, and syndicated loans are a key source of funds.

Building and maintaining these war-chests is essential because of capital controls on the Mainland. A sudden change in regulation could make it di�cult for �rms to move money out of the country, which is critical in a time sensitive acquisi-tion situation.

It was against that backdrop that Baidu, taking cue from the likes of Alibaba and Tencent, which have been proli�c issuers of syndicated loans, chose this year to make its debut.

But being the new kid on the block did not stop the Chinese search engine service from pulling o� a pricing that had been the preserve of its larger, more experienced peers. The three original MLABs — Citi, Deutsche Bank and HSBC — launched the deal the same week Alibaba closed its $4bn syndication. Both transactions paid a margin of 110bp above Libor.

Notwithstanding the tight pricing, 13 retail lenders piled into Baidu’s deal and

the robust demand led the company to double its borrowing to $2bn.

Banks were eager to start a relationship with Baidu, which is far and away the biggest internet search provider in China, with 90% of internet users turning to its service for searches.

In addition to the prospect of more business from future acquisitions, Baidu’s status as a new economy company in an industry that is driving much of China’s economic growth, also reeled in demand.

The bullet was split 50-50 between a term loan and revolver, with the �exibility around drawdowns o�ered by the latter making it ideal for potential overseas investments.

With this maiden outing, Baidu man-aged to kill the proverbial two birds with one stone. It clinched crucial funds for future ventures overseas and cemented relationships with a diverse group of lend-ers from Asia, all while paying a margin reserved for only the most prestigious names from China.

For these reasons, Baidu’s debut bor-rowing walks away with the title of Best Investment Grade Syndicated Loan.

BEST HIGH YIELD SYNDICATED LOAN

Birla Carbon Group $925m term loan and revolver due 2020 MLABs: ANZ, Axis Bank, Bank of Amer-ica Merrill Lynch, Crédit Agricole, ICICI Bank and Standard Chartered The $925m dual tranche re�nancing for the Birla Carbon Group is our pick for Best High Yield Syndicated Loan. Not only did the borrowing help Birla Carbon consolidate debt scattered across multiple geographies, it did so while overcoming the di�erent risk pro�les of its operating entities.

Aditya Birla Group’s acquisition of Colombian Chemicals in 2011 was under-pinned by a three pronged �nancing, comprising a $500m �ve year raised in the US, a $175m facility for the Thai entity and a second $175m �nancing for the Egyptian part of the business.

With less than a year to spare before the US portion fell due, Birla was under-




BEST LOANS HOUSE

ANZThis year was a challenging one for syndicated loans. With declining volumes, ample liquidity squeezing pricing and the ascendance of local competitors, loan desks were forced to rethink how they conducted business in the region.

At ANZ, our pick for Best Loans House, the evolving market backdrop coincided with a bank-wide shi£ in strategy. New CEO, Shayne Elliot, overhauled the Asian business at the begin-ning of the year, putting in place a new structure that saw the bank focus on key clients and sectors.

For the loans team, headed by John Corrin, this meant devot-ing more energy to clients where the bank had or felt there was opportunity to gain a bigger share of wallet. While this shi£ has been evident in other banks for a while it marked a depar-ture for ANZ which over the past seven years has developed into one of the biggest loan houses in the region

Yet despite the more selective approach, ANZ has held on to its market position. It was second in the bookrunner league table for G3 Asia ex-Japan ex-China-onshore syndicated loans during the awards period.

The bank still o�ers a breadth of operations. Greater China and India were the biggest contributors to the loans desk’s PnL this year — even outstripping the bank’s home market of Australia — but during the awards period, ANZ also led trans-actions in 14 di�erent jurisdictions including frontier markets such as Cambodia, Laos, Mongolia and Vietnam.

One way it has managed to maintain volumes and stay pro�table is by pitching harder to secure sole underwrites and mandates.

Take the instance of TML Holdings. In the company’s pre-vious deals ANZ featured as a joint MLAB but successfully clinched a sole mandate this year a£er o�ering a loan for a

bond buyback that resulted in sizeable cost savings to the �rm. The $250m loan attracted several new lenders from Taiwan.

That transaction was one of seven sole mandates in Asia ex-Japan ex-China onshore the bank won during the awards period. To support this e�ort, ANZ spent time expanding its distribution channels with a focus on identifying new liquidity from retail banks in Taiwan and Japan.

In a year full of surprises, ANZ proved able to help clients navigate choppy water. The prime example is a $500m syndi-cation for Fosun Industrial which came to a halt a£er Fosun Group co-founder Guo Guangchang went temporarily missing. It later emerged that he had been invited to be a witness in an investigation by Chinese authorities but was not considered to have done anything wrong.

Although Fosun Industrial eventually trimmed its borrowing from the original amount it sought, the fact that most of the participants that committed before the incident were still part of the �nal syndicate, is testament to the leads’ ability to get them comfortable with the unforeseen political risks.

The new approach has also not stopped the bank from estab-lishing lending relationships with new clients including a $330m term loan facility for Midea International Corp and the �rst Asian syndication for Santander Consumer Finance.

While ANZ posted a sterling performance this year, some of its competitors also deserve a mention for their e�orts. Chief among them is Credit Suisse, which made the most of the greater autonomy given to the Asia Paci�c division by chief executive Tidjane Thiam.

The Swiss bank was able to put serious balance sheet to work, with risk weighted assets increasing 21%. Its expertise in frontier and emerging markets was once again on display as it brought several sovereigns to the loan market in 2016, includ-ing Sri Lanka, Mongolia, Pakistan and Papua New Guinea. It also tapped into the capabilities of its Asian private bank to

place loans with family o�ces, unearthing a new investor base for syndications in the region.

And while it has typically been viewed as a niche arranger, Credit Suisse's e�orts this year saw it enter the top 10 bookrunner league table for Asia ex-Japan ex-China-onshore loans.

All that remains to be seen is whether the Swiss bank will be able to sustain the momen-tum it has whipped up in 2016.

This is where ANZ edged out its European rival. It has been a consistent performer as an arranger of quality trades in Asia and has proved the ability of its franchise by maintain-ing its dominance in a year of more di�cult trading conditions and a new strategic focus. This is borne out by its presence in the MLAB groups in all three of our loan deals of the year. ◼

ANZ held on to its strong market position




EQUITYBEST EQUITY-LINKED DEAL

So�Bank Group Corp $6.6bn mandatory exchangeable trust securities due 2019Joint bookrunners: Deutsche Bank and Morgan Stanley The past year has been one of scant supply in Asia’s equity-linked market. So when So£Bank Group turned up with the largest equity-linked deal globally since 2010 in a structure not o£en seen in the region, it attracted huge interest.

The deal was the �rst equity-linked transaction to involve Alibaba Group stock and used a mandatory exchangeable trust securities (Mets) structure, which helped bridge the gap between the Japanese issuer and US-listed shares. And at the same time it pulled in investors. For all these reasons, the $6.6bn issue is GlobalCapital Asia’s Best Equity-Linked Deal of 2016.

So£Bank was weighed down by a rising amount of debt and was under pressure to monetise some of its $65bn position in Alibaba Group to deal with the problem. But the Japanese company is not regis-tered with the US Securities and Exchange Commission and so couldn’t simply o«oad some stock onto the market.

The leads began working on a Mets structure with So£Bank’s in-house �nance team some four months before the launch, part of which included con-vincing chairman Masayoshi Son of the format.

The three year trust securities, part of an $8.9bn sell-down of Alibaba stock, allowed So£Bank to jump the SEC hurdle by automatically exchanging into Aliba-ba’s American Depository Shares (ADSs) at maturity.

Alibaba was naturally concerned with the impact a multi-billion-dollar sale of its shares could have on its stock price. But the structure cushions the e�ect on Alibaba’s stock, as the company’s share price at the Mets maturity will determine how many ADSs each trust securities exchanges into.

Meanwhile, on top of a 17.5% con-version premium, investors are paid a healthy 5.75% coupon. So the deal drew the whole gamut of investors from traditional equity buyers to specialist equity-linked funds. As a result, the leads executed the sale of 55 trust securities in 24 hours and a day later exercised the $1.1bn greenshoe. The success of the deal has laid the groundwork for the use of more Mets structures in Asia.

BEST IPO

Samsung BioLogics Co W2.25tr ($1.9bn) IPO Joint lead managers: Citi, Credit Suisse, JP Morgan, Korea Investment & Securities and NH Investment & Secu-rities A reliance on cornerstone investors has characterised IPOs this year, more o£en than not in a bad light. Certainly the largest deals were de�ned by the portions signed over to cornerstones. And the bigger the transaction the more noticeable it was. For example, some bankers working on Postal Savings Bank of China Co’s Hong Kong listing called it “the largest club deal in the world”.

So, Samsung BioLogics Co’s W2.25tr deal stands out from the crowd, not only being the second largest IPO in Asia Paci�c ex-Ja-pan this year and the largest in Korea for three years, but for being completed with-out cornerstone investors.

BioLogics was a£er a large sum of money but had not posted a pro�t since it was founded in 2011. But the �rm is the jewel in Samsung Group’s crown and in two or three years is expected to be perhaps the dominant player in the multi-billion-dollar global biopharmaceutical manufacturer market. So, in February it started asking banks how it could raise money.

stood to be leaning towards a term loan B to re�nance the debt. But a propo-sition by bank units in Asia led to a rethink.

The idea of a single Asian syndicated loan to replace the three original facil-ities, while ensuring signi�cant cost savings for Birla, had obvious advan-tages, but executing it was far from simple.

Birla Carbon’s operating companies were located in countries as diverse as Brazil, Egypt, Hungary, Thailand and the US. One struggle was coming up with a uni�ed pricing that would address vola-tility in Egypt, heightened political risk in Thailand, and account for the relatively stable environments in which the Hun-garian and US companies operated.

To deal with this, the MLABs suggested the setting up of a holding company called SKI Carbon Black (Mauritius), under which all seven entities would sit. To deliver on the promise of cost savings for Birla, weaker opcos were shored up with the help of entities in developed markets, which were able to cross-guaran-tee obligations of the entire facility.

Then there was the issue of foreign exchange movements and the impact they may have on the consolidated dollar earn-ings of the business. This was tackled through a debt-to-Ebitda covenant that capped leverage at 4x. This gave the com-pany su�cient headroom as its leverage was around 3.3x.

Other covenants too, were designed to be tested on a pro-forma basis, so that the

company could bene�t from the �nancial performance of the more robust co-guar-antors.

The e�ort that went into structuring cer-tainly paid o�, with the leads selling down 60% during syndication, netting commit-ments from European, Australian, Canadian, Brazilian, Indian and Taiwanese lenders.

The Birla Carbon loan was a pioneering transaction that set a template for others to follow. And follow they are. Novelis, another constituent of the Aditya Birla Group, is now in talks to take out US TLB debt with an Asian loan.

The Birla Carbon trade showed that Asia can o�er competitive terms versus the institutional US TLB market, making it a clear winner in the high yield cate-gory this year. ◼




Fast forward to the last week of October and BioLogics priced its IPO at the top end of the W113,000-W136,000 guidance range, multiple times subscribed, with a bulging book of high quality demand. The team of bookrunners had managed to sell the company using a 2021 price-to-earn-ings multiple and the story of its future as a contracted manufacturing organisation (CMO).

But BioLogics’ most striking success and perhaps most deserving reason for best IPO was its a£ermarket performance. Debuting the day a£er Donald Trump took the White House, BioLogics’ stock price had a minor blip and then proceeded to climb 16.1% over the next two weeks to November 25.

It came in contrast to a long list of headline IPOs this year in Asia, which �opped a£er listing — from BOC Aviation, which priced its HK$8.7bn IPO at HK$42 per share and dropped to HK$39.35 apiece a£er its �rst month, to Postal Savings Bank’s HK$57.6bn mammoth, which debuted at HK$4.76 per share on Septem-ber 27 and had hit HK$4.16 by October 28.

For its execution, the returns it bagged for the issuer and its a£ermarket trading, Samsung BioLogics deserves the title of Best IPO this year.

BEST FOLLOW-ON/ ACCELERATED BOOKBUILD

Mapletree Commercial Trust S$1.04bn ($732.16m) placement and preferential o�ering Joint global co-ordinators, joint bookrunners and joint lead managers: DBS, Goldman Sachs and HSBC Real estate investment trusts may be safe as houses, but Mapletree Commercial Trust still managed to shake things up when it sealed an overnight block-plus-rights combo to raise S$1.04bn in July.

The issuer made the unique decision to simultaneously launch a S$529.1m place-ment and S$515.2m preferential o�ering, aiming to use the proceeds for its S$1.8bn acquisition of o�ce and business parks from its sponsor.

In an e�ort to capture di�erent pockets of liquidity and tap into latent demand from new and existing unitholders,

BEST EQUITY HOUSE

Citi

In a year of upheaval for ECM and the franchises of global banks in Asia, Citi’s consistency has not only allowed it to maintain its market share, but also grow it. For that, the bank wins the award for Best Equity House.

The past year has been one of extreme headwinds for international banks in the region, with equities desks bearing the brunt of a plunge in volumes and investor capitulation. The role of global ECM houses has been called into question.

All that has not dented a franchise like Citi’s, whose breadth of products and ability to leverage both its corporate lending relationships and savvy advisory have helped it serve clients in good and bad times.

Citi may not be able to claim a chokehold on China, Asia’s most important market for equity issuance, but its broad footprint across the region means it does not have to be over-reliant on any one market to deliver the numbers.

And deliver it has. During the awards period, Citi not only maintained a leading position in the Asia ex-Japan ex-onshore China ECM bookrunner rankings, but also improved on it, according to Dealogic.

At a time when global banks are scaling back in Asia, Citi successfully clawed its way from 7th to 4th place on the league table, earning credit for $4.58bn worth of deals and a 4.4% market share, compared to a 3.6% share in the previous comparable period.

And although Asian banks have thrown down the gauntlet this year in ECM, with the Chinese lenders mounting an increasingly bloody campaign, Citi played to its strengths in southeast Asia, South Korea and India.

It topped the league table in India, a notoriously di�cult market in which to make money, beating �erce competition from local rivals. It was also the top blocks house in South Korea, and in southeast Asia it has more than doubled its market share from the previous period, courtesy of its dominance in Reits.

That consistency is key to ensuring clients are engaged throughout all stages of the business cycle, and making sure the bank gets a seat at the table no matter how mar-kets are doing.

There is no denying the strength of Citi’s commercial banking relationships and the opportunities it has mined from there – yet the bank has been over reliant on its big balance sheet.

Instead, what Citi has brought to the table is the ability to understand the client and marry their needs with succinct advice on structuring, timing and distribution, whether that should be in the form of an IPO, overnight block, rights issue or equi-ty-linked o�ering.

The breadth of its o�erings this year bears testimony to that. Citi navigated India’s maze of foreign ownership rules to help Sumitomo Mitsui Banking Corp sell down a $305m stake in Kotak Mahindra Bank. Citi also led the way for Chinese IPOs in the US, bringing deals such as ZTO Express, GDS Holdings and Gridsum Holding.

Special mention goes to Deutsche Bank, the most improved ECM house in Asia. A£er a couple of choppy years the bank has returned to form in ECM with a new leadership team and several marquee trades, the most notable being our Best Equity-Linked Deal – the $6.6bn mandatory exchangeable trust into Alibaba Group Holding.

Its ECM business leapt an impressive six spots to second place during the awards period among Asia ex-Japan ex-onshore China bookrunners, according to Dealogic. Deutsche was the only house in the top 10 to improve its league table credit by $1bn.

Whether it can sustain this performance remains to be seen, but Deutsche’s ambi-tions will be one to watch as its franchise is rebuilt in Asia.

But for showing consistency throughout market cycles and resilience in its fran-chise amid unwavering volatility, Citi is our choice for Best Equity House. ◼




BONDSBEST LOCAL CURRENCY BOND

Nirchem Cement Rp40bn ($600m) four tranche bond Rp11.5bn due 2018, Rp12.5bn due 2019, Rp8bn due 2020, Rp8bn due 2021Arrangers: Barclays, Credit Suisse and IDFC Nirma’s acquisition of Lafarge India’s cement assets in July is the largest acquisition in the country this year and the most high pro�le one. However, as regulators forbid Indian corporates from using bank loans to fund an acquisition in the country, the consumer and industrial product manufacturer turned to the bond market for help.

The journey to sell the largest rupee bond for a leveraged acquisition and the largest AA-rated debt instrument was a bumpy one.

Investors had concerns over the success of the acquisition given that Nirma was going into a new business segment, not to mention the amount of work to be done structuring such a complex transaction.

More importantly, while there is a deep pool of liquidity in the onshore rupee market, Nirma was unable to fully access this as the same rule that prevents banks funding domestic acquisitions through loans, also stopped them subscribing to the bond. In addition, non-banking �nancial companies were only eligible to buy short-dated tenors. This le£ only mutual funds

and insurers which make up just 5% of the domestic investor pool.

If that wasn’t enough, the rapidly changing global macro factors and the fast approaching deadline of the completion of the M&A le£ the leads no time to hesitate. The pressure proved too much for some, causing some banks who were uncomfortable with the underwriting risk to drop out.

A special purpose vehicle, NirChem Cement, was created for the buyout, as well as for the bond issuance. The management of both Nirma and Lafarge took part in the roadshow and the leads built a shadow book to ensure there was good demand and liquidity. In the end, the bond was wrapped up within four months and achieved a 2x covered order book.

The leads were pleasantly surprised by both the price compression and oversubscription, given that investors initially showed reluctance to commit below a price of 9% but the �nal yield for the longest tranche came in at 8.66%.

For opening up a new source of funding for acquisition �nancing in India while overcoming a number of regulatory hurdles, this trade is our pick for Best Local Currency Bond.

BEST STRUCTURED FINANCE

Astrea III $510m private equity collateralized ¡nd obli-gation Originator: Azalea Asset ManagementFinancial and structuring agent: PJT Partners/Park Hill Group

Joint lead managers: DBS and Credit Suisse Structured �nance transactions are notorious for their complexity and the time it can take to get to the �nishing line. But the e�ort required to price Astrea III made it the standout winner.

Astrea III is one of the few securitizations anywhere to be backed by cash �ows generated by private equity funds. PE CFOs have been largely absent globally since the 2007-2008 �nancial crisis with the only notable example being 2014’s Astrea II, which was mostly placed to a single investor.

But unlike its predecessor, the main objective of Astrea III was to engage a wider investor base in an e�ort to make the asset class more mainstream. This required a fully marketed transaction, which was no easy feat as most investors do not have the mandate or the technical knowledge to buy the product.

As a result, Azalea had to engage PE specialist Park Hill of PJT Partners to identify assets within parent Temasek Holdings’ collection that would suit a wider audience. The end result was a mature portfolio with weighted average vintage year of 2009 and total NAV of $1.14bn from 34 PE funds.

Lead managers Credit Suisse and DBS also had to spend a lot of time to sound out investors, educate them about the assets and get their thoughts on pricing when there were no comparables.

There were also concerns that needed to be soothed such as the uncertain nature of private equity distributions and the multi-currency exposure of the asset pool.

the fundraising was structured in two tranches: one aimed at institutional investors via the overnight bookbuild, and the second at unitholders via the rights o�ering.

This was no mean feat given its size and pricing goals. Mapletree was looking to not only carry out one of the largest equity follow-ons for a Singapore Reit, but also increase its market capitalisation by a third and price at a discount the market considered aggressive.

The fundraising achieved those objectives thanks in large part to the tightly-executed dual tranche structure. Investors made a beeline amid a global hunt for yield and outperformance of Reits. The block-plus-rights combination, meanwhile, gave the leads the ability to create price tension between the di�erent investor groups and maximise distribu-tion.

The move paid o� handsomely. The block was covered an hour into the launch

and eventually 3.8x subscribed, with �nal demand exceeding S$2bn from over 100 accounts.

High quality investors – 80% of them long-only – crowded into the book, with the units distributed to Asia, US and Europe. Pricing ended up at the top of the S$1.41-S$1.45 a share range, translating into a razor thin discount of 1.4% on an adjusted basis. The rights o�ering, which was 1.5x covered, priced at S$1.42, a 3.5% discount. ◼




BEST LOCAL CURRENCY BOND HOUSE

HSBC

For the third year running, HSBC takes the gong for the Best Local Currency Bond House for continuing to build and innovate its strong franchise that has a scope that is hard to beat.

In what was a watershed year for the onshore renminbi market, HSBC’s credentials were unrivalled. Credit needs to be given to the fact that the bank began positioning itself for the opening up of China’s onshore bond market last year, when it sold a Panda bond in its own name – becoming one of the �rst �nancial issuers in September 2015.

Since then, HSBC has been a key underwriter of transactions that raised the pro�le of the Panda market. Whether it was leading the �rst sovereign transaction (Republic of Korea), the �rst from a European sovereign (Republic of Poland) or the initial Panda from North America (Province of British Columbia), HSBC was a lead bank.

Its dominance was down to the realisation that Chinese regulators were keen to internationalise the domestic market and bring the best international standards onshore. HSBC was well placed to deliver given its closeness to Mainland regulators. This was despite having to navigate regulatory challenges in the onshore market and lack of clear guidelines.

Part of HSBC’s strength comes from the fact it has a dedicated local currency syndicate desk in Hong Kong, allowing for co-operation with counterparts in London and

New York. This helped the lender �nd liquidity from sovereign wealth funds in overseas geographies that were keen to buy Asian local currency debt. The bank also has a strong on the ground presence in many Asian countries.

Landmark trades run by HSBC during the awards period included New Development Bank’s onshore RMB green bond and World Bank’s SDR trade. Even with o�shore RMB volume taking a hit since the devaluation of the currency in August 2015, HSBC still managed to work on some ground-breaking transactions, including the �rst Chinese sovereign dim sum bond sold outside of the Mainland and the �rst Malaysia-listed o�shore RMB deal for a Chinese commercial bank (CCB Asia).

Critics that consider HSBC to be e�ectively a Hong Kong/Chinese bank should think again given its strength outside of Greater China. In liability management, a key strength of HSBC’s platform, it helped the Kingdom of Thailand raise Bt58.682bn ($1.65bn) while extending the country’s debt maturity. And in the o�shore rupee market, which took o� this year with the �rst Masala bond by an Indian issuer, HSBC was very much active. It was involved in trades for HDFC Bank, British Columbia and NTPC’s green Masala among others.

The banks’ structuring expertise was also evident in local currencies with HSBC working on a number of bank capital and hybrid market trades. For instance, it advised United Overseas Bank to issue a Singapore dollar additional tier one in May, as it was a cheaper option than funding in dollars.

HSBC also ran ABN Amro’s tier two Formosa bond in Taiwan and AusNet Services’ Singapore dollar hybrid. And in the ringgit market, it led the way for project �nance bonds,

providing advisory and structuring services while putting its balance sheet to use.

In short, HSBC’s breadth of coverage in a year when regional banks gave international �rms a run for their money was unmatched. Strong competitors include Bank of China International and Industrial and Commercial Bank of China International, and Singapore’s DBS but so far they have tended to dominate in one currency.

For its broad geographical reach and structuring capabilities, HSBC clinched the award this year. ◼

HSBC led in a landmark year for renminbi




The former was balanced by a liquidity facility provided by Credit Suisse to cover expenses and interest payments in case of cash �ow shortfalls, while the latter was compensated by built-in currency hedges.

But it wasn’t just investors that needed educating. Months were spent talking to Fitch and Standard & Poor’s. Not only did the notes require a rating but the agencies needed to update their respective methodologies for PE CFOs.

The trade was o�cially announced on June 6 and an extensive one and a half week roadshow soon followed. But even when the meetings were complete, the issuer made a deliberate decision to not rush the trade and allow investors to digest the structure, complete their credit work and obtain internal approvals.

This cautious approach was also apparent in the bookbuilding process, which lasted for two trading days between June 17 (Friday) and June 20 (Monday) — a decision that was vindicated by an eight times covered book, plus an even distribution among fund managers (29%), private banks (32%), insurers (10%) and others (29%).

Astrea III might have taken 18 months to complete, but it was worth the wait as a strong benchmark has been set for Azalea to eventually meet its �nal goal of providing PE exposure to retail investors.

BEST HIGH YIELD BOND

HT Global IT Solutions $300m senior bond due 2021 Joint global co-ordinators: Deutsche Bank and Standard CharteredJoint bookrunners and joint lead managers: ING and UBS The Indian high yield market had a rough year, with only one deal pricing during the �rst six months of 2016. Asia’s choppy �rst half, driven by macro problems, ended with the Brexit vote, further shaking investors. But the six month silence meant there was a good opportunity for the �rst issuer to brave the market.

For HT Global IT, an investment vehicle wholly owned by Baring Private Equity Asia, Brexit posed but a mere speed

bump. The issuer began preparations to launch its new bond in the second quarter, pausing its intended launch right before the Brexit vote and instead waiting to enter the following week and reopen the Asian high yield market. The push also bene�ted the issuer, giving it time to receive a surprise rating increase.

The deal was a debut for HT Global, opening up a new investor base for the company. And, the 144A/Reg S deal marked the �rst successful instance of a bond take-out for acquisition �nancing of an Indian asset — HT Global’s purchase of a majority stake in Hexaware Technologies.

Investor education, which took place over two weeks of global roadshows, proved essential for the deal. HT Global issued the transaction at the holding company level, a rare move in the Indian debt market. The banks also chose a non-call two structure, as opposed to a more common non-call three, to reduce risk. The transaction was also set up with an interest reserve account in dollars, which had funds equal to the amount of interest due for the �rst two years of the bond, in addition to a separate collateral account. The intricacies of the structure and the unique sector created some di�culty in �nding a ready comparable, but also gave investors the security they sought.

The move proved the correct one and investors ate up the unique tech sector transaction. The banks were able to tighten the deal 50bp from initial price guidance and the order book peaked at $2.1bn before closing at $1.9bn. In an unusual move, the leads revised price guidance twice, in an e�ort to create a more e�cient price discovery process. The $300m 7% notes were sold at 99.482 with a yield of 7.125%.

In a year that proved di�cult for many high yield issuers, HT Global stands out as a well-executed transaction.

BEST INVESTMENT GRADE BOND

Citic $1.25bn dual tranche bond $500m due 2021, $750m due 2026Joint global co-ordinators: Citic CLSA Securities, HSBC and UBSJoint bookrunners: BOC Interna-tional, China Citic Bank International and Natixis The �rst half of 2016 was tough for all Asian bond issuers. But for Citic, launching an investment grade transaction presented unique challenges, as it marked the company’s �rst bond

HT GLOBAL reopened the market a�er Brexit




BEST G3 BOND HOUSE

Bank of America Merrill Lynch

Picking the best G3 DCM house in Asia in what was an exceptionally tough year for capital markets was no easy task.

Increasingly there is a bifurcation between houses that dominate the league tables thanks to their breadth and depth across markets and products, and houses that provide a more focused o�ering in which they excel. Both models have merit, but this year for staying relevant and increasing market share in the key region of China, Bank of America Merrill Lynch is our pick for the Best G3 Bond House of 2016.

The US bank received league table credit for 87 deals in Asia ex-Japan ex-onshore China worth $14.8bn during the awards period, giving it a market share of 6.8% and placing it in third position behind HSBC and Citi. In a year of tougher competition, BAML boosted its position from �£h with a 6.1% share from a year earlier, according to Dealogic.

E�orts were given a li£ this year by the decision to create a more integrated debt team, which bankers at the lender say paved the way for a more cohesive approach to clients.

In June, the bank formed a new debt solutions unit encompassing the DCM, leveraged �nance and syndicated loans businesses, which until then were run relatively separately. Devesh Ashra and Conan Tam were put in charge of the new platform.

As a result, the bank was able to target clients in a more e�cient manner, which was evident in the suite of transactions it executed during the awards period. It was one of the bookrunners on CK Hutchison Finance’s €2bn ($2.12bn) dual-trancher and Sinopec’s $3bn trade, as well securing a top role in Indonesia’s opportunistic dollar deal from the end of 2015, South Korean Kia Motors’ $700m issuance and Lippo Karawaci’s high yield deals.

Away from corporates, BAML’s long-standing relationship with Industrial and Commercial Bank of China was a key part of the US lender’s growth story this year. ICBC, through its various arms, hit the debt market more than 10 times during the awards timeframe, and BAML featured on a chunk of those transactions. But the bank had a broader e�ort to increase its focus on the FIG sector, leading deals for names including Agricultural Bank of China, ICICI Bank and Shinhan Bank, among others.

CHINA GROWTHBut it was its growth in Greater China that was impressive. As the region typically accounts for the highest portion of bond volumes in Asia, BAML has been exploring ways to increase its market share and the years of building a solid China team paid o� handsomely in 2016.

The e�ort started in October 2012 when Margaret Ren returned as China chairman — a new position at the time —

and country executive at BAML. Since then, the entire China team has been revamped, with BAML working proactively to make sure it had the right mix of personnel, say bankers at the �rm.

More recently, BAML appointed Anthony Lin as head of China corporate banking and branch manager of Bank of America Shanghai last year, and Helen Qiao as Greater China chief economist and head of Asia economics ex-Japan also in 2015.

Another coup was hiring Alex To in 2014, who is now head of Asia Paci�c investment banking, as well as head of China IB and co-head of China global corporate and investment banking from Morgan Stanley. BAML also strengthened its distribution platform by adding more sales force capability.

This multi-year focus on China was re�ected in the numbers. In the China o�shore G3 bookrunning league table, BAML ranked sixth during the awards period with a 4.8% share, having failed to make a dent in the top 10 a year earlier.

Its rise came despite the bank eschewing bonds from one issuer sector that was behind a large pick-up in China bond volumes. BAML was noticeably absent from local government financing vehicle transactions given its strategy to focus on clients where there is potential for repeat mandates. The desk made the conscious decision to let those deals pass by, but nevertheless gained market share in China.

And in a year when green bonds really took o� in Asia, BAML was able to leverage on its global capabilities to win business in the region. Its roster of green deals included Bank of China’s multi-currency $2.8bn trade — the largest international green o�ering globally — Axis Bank’s debut and the �rst from a Hong Kong corporate, Link Real Estate Investment Trust. Where there was a green transaction this year, there was BAML.

Special mention goes to GlobalCapital Asia’s winner for the past two years HSBC which continued to lead the G3 league tables during the awards timeframe and deserves credit for its consistency. The close collaboration between HSBC’s investment banking and commercial banking arms went from strength-to-strength this year, with the �rm moving Wallace Lam, formerly the head of high yield capital markets and CMB debt origination, to commercial banking in October to further strengthen the tie-up.

In a year when issuance windows shut as quickly as they opened, HSBC was able to use its CMB relationship to help bring high yield names to the market, with bankers saying that 13 of its 17 high yield mandates came from commercial banking clients.

HSBC’s strength did not fade this year, but for growing during a di�cult period and for steering its business successfully while staying disciplined, BAML is our pick for the Best G3 Bond House in Asia. ◼




since completing a reverse merger with Hong Kong unit Citic Paci�c that saw it gain a listing on that city’s exchange.

A£er the restructure, the company was cautious about re-entering the market, waiting until the new structure had bedded down and it was ready to educate investors on the new Citic.

Ahead of announcing the transaction, Citic embarked on a non-deal roadshow, meeting with more than 100 investors in Asia and Europe.

The restructuring created massive changes for Citic which required explaining. But it also created an opportunity as it boosted the company’s credit rating from high yield to investment grade. It did make comparables hard to �nd for a company whose operations span �nancial services, resources and real estate, as its only outstanding o�shore dollar bond was sold before the restructuring.

The borrower announced the dual tranche bond in early June and the timing proved to be perfect, as Citic was the only dollar issuer out on its launch day.

Citic was able to tap a large number of international buyers, with its order book peaking at $4.25bn across the tranches.

The 5.5 year portion closed with an order book of $1.6bn and a yield of 2.805% while the 10 year attracted bids of $2bn and priced with a yield of 3.726%.

The deal proved to be the biggest international bond o�ering by Citic, its �rst dual tranche international o�ering, and presented the lowest ever yields at the time for an international dollar bond o�ered by a Chinese conglomerate.

BEST FINANCIAL BOND

DBS Group Holdings $750m Basel III AT1 Sole global co-ordinator: DBS BankJoint bookrunners: Citi, Deutsche Bank, HSBC and Société Générale Pricing for additional tier one (AT1) bank capital o�erings from Asia experienced a downward trend during our awards period. But even in that context, the coupon achieved by DBS was remarkable on a global scale.

The transaction was always going to be a landmark. It was DBS’s debut dollar-denominated AT1 and the �rst from southeast Asia.

But it came at a time when there was noise around Singapore banks' exposure to the oil and gas sector, and shortly a£erwards DBS reported a 6% fall in net pro�t, dragged down by its exposure to troubled energy �rm Swiber Group.

The issuer addressed investor concerns during an extensive four-day roadshow in Hong Kong and Singapore engaging with over 100 accounts including those from Europe and the US. Originally seeking to raise just $500m, a well-capitalised DBS garnered $2bn in indications of interest before the deal was announced.

Following Janet Yellen's Jackson Hole speech in late August, a£er which �xed income investors continued the hunt for yield, the leads opened books knowing that demand would be there for the highest ever rated AT1 (A3/—/BBB). But a 40bp tightening still came as a pleasant surprise.

Piercing through an initial 4% handle to a �nal yield of 3.6% meant the trade secured the lowest yield and the tightest spread ever achieved by an AT1 globally.

That and a $6.5bn �nal order book demonstrated the strength of DBS’s credit pro�le and name recognition, the investor-friendly structure of the transaction, and

DBS AT1: remarkable on a global scale




is a testimony to the textbook execution, which also enabled the issuer to increase the deal size to $750m from $500m.

The leads were also mindful of the bond’s secondary performance. The landmark AT1 traded well in the a£ermarket, seen as high as 100.875 before settling down to around 100.40 the next day.

And in light of DBS’s success, compatriot bank UOB ventured out with a tier two deal the following day.

BEST SOVEREIGN BOND

Republic of Indonesia €3bn dual tranche bond€1.5bn due 2023, €1.5bn due 2028Joint bookrunners: Barclays, Deutsche Bank, JP Morgan and Société GénéraleCo-managers: Bahana Securities,

Danareksa, Bank Mandiri and Trimegah Sekuritas The sovereign is no stranger to euro-denominated debt, having made its debut in the currency in 2014. But this year’s transaction impresses by allowing Indonesia to reach new milestones while strategically maintaining a presence in the liquid euro bond market.

A dollar deal would have been easier to sell, but given the frequency with which Indonesia taps that investor base, the borrower is mindful that it is unwise to rely on just one set of investors.

And so even though this was just the borrower’s third appearance in the currency, on the roadshow the leads took the issuer to less frequently visited cities including Helsinki, Madrid and Rome as well as the traditional euro hubs like Frankfurt and Paris.

Around that time, there was an expectation that Baa3/BB+/BBB- rated

Indonesia would receive an upgrade from Standard & Poor’s, so it came as a disappointment when that failed to materialise. Nevertheless, the leads decided to take advantage of a low rate environment and go ahead with the deal ahead of the upcoming UK Brexit referendum in late June. It was proved the right thing to do.

The sovereign’s strategy was clear. O�er-ing a seven year portion, which is euro in-vestors’ sweet spot, while extending its euro curve to 12 years to set a new a benchmark for SOEs and corporates from the country. The trade also represented Indonesia’s �rst dual-tranche o�ering in the currency and the largest euro transaction from Asia and from a non-European sovereign.

And unlike some euro deals from Asian borrowers, of which the majority makes its way into the hands of domestic investors, 58% of the seven year and 49% of the 12 year was allocated to Europe, with 21% and 39% going to the US. ◼

INDONESIA'S euro bond is a landmark transaction




INVESTMENT BANK

BEST ASIAN INVESTMENT BANK

DBS

When highlighting their credentials, Asia’s home grown investment banks have tended to emphasise their commitment to the region and particularly the fact that they continue to grow and invest resources while global banks tend to ebb and �ow with market cycles. But the last few years have challenged that idea as pan-regional names re-evaluate their strategies and reduce costs through job cuts.

One notable exception to this trend is DBS, our pick for the Best Asian Invest-ment Bank. DBS’ strategy is always to be nimble so rather than downsize in times of stress, the bank has remained at full strength but redeployed resources as nec-essary.

This is all the more notable given that DBS’ home market of Singapore, and the broader ASEAN region, have not provided the best opportunities. Volumes in the Singapore equity market have been lack-lustre and the defaults that emerged in the oil and gas sector in the second half of the year have hurt sentiment. Of course, where there was activity in Singapore, DBS dominated. Standout transactions include the S$903m ($636m) IPO for Frasers Logistics & Industrial Trust, the �rst pure play Australian real estate investment trust in Singapore, and its role as joint �nancial adviser to Citic Private Equity on its S$1.4bn acquisition of Biosensors Inter-national.

DBS was not immune from the fallout of the problems in the commodity sector and reported a 6% fall in net pro�t, dragged down by its exposure to troubled energy �rm Swiber Group. But the bank seems well placed to deal with problems. Certainly the market gave it a strong vote of con�dence when the bank managed to secure the lowest ever coupon for an AT1 transaction through its dollar debut in August. The $750m bond, for which DBS

was sole global co-ordinator, is our pick for Best Financial Bond.

But DBS’s real strength this year has come from its China franchise. China is home to the bank’s biggest o�ce outside of Singapore and the investment is paying o�. It was �nancial adviser on seven M&A transactions in the country including China Merchants Group’s $333m privatisa-tion of China Merchants Holdings.

And India, where the bank has tradi-tionally had a strong commercial banking presence, is also now starting to be a place where it can win mandates for the invest-ment bank. This has been particularly noticeable in bonds where it priced �ve of the nine G3 corporate bonds from the country sold during the awards period. Issuers include Adani Transmission, Glenmark Pharmaceuticals, ONGC Videsh, Jubilant Pharma and Samvardhana Moth-erson Automotive Systems.

The �xed income team, led by DBS stal-wart Cli�ord Lee, remains the strongest component of the investment bank, reg-ularly ranking in the top 10 league table for Asia ex-Japan, ex-China bonds. It also boasts a diversi�cation across geographies and products that is still to be matched by equities, which is almost exclusively active in Singapore, and M&A which is starting to make some strides into China.

But in a year when many of Asia’s investment banks scaled back their ambi-tions and failed to capitalise on the growth in opportunities in China, DBS is the deserving �rst winner of our Asian Invest-ment Bank award.

BEST INVESTMENT BANK

HSBC

It’s been a year that has shaken the very notion of what it means to be an investment bank operating in Asia. Even the most robust franchises were challenged this year as falling transaction volumes, bearish sentiment and the competitive threat from Chinese banks led to a serious reassessment of resources. The fallout has been well documented with strategic retreats and headcount reduction as banks try to �nd a model that suits the new environment.

It will take some time for the new strat-egies to settle down but throughout the upheaval, HSBC has demonstrated that its investment banking franchise is able to deliver in the tough times as well as the good.

HSBC did implement a restructuring under new co-head of global banking Matthew Westerman earlier this year, which merged global banking with capital �nancing. But in Asia, there was no head-count reduction and the leadership team of the last few years remains in place with Gordon French as head of global banking and markets Asia Paci�c, and Martin Haythorne and Liu-Che Ning as regional co-heads of banking. In addition, Stephen Williams moved into a new role as head of ASEAN to strengthen the bank’s operations in that region.

The development of HSBC’s franchise into a full service investment bank has not happened overnight. Always a strong bond and lending house, in the past clients were happy to choose HSBC for �nancing but more o£en than not it missed out on advisory work.

But thanks to a greater emphasis on deal making since Stuart Gulliver became CEO in 2011, the bank has been working towards a more cohesive investment bank-ing model.

The e�orts have paid o�. Now senior bankers in Asia talk about increasingly receiving the �rst call when clients are looking to do something strategic. As well a sign of the progress the bank has made, this also means it has more say over which mandates it decides to take on.

One of these �rst calls was on Tencent’s acquisition of Supercell. The $8.6bn deal was the largest investment in EMEA by a Chinese privately owned company and required a loan of $3.5bn for which the bank was a joint MLAB and underwriter.

And HSBC’s role advising Tesco on the disposal of its South Korean business last year was one factor behind French supermarket operator Casino’s decision to pick the bank as the lead �nancial adviser for the sale of its Thailand and Vietnam units as part of a plan to strengthen its �nances. Mandated in January, HSBC ran two parallel and concurrent sale processes that wrapped up within four months with




Casino’s Big C Thailand sold to TCC Group for $6.4bn and Big C Vietnam purchased by Central Group for $1.1bn.

HEAD-TO-HEADYet while the bank is keen to emphasis the more advisory aspects of its business, it’s not afraid to put its huge balance sheet to work and take large positions where it makes strategic sense. This has been important in a year when the impact of cheap liquidity from Chinese lenders has challenged the viability of some its peers’ models. Bankers at HSBC make no bones about the fact that they are able to go head-to-head with their Chinese rivals. So on China National Chemical Corp’s $46bn acquisition of Syngenta — the largest overseas acquisition by a Chinese company — while China Citic Bank Corp was able to solely underwrite the $12.7bn Asian leg of the �nancing, HSBC was able to underwrite the $20bn portion that had recourse to the target but not before securing a role as the lead �nancial adviser to ChemChina, underscoring the bank’s growing reputation for advising on more complex transactions.

One way the bank has been able to thrive in tougher markets is that it took the

view that rates were going to be lower for longer. This led to a decision a few years ago to focus on more event driven business as well as de-risking and looking for ways to replace revenues.

And in line with many banks, a key area of focus has been FIGs. The clearest demonstration of this comes from HSBC’s dominant bond franchise run by global co-head of debt capital markets, Alexi Chan. In G3 currencies, the bank worked on 15 of the 17 bank capital transactions during the awards period while deals in the insurance sector include Ping An Life Insurance’s $1.2bn dual tranche debut.

When assessing HSBC’s investment banking credentials, its rivals o£en high-light the bank’s limited equity business. There is some merit to this argument. The bank has still not demonstrated the ability to win important mandates outside Hong Kong, but in a year when IPOs have delivered terrible results this has not hurt the bank. And it has still tried to stay rel-evant. In an environment where Chinese liquidity was key to getting deals priced in Hong Kong, the bank brought in Shanghai International Port Group as a cornerstone investor for Postal Savings Bank of China’s $7.4bn IPO in September.

CMB COLLABORATIONAnd the ongoing wait for regulators to approve its Chinese joint venture is one of the year’s obvious disappointments. The bank remains committed to China and the Pearl River Delta strategy but progress will be constrained until it gets the go ahead.

More positively, the collaboration with commercial banking continues to be a key source of new revenues with many of its M&A mandates coming from this set up. For example, HSBC bankers are keen to point out that ChemChina started as a CMB client.

The same e�ort is now going into work-ing with the private bank which promises to deliver new opportunities.

The harnessing of private bank relation-ships and investment bank deal making has also proved a winning formula for Credit Suisse.

The Credit Suisse model is unique. Asia operates as a standalone business with all risk managed from the region and all rev-enues staying within the Asian business across every division. This has given Credit Suisse an agility and level of control that is unrivalled among international banks.

Underpinning the model is the idea of servicing the entrepreneur. This combined with its strong frontier markets coverage and an ability to support deals with bal-ance sheet has seen Credit Suisse thrive this year while others have fallen by the wayside. It will be inter-esting to watch if the bank can sustain this perfor-mance over the longer term and how its competitors respond to the challenge.

But HSBC has shown that the investment bank model it has developed over the past few years is well positioned to meet the chal-lenges and opportunities in Asia’s �nancial markets. For staying nimble and rel-evant in di�cult markets, HSBC is our choice of Best Investment Bank. ◼

HSBC: roaring ahead



Best Managed Company Awards

AUSTRALIABEST SMALL CAP COMPANYSigma PharmaceuticalsMany attribute Sigma’s success to chief executive Mark Hooper, who took the reins in 2010 — he was previously the company’s chief �nancial o�cer between 2001 and 2006 — and drove a turnaround in its fortunes. In the years Hooper was absent Sigma went through tough times: the company’s market cap collapsed and its debts became unman-ageable.

Rather than focus on short-term damage control, Hooper chose to prioritise investment and long-term change and devel-opment. Sigma has since grown to become Australia’s largest pharmacy network, operating over 700 branded pharmacies in the country.

The company’s continued movement away from reliance on Australia’s Pharmaceuticals Bene-�ts Scheme (PBS) — a government initiative that provides subsidised prescription drugs — in order to focus on higher margin busi-ness has been well received by analysts. A reliance on the PBS kept earnings suppressed during Sigma’s tricky years: the return on invested capital stood at around 6% when Hooper became CEO, but by June 2016 that �gure had more than doubled to 15.2%. In the �rst half of its 2016-2017

�nancial year, the company reported a 50% increase in its non-PBS sales.

This year has also seen foreign expansion for Sigma, with the company beginning to operate in China in June, with sales in the country comfortably outstripping the company’s projections.

BEST MEDIUM CAP COMPANYTreasury Wine EstatesWinemaker Treasury Wine Estates is a perfect example of just how much di�er-ence a change in management can make to a company.

When Treasury Wine was �rst carved out of brewer Foster’s Group in 2011 it got o� to a rough start. The new com-pany was forced to issue multiple pro�t warnings, which analysts blamed, at least in part, on poor management. Notably, nobody was blaming the company’s struggles on the strength of its product, with brands that run the gamut from the ubiquitous Blossom Hill to the far more upscale Penfolds.

That led to a management change in 2014, with new chief executive Michael Clarke brought in to turn the company’s

Asia's best companies stand outAsiamoney is pleased to present its choices for Asia’s Best Managed Companies in 2016. In a year marked by political and economic upheaval, the region’s best �rms and executives impressed on through a combination of factors including �nancial performance, innovation and strategic execution.

Treasury Wines: sound as a barrel

BMCs-Best Execs-r2.indd 67 15/12/16 2:48 pm



fortunes around. And turn them around he did. When Clarke joined in February 2014, the company’s stock was worth around A$3.50 ($2.64) per share, now it has climbed up to around A$10.60.

While Treasury Wine has been helped in recent years by a weaker Australian dollar, market observers attribute the company’s turnaround mainly to the change in leadership. Treasury Wine has bene�ted in particular from decisions to target Chinese wine buyers — in Septem-ber China overtook the US to become the largest importer of Australian wine on a rolling 12 month basis — and to modify its supply chain management, improving the ways it brings wine from vineyards to consumers.

As one analyst put it: “Their execution is great. They used to just make good wine, now they’re good at selling it too.”

BEST LARGE CAP COMPANYWesfarmersWesfarmers is o¢en compared to Aus-tralia’s other retail giant, Woolworths, which is little surprise when the two are the country’s largest and second largest companies by revenue, respectively. Two things that market watchers love to see are a strong track record and transparency, and it’s de�nitely the case that analysts value Wesfarmers for its reliability and solid corporate governance — with some presenting these qualities as a contrast to the company’s main rival.

“You get a very conservative view of how they book their numbers,” said one analyst. “It’s very di�erent to how Woolies do it.”

The company’s reputation for reliability may have taken a knock in 2016, however, with one-o� impairment charges sharply eroding pro�ts.

The main culprit was the conglomerate’s coal mining business, Curragh, which was hit with a A$2.1bn writedown for the 2016 �nancial year, a result of slumping commodities prices. However, the price of coal is back on the up — Australian thermal coal closed September at $78.11 per ton, compared to the $55.85 level it started the year at.

These ¥uctuations mean the business is proving a headache for chief executive Richard Goyder, who looks to end the saga by putting Curragh and its other coal mine Bengalla up for sale in November.

Ultimately, if Wesfarmers is able to successfully o¦oad its mining businesses, the Aussie giant could rebuild its well-earned reputation for reliability.

CHINABEST SMALL CAP COMPANYTCL Communication TechnologyIt hasn’t been the easiest year for TCL Communication, the mobile handset producer and internet service provider. The level of competition in the mobile phone business has been rising in recent years and within China TCLC has had to face o� against companies ranging from the likes of well-established Huawei to upstarts like OneTouch.

There’s no denying that this level of competition has taken a toll on TCLC: both revenues and pro�ts were down when the company reported its half-yearly results at the end of June. Nevertheless, the company remains a favourite of analysts polled.

It’s easy to do well in forgiving con-ditions, but a management team’s real calibre is shown in how it deals with the tough times. Analysts, it seems, like what they see in TCLC’s reaction to di�cult conditions. The company took the step of delisting itself at the end of September, a somewhat radical step that could be just what it needs.

Analysts see the delisting as the �rst step in a period of repositioning for TCLC, giving the management team the ¥exibil-ity to undertake a period of reinvestment that could allow the company to regain its edge in the smartphone market. In the short term this is likely to prove painful, but the fact that the delisting was approved by shareholders is a vote of con�dence in executive chairman Li Dongsheng’s team.

BEST MEDIUM CAP COMPANYXtepFujian-based sportswear company Xtep International has undergone something of a rebranding exercise over the last two years. Originally more of a fashion brand than a true sportswear operation, Xtep has recently shi¢ed its emphasis to o�ering a greater array of functional

products. In particular, the company’s R&D e�orts for these new products have been well received.

This move has been greeted favourably by industry experts, who point to life-style changes in China towards greater health consciousness and recreational physical activity. The Chinese govern-ment has been taking steps to encourage greater participation in sporting activi-ties — particularly football, which it has made a compulsory sport in the nation’s schools — which Xtep has been quick to react to.

Analysts’ opinions aside, the 6% growth in revenues and 16.5% increase in pro�ts reported by Xtep for the �rst half of 2016 also indicate that the com-pany’s decision to focus on function and not just form is a savvy one.

The company operates over 7,000 stores across China and has enjoyed a steadily growing market share in recent years. Xtep plans to keep the size of its retail network stable in the near future — with the exception of its stores spe-cialising in children’s products, which it intends to expand to capitalise on the government’s push on youth sports — a decision that has been welcomed by ana-lysts, who have indicated a preference for the company to focus on expanding and upgrading existing outlets rather than growth for growth’s sake.

BEST LARGE CAP COMPANYChina MobileFor some companies, numbers alone are enough to impress, China Mobile is one such institution. With a customer base of around 844m mobile subscribers, and providing wired broadband services to a further 74m, the company has the largest mobile phone network in the world.

While the sheer scale of China Mobile’s customer base is impressive, so is its growth rate: over the �rst nine months of 2016 the company has averaged 1.9m net new customers per month.

The speed at which China Mobile has embraced new technologies has been a key driver of growth. The company’s expan-sion of its 4G network has been cited by analysts as a particularly positive sign.

Chinese consumers have been adopt-ing 4G at a far faster rate than they did 3G and that has been particularly true of




China Mobile customers. The company has been the leader in 4G in China since the technology was �rst introduced and the gap between it and its competitors is only widening.

At the end of 2014 just 11.2% of its sub-scribers bought 4G packages, but analysts’ projections indicate that number should be more like 60% at the end of this year. That growth should o�set the slightly weaker earnings that the Chinese telecom sector as a whole su�ered from in 2015 and puts China Mobile in a very strong position compared to rivals China Telecom and China Unicom. Numbers at China Mobile are already on the up, with the company boosting its net pro�ts by 5.6% year-on-year for the �rst half of 2016.

HONG KONGBEST SMALL CAP COMPANYFar East Consortium Real estate �rm Far East Corporation has long been a favourite of analysts and investors and it’s easy to see why. The company has managed to deliver solid and consistent growth over the last seven years. They key to FEC’s success is its level of diversi�cation, particularly impressive for a small cap company.

It owns and manages properties across six di�erent countries — China, Hong Kong, Malaysia, Singapore, Aus-

tralia and the UK — meaning it operates in six di�erent property cycles and can manage each separately to boost its earnings.

By avoiding being locked into any one property cycle, FEC can deliver maximised and consistent pro�ts. The company has a reputation for dipping into a property cycle at its lows, before turning the real estate around at a high when the market recovers.

Buy low and sell high may be a truism, but few small caps have the expertise or resources to operate across such a range of countries and the skills of FEC’s management team are the key to its success.

“It’s the talent of the management that lets them do this, not many small caps have the talent to manage prop-erties across di�erent countries in the same way,” says one analyst. “It really sets them apart from the competition.”

The company is placed to continue its strong track record, having recently added further properties in Hong Kong, Singapore and Australia to its portfolio, with further Australian properties in the pipeline.

BEST MEDIUM CAP COMPANYKerry Logistics NetworkFrom its humble origins as a warehouse operator, Kerry Logistics has grown into one of Asia’s most prominent transport

and logistics companies. Over the last two years in particular, the company’s growth has been impressive. It has broken into markets as varied as Canada, Dubai and Myanmar, with little sign that its expansion plan is likely to slow.

The �rm acquired a majority stake in San Francisco based Apex Maritime in June for $88m, with the plan of using the trans-Paci�c trade specialist’s exper-tise and relationships in order to further its ambitions of a global network. The company is also looking at expanding its networks in both south and southeast Asia, with the latter region earmarked for particular attention.

Analysts have been impressed by Kerry’s performance in a tricky macro environment, with the company’s earn-ings for the �rst half of 2016 remaining stable compared to the same period in 2015.

The company’s performance in its international segment su�ered from the less than ideal conditions, but it was able to o�set that through a good showing in its business in China. While its international expansion may not be paying dividends just yet, industry experts are con�dent that an upturn in the macro environment will transfer into greater pro�ts for Kerry. Analysts also praise the company for its trans-parency and extensive investor relations work.

Diversi�cation is key for Far East Consortium




BEST LARGE CAP COMPANYHong Kong Exchanges & Clearing (HKEX)Conditions were not ideal for Hong Kong Exchanges and Clearing in the �rst half of 2016. Volatile conditions proved tricky for Hong Kong’s bourse as trading volumes dropped o�, but the outlook for the com-pany remains positive.

In December, HKEX further expanded its connections to the mainland stock market through a link with the Shenzhen Stock Exchange. The scheme — mirroring a similar scheme operated between HKEX and the Shanghai Stock Exchange — allows Hong Kong-based investors to trade on the Shenzhen exchange and vice-versa.

While the Shenzhen exchange is smaller than the Shanghai bourse, it is still the world’s eighth largest exchange and is comparable size to the Hong Kong exchange. Importantly, Shenzhen has become a popular listing spot for compa-nies in fast-growing sectors like technology and pharmaceuticals, meaning it is likely to prove highly attractive to foreign inves-tors.

Analysts have already cited the Shang-hai-Hong Kong link as having been a major boost for HKEX since its inauguration and the addition of the Shenzhen exchange is likely to have a comparable e�ect on the company.

Coupled with consistent growth in the number of derivatives contracts on the Hong Kong Futures Exchange — volumes hit a record high in the �rst half of 2016, breaking the record set in the previous year — the increased links to the mainland stock market should help o�set what has been a slightly subdued stock market in its domestic market of Hong Kong.

BEST EXECUTIVEDavid Chiu, chairman and CEO, Far East ConsortiumDavid Chiu’s career at Far East Consortium, our winner for best small cap company in Hong Kong, has been long and distin-guished. Chiu, the son of the company’s founder Deacon, has been the chief executive since 1997 and chairman since 2011. Under his watch the company has ¥ourished, and analysts are comfortable in giving him much of the credit.

Chiu may be the son of the company’s founder, but he did not attain his position

at the top of FEC just through the connec-tion. In the 1990s, seeking to step out from his father’s shadow, he moved to Malaysia and set up his own property business Malaysia Land Properties. Operating the business gave him invaluable experience of the Asian property market and he also picked up a pair of honorary titles, allowing him to style himself Tan Sri Dato’ David Chiu.

Industry watchers praise Chiu for how he has assembled a top notch team at Far East Consortium. For such a small com-pany to operate across di�erent countries and manage di�erent property cycles in the way that FEC does is a rare thing and analysts attribute this ability to the compa-ny’s ability to spot and attract top-notch talent.

INDIABEST SMALL CAP COMPANYDCB BankFlexibility can be important to a good management strategy. In October 2015, DCB Bank announced that it would expand its network by around 150 branches over the following 12 months. This proved to be an unpopular move: the bank’s share price dropped as inves-tors and analysts reacted poorly to the aggressive expansion plan — the bank had already almost doubled its number of branches between 2012 and 2015.

Within days the bank rolled back. While it still planned to open 150 branches, it would slow the pace and open them over two years instead of just one. Chairman Nasser Munjee maintained that the original plan was viable — even preferable to the slower plan — but he also recognised that investor impressions are crucial. Analysts maintain that the original strategy was too aggressive, but they also like that the bank responded to their concerns rather than digging in its heels.

And anyone who had their faith shaken in DCB by its ambitious plans should draw some reassurance from its �nancial successes. It has added some 30 branches over the last six months — bringing its network across 20 Indian states and prov-inces up to 228 — but has also managed to boost pro�ts. Pre-tax pro�ts for the six

months ending September 30 were up 14%, with the 32% growth in the same metric in the quarter ending that date particularly impressive.

DCB’s growth plan may be ambitious, but the management team are doing an impressive job of showing they can pull it o�.

BEST MEDIUM CAP COMPANYAshok LeylandIn many ways, it’s been a tough few years for Ashok Leyland. Since 2012, industry wide sales in the �rm’s specialist �eld of heavy vehicles have dropped o�, while competition has stepped up as both domestic and foreign auto companies have sought to carve out a chunk of the market.

While other �rms began to refocus on other areas of the auto industry, Ashok instead opted to concentrate on its tradi-tional speciality. The company re-invested pro�ts and sought to improve e�ciency and cut operating costs. Ashok was forced to cut back sta� numbers and restructure its balance sheet, leaving the company looking much healthier, according to analysts.

Now demand for big trucks is once again on the up — a product of a resurgent mining sector in the country — and Ashok looks set to bene�t. The company’s market share for medium and heavy commercial vehicles has grown from 22.5% in 2012 to 31% today, just as industry-wide sales are rebounding.

The company’s decision to retain its focus on a tricky industry was neither easy nor certain to pay o�, but by playing to its strengths Ashok Leyland is now set to reap the bene�ts of playing a central role in a rebounding market.

BEST LARGE CAP COMPANYMaruti SuzukiIt’s hard not to be impressed by the dominance that Maruti Suzuki can claim over the Indian automotive market. At the close of the Japanese-owned company’s last �scal year, it could claim 47% of the market share for passenger vehicles in the country.

Analysts put the company’s sustained success down to its responsiveness to cus-tomer demand and a strong track record of launching new products.


“They maintain their peak through prod-uct action,” said one analyst. “The strength of the products they launch speaks loudly for them.”

Maruti’s numbers certainly tally with the praise from industry experts. For the quarter ending September, Maruti reported 18.4% yearly growth in sales and an impressive 58% growth in pre-tax pro�ts.

That success is all the more impressive given that conditions haven’t been ideal for Maruti over the last 12 months. The strength of the Japanese yen has been a problem for the company, which has around 20% of its costs denominated in the currency. Maruti imports a large number of parts from Japan and has also historically made royalty payments to its Japanese parent Suzuki in yen. At the start of 2016 the year Rp0.55 was equal to around ¥1, but by the start of November that number had hit Rp0.64.

Fortunately, Maruti’s management were more than aware of the problems that a strong yen posed for them. In April the company announced that it would begin making royalty payments for new models in rupees rather than yen. While payments for old models will remain in the Japanese currency, the change will insulate Maruti somewhat from volatility in the exchange rate.

BEST EXECUTIVESiddhartha Lal, CEO and manag-ing director, Eicher MotorsSiddhartha Lal cuts an atypical �gure for the chief executive of a motor company. Lal tends to look more like he belongs in the boardroom of a tech startup than in the CEO’s o�ce of an established automaker.

A noted motorbike enthusiast — he started out at Eicher in 2000 as CEO of its motorcycle subsidiary Royal En�eld — Lal is more commonly seen clad in jeans and leathers than a business suit. Lal is open about his dislike for formal dress and, a¢er all, one of the good things about being the boss is that nobody can criticise how you dress

While he may not look the part of a bigtime chief exec, nobody doubts Lal’s knowledge of his sector, or his business prowess. With quali�cations in both economics and mechanical engineering, he can boast that he knows his business from top to bottom. His con�dence and

expertise was apparent when he made the step up to chief operating o�cer of Eicher in 2004. Wasting no time in changing the business, he shuttered a number of business lines in order to focus on what he perceived as Eicher’s true strengths. There was a focus on heavy vehicles but Royal En�eld, unsurprisingly, also remained intact.

Lal’s decisions were well received and he was promoted to CEO in 2006. Since then he has presided over a debt light company that analysts value for its reliability and solid return on investment.

INDONESIABEST SMALL CAP COMPANYSarana Meditama Metropolitan (SMM)The future looks bright for Sarana Meditama Metropolitan. Operating under the brand name of Omni Hospitals, SMM operates three hospitals in Indonesia, with a fourth set to follow in 2017. The company’s growth prospects are prom-ising, owing to a lack of penetration in Indonesia’s healthcare industry gen-erally and changes in the sector over recent years. In 2014 the government of Indonesia launched the country’s �rst universal healthcare programme, Jami-nan Kesehatan Nasional (JKN), leading to a shake-up in the country’s healthcare sector.

The country has one of the lowest bed-to-population ratios in the world, suggesting that companies like SMM have plenty of scope for growth. Industry experts point to the country’s growing middle class as a factor that will help drive business to SMM, particularly given the company’s proven track record of operating multiple hospitals in di�erent parts of the country.

Analysts are certainly pleased with the work that SMM’s management team — in place since 2012 — have done in improving the company and driving revenues and pro�ts to record highs. Since the company was �rst listed on the Jakarta exchange in 2013 it has enjoyed strong growth, with pro�ts growing from Rp203.9bn ($15m) in 2014 to Rp253.71bn in 2015 on the back of revenues that increased by over 24%.

BEST MEDIUM CAP COMPANYMitra Keluarga Karyasehat (MKK)Hospital group Mitra Keluarga Karyasehat is another company that looks certain to thrive in the coming years, with high growth prospects driven by increased demand for its services from Indonesia’s growing middle class.

Analysts laud the company for how it has managed the changing landscape of the healthcare industry in Indone-sia since the introduction of universal healthcare two years ago and on the discipline it has shown in expanding its business at a steady pace.

The advent of universal healthcare presented a choice to healthcare com-panies in Indonesia: target the high volume, but low return, business created by the expansion of the sector, or focus on higher margin business from the country’s expanding middle class. MKK opted for the latter, choosing to leverage its existing position as a well reputed provider of private healthcare.

Analysts have been pleased to see the hospital focus on its core business by choosing the private healthcare route and in its decision to prioritise growth and expansion in regions of the country where it is already well known. And not only is MKK set to bene�t by leveraging its existing skillset, analysts predict that a supportive operating environment will keep the company sitting pretty in the coming years.

“The market is so big that whatever route you choose, you are in a growth market,” said one analyst. “Penetration is so low that you can just expand as people become wealthier.”

BEST LARGE CAP COMPANYBank Central Asia (BCA)Indonesia’s economy has been struggling in 2016, hit by the slump in demand for commodities that impacted markets across the world. That’s bad news for the banking business, making it all the more impressive that Bank Central Asia remains a favoured pick by experts on Indonesia’s markets.

Indeed, in some ways it’s when the going gets tough that Bank Central Asia’s real positive traits begin to shine. A¢er all, what analysts prize most in Indonesia’s




largest privately owned bank is its safety and stability. The bank boasts a solid and growing deposit base — Rp493bn as of September, up 6.7% year-on-year — and keeps a close eye on its loan book to make sure it stays healthy. Non-performing loans are actually up year-on-year, driven by a spike in non-performance for commercial and SME loans, but are still very managea-ble at just 1.5%.

And while the management may have something of a reputation for conserv-atism, it doesn’t seem to be hurting the company’s bottom line. In September the bank reported pro�ts for the �rst nine months of the year of Rp22.1bn, up 20.5% on the same period in 2015.

When BCA won the award for best large cap in Indonesia in 2015, Asiamoney wrote that there was no doubt that it would be the company to beat in 12 months’ time. Unfortunately for its peers, BCA has proved once again to be the top pick in Indonesia.

MALAYSIABEST SMALL CAP COMPANYMedia PrimaMedia Prima is a well-run company in a tough sector. Historically specialising in TV and print media, Media Prima is facing the same problem as the rest of the sector: print media circulation is falling

and revenues for advertising are dropping across the board as customers rethink their spending.

“Revenue for TV and print advertising is struggling,” said one analyst. “People just don’t have the same amount of money to commit to advertising as they did in the past.”

Fortunately, Media Prima has taken steps to remedy this problem and has begun to refocus its e�orts on other sources of income, particularly online advertising which has proven to be more resilient than more traditional meth-ods. Media Prima streamlined its digital business in 2015, incurring signi�cant one-o� costs but allowing a return to pro�tability in the �rst half of 2016. Not only is the business generating a pro�t again, but revenues for the �rst half are up 80% year-on-year. Experts are con�-dent that the company’s well established digital presence will allow it to weather problems in other businesses.

The company has also diversi�ed its business, acquiring several radio stations and launching a home shopping business that has helped to somewhat o�set some of the problems facing its TV business.

Analysts are con�dent that things will improve at Media Prima. If there is one criticism to be levelled at the company it’s that it took all the right steps, but took a little too long to do so — it’s not

enough to make the right calls, you have to make them at the right time too.

BEST MEDIUM CAP COMPANYGenting Plantations“Plantations are sometimes boring,” con�ded one analyst. “There’s a lot of planting, and a lot of waiting for the fruit to grow.” However, as another analyst noted — one man’s boring is another’s good business. At any rate, Genting Plan-tations sounds anything but tedious.

Like other planters in southeast Asia, Genting has struggled with issues out-side of its control over the last year. The periodic El Niño weather phenomenon has led to droughts in the region: bad news when you’re in Genting’s line of business.

While Genting may not be able to con-trol the weather, it is encouraging to see management taking long-term steps to mitigate how reliant their business is on meteorological conditions. The company has engaged in extensive expansion work — increasing its acreage in Malaysia, while also expanding into neighbouring Indonesia — and has been conducting genealogical research in a hunt to boost yields and increase resistance to drought.

While these avenues have yet to pay o� — the genealogical route, in particular, has yet to make much progress, according to analysts — Genting is set up to thrive

Genting continues to grow




once the weather conditions return to normal.

In the meantime, the company is focusing on cost control and expanding the breadth of its operations. Tradi-tionally the company — like most small and medium sized planters — has been involved almost solely in the growing of palm crops. It is now moving into the downstream portions of the business, particularly the re�ning of palm oil and biochemical applications, which should help control costs by freeing the company from the demands of downstream buyers.

BEST LARGE CAP COMPANYIHH HealthcareStrong performances from healthcare com-panies is a running theme this year, with well managed out�ts able to take advan-tage of growing a¦uence and the ensuing demand for top notch care. IHH Healthcare is no exception, being analysts’ favoured pick in Malaysia’s healthcare sector.

The company has displayed a consistent strong performance. For the �rst half of 2016, revenues and pro�ts are both up over 20%. Analysts expect these numbers to remain resilient in the future, pointing to growing demand for private health-care in Malaysia as a result of increasing a¦uence and an expected shi¢ in demo-graphics towards an older population.

IHH is set to take advantage of that increased demand, having ramped up its bed capacity by expanding through both brown-�eld and green�eld projects. The company typically has up to 15 expansion projects in the works at any one time and with Malaysia’s bed to population ratio standing at around 1.9 per 1,000 people — the global average is 2.6 per 1,000 — there is certainly untapped capacity to support this rate of growth.

Analysts also praise its decision to diversify by looking at international operations to supplement its core business in Malaysia. Most notably, Singapore and Turkey are strong sources of earnings for IHH, but the company has also made inroads in Hong Kong and India.

BEST EXECUTIVETan See Leng, managing direc-tor and CEO, IHH HealthcareTan See Leng has assembled a very impres-sive set of credentials. As both a quali�ed doctor and the holder of a master’s degree in business administration, the chief exec-utive of IHH Healthcare seems the ideal �gure to run a healthcare company.

Tan has a long career in healthcare administration. He founded his own pri-mary healthcare group when he was just 27 years old, building it up to be the second largest of its kind in Singapore before sell-ing it to an international provider.

He later joined Parkway as the chief operating o�cer of its Mount Elizabeth Hospital, later rising to become its CEO. Parkway was later acquired by IHH and Tan’s rise continued, with him taking the top job at IHH in 2014.

Analysts emphasis that Tan’s in¥uence has been apparent in IHH’s success in recent years, particularly his talent for scoping out inorganic expansion opportu-nities.

PHILIPPINESBEST SMALL CAP COMPANYCentury Paci�c FoodCentury Paci�c’s mainstay product, canned tuna, may not be the most excit-

ing thing on the market, but the company will do its best to convince you otherwise. Analysts congratulate the company for the clarity of its strategy and its adept use of marketing. The company makes healthy use of young celebrities in its advertising and emphasises the health advantages of its products, appealing to young consumers that value a recognisa-ble brand and clean living.

“It’s very smart marketing,” said one analyst. “They market their products as a lifestyle. It’s good marketing and helps make them relevant in the consumer space.”

This focus on marketing has translated into a booming business. Year-to-date revenues at Century Paci�c are up 15% to Ps13bn ($264,000), with that growth driven by boosts in sales volume that the company attributes directly to the success of its extensive marketing e�orts. The company was able to translate those increased revenues into a 46% boost to its net income.

As with other food companies in the region, Century Paci�c has faced prob-lems generated by the El Niño weather e�ect, which has led to drought condi-tions in parts of southeast Asia. However, the company has been able to o�set this somewhat by seizing on growing interna-tional demand for coconut based products such as coconut water and coconut oil.

Globe Telecom is making the right connections




BEST MEDIUM CAP COMPANYSecurity BankIn January, Bank of Tokyo-Mitsubishi UFJ injected $773m into Security Bank in exchange for a 20% stake in the busi-ness. The transaction — the largest ever in a Philippine lender from a foreign financial — is expected to have a big impact on the smaller institution. Ana-lysts have always praised Security Bank for being able to hold its own against larger domestic rivals and the entrance of MUFG is likely to cut that size dispar-ity.

“It’s a huge equity in¥ux,” said one analyst. “With this deal, in the next few years Security Bank should be one of the top �ve banks in the Philippines.”

The money is expected to be used to allow Security Bank to boost growth and expand its branch network. At the time of the deal, Security Bank said it planned to expand its network from 262 branches to over 500 by 2020.

As well as the substantial cash injec-tion, the involvement of MUFJ is expected to have other positive rami�cations for Security Bank, with analysts expecting the deal to allow Security Bank to take advantage of MUFG’s existing relation-ships with Japanese companies.

The Japanese institution also obtained two seats on Security Bank’s board and is expected to second a number of sta� members to the smaller operator, o�ering a new level of expertise that analysts expect to translate into improved prac-tices for the business as a whole.

BEST LARGE CAP COMPANYGlobe TelecomComing second is never fun, and always coming second is even worse. That’s historically been the case for Globe Tele-com, which has struggled to displace its historic rival PLDT, which has been the Philippines’ largest telecommunications company since the country achieved independence. That status quo, however, may be in line for a shakeup as Globe gains ground on PLDT.

In 2006 PLDT held a market share of around 70%, but the two are now almost neck and neck, with PLDT retaining only a narrow edge.

Analysts attribute Globe’s growing share of the market to its focus on inno-

vation and faster pace of technological improvement. In October the company signed deals totalling $750m with FiberHome, Huawei and Nokia in order to upgrade its mobile network.

“In terms of technology and digitalisa-tion, Globe are ahead,” said one. “They’ve leapfrogged PLDT and now have the better network. It’s always been good, but in recent years it’s really leaped ahead.”

As well as the organic growth that Globe has achieved on the back of its improved technology, the company has also grown inorganically. At the end of 2015 it successfully integrated fellow telecoms operator Bayan Telecommunications, which operates in densely populated Manila and neighbouring regions, and committed to invest at least $200m in improving the smaller operator’s sub-standard network.

Unsurprisingly, PLDT has responded with a network upgrade push of its own, but if Globe can sustain its recent pace of growth it may just be able to overtake its well-entrenched rival to become the top player for the �rst time.

BEST EXECUTIVEAlberto Villarosa, chairman, Security BankSecurity Bank chairman Alberto Villarosa hasn’t been in his current job long, but he has a long track record at Security Bank that leaves little doubt of his talent. Before making the step up to chairman in May 2015, Villarosa spent 11 years as the bank’s chief executive and president. Prior to that he spent two years as the bank’s chief operating o�cer, meaning few people have a more detailed under-standing of Security Bank’s history and operations than him.

Villarosa began his career at Citibank, later joining CityTrust Banking Corp. CityTrust was acquired by the Bank of the Philippine Islands, where Villarosa also enjoyed a successful career, ultimately serving as the bank’s treasurer.

As both chairman and chief executive, Villarosa — commonly called Abet — has presided over years of growth and success at Security Bank. Analysts credit him for taking the bank from a �rm focused on treasury operations to a truly diversi�ed business, and for bringing it into the country’s top 10 banks.

SINGAPOREBEST SMALL CAP COMPANYBumitama AgriLike other planters in southeast Asia, Bumitama Agri has taken a hit from El Niño over the last 12 months. The drought conditions created by the unwel-come weather e�ect have hit the small planter hard. The company’s production numbers for the �rst half of 2016 were down sharply, leading to drops in both revenues and pro�ts.

However, if Bumitama Agri can hold out until weather conditions normalise then the company is set to thrive. Ana-lysts emphasise that the company still has a relatively young plantation pro�le, meaning that there is strong potential for growth in future earnings. The average life on Bumitama’s palm crop is around eight years, putting their crop’s lifespan at the young end of oil palm trees’ most productive period, which is between seven and 18 years.

The company also makes good use of agronomy practices, producing high yields from its fairly limited acreage while striving to manage the soil erosion that is the inevitable consequence of any kind of intensive farming.

Weather conditions are already beginning to return to normal and the company predicts that its �gures for the second half of the year will be stronger, a conclusion that analysts are inclined to agree with.

BEST MEDIUM CAP COMPANYRa�es Medical GroupRa¦es Medical provides a perfect exam-ple of just how important it is to know which part of your business to prioritise. At the moment the company owns one large hospital in Singapore, along with a network of smaller clinics and health centres across several countries.

The ¥agship Ra¦es Hospital — its spe-cialist services, in particular — has been a key driver of the company’s earnings in recent years and boasts a higher return on equity than other parts of the busi-ness. Naturally, then, Ra¦es has opted to develop this part of its business, much to the delight of analysts. The company is expected to complete an extension to the ¥agship hospital in 2017.




The company has also begun work on its �rst full size hospital — it already operates several clinics — in China, having laid the groundwork for a 40,000 square metre site in January. Analysts see the new Shanghai site as a savvy target for expansion and a potentially huge source of revenues, owing to the city’s large and wealthy population, coupled with a surprising scarcity of quality pri-vate healthcare. The company’s operation of smaller clinics in China is also seen as a positive, giving it valuable experience in the market.

If Ra¦es can duplicate the success of its ¥agship hospital with its new Shanghai venture — and analysts seem to think it can — then the outlook is promising indeed.

BEST LARGE CAP COMPANYSingtelDiversi�cation is the name of the game at Singtel and it’s what makes analysts love the company. From its roots as a telecoms company, Singtel has expanded into a variety of other business lines, leading to increased revenues and pro�ts along with a resilience to market downturns in any one of its businesses.

Through its NCS subsidiary the com-pany is involved in IT services provision, including consulting. Its inSing brand o�ers Singapore-focused lifestyle news, user reviews and editorials, while through Trustwave it provides cyber security and data protection.

While in its home market Singtel has strived to branch out into di�erent busi-ness areas, it has also looked to expand its core telecom business abroad. In addition to its Singapore business, Singtel also operates a telecom subsidiary in Aus-tralia and has associate agreements with operators in India, Indonesia, Thailand and the Philippines, where it works with Globe Telecom, Asiamoney’s pick for best Philippines large cap.

The international segment looks to be a key part of Singtel’s future, o�ering higher growth than its home base. In the last quarter pro�ts in Indonesia’s Telkomsel leapt 22% while India’s Airtel saw a 13% improvement. It’s no coincidence then that in October Singtel expanded its exposure to both companies by purchasing stakes in both Telkomsel and Airtel’s holding companies.

BEST EXECUTIVEChristina Lim, head of investor relations, Bumitama AgriIt is rare indeed to see a company’s head of investor relations nominated for the best executive award. Generally the names that are o�ered up are at the very top of the corporate ladder, chief executives or chairpersons. Christina Lim is one of the unusual exceptions, having proved herself popular indeed.

Analysts are uniformly positive regarding the investor relations work at Bumitama. For a small cap company, in particular, it is praised for its standards of corporate governance and, most of all, the transparency and responsiveness of its investor relations team.

A quick glance at Lim’s career suggests an obvious explanation for her talents. She began her working life as an investment analyst for Nomura before helping found Harita Securities, an Indonesian broker-age. As a poacher-turned-gamekeeper, Lim is well placed to know exactly what it is that analysts and investors demand from an IR team.

SOUTH KOREABEST SMALL CAP COMPANYWonik IPSFew things are more crucial to modern living than semiconductors. Without companies like Wonik making these ingenious devices, most of the other com-panies in this list of awards would not be able to do business — and Asiamoney would be putting the list together on a rather more primitive platform.

It’s easy to forget that the development and production of complex technological devices isn’t just done in-house at big tech companies like Apple and Samsung and that much of the heavy li¢ing is done by smaller �rms.

Among those �rms, Wonik has earned a solid reputation for its innovative research and development work. Indeed, the small cap has bene�ted in recent years from a number of deals with tech giant Samsung, mostly contracts to provide semiconductors and similar equipment for the larger Korean compa-ny’s high tech o�erings. In particular, analysts have recently lauded the com-

pany for its work in the �eld of organic light emitting diodes (OLEDs), a growth area that promises to improve on con-ventional LEDs in a number of ways.

Pro�ts at Wonik have skyrocketed in recent years. In 2013 the company reported net income of W16.6bn ($14.2m), but by the end of 2015 that number had more than tripled to reach W50.5bn. Analysts note that Wonik’s earnings comfortably outstrip most of its peer group.

Chief executive Byun Cheong Woo took the top job at Wonik in April 2016 and has inherited a solidly run company, but will have to work hard to live up to the standard set by his predecessors.

BEST MEDIUM CAP COMPANYMando CorpInternational expansion has suited car parts manufacturer Mando. While its home market of South Korea still makes up just under half of its sales, the company’s international operations are a growing part of its business mix. This is particularly true of Mando’s foray into China, which is thriving in the world’s largest market for car parts.

As of September, the company’s sales of parts into China were up 51% year-on-year, with that acceleration in sales also coming with a higher pro�t margin than the company’s Korean operations. The company is also enjoying progress in the US market. At the end of 2015 Mando was tapped by electric vehicle manufacturer Tesla to develop failsafe technology for self-driving cars. Inves-tors certainly like what they’ve seen from Mando over the last 12 months: the company’s share price at the start of November was over 50% higher year-on-year.

Mando hasn’t always been a popular name. Some analysts con�de that in the past the company has had issues with corporate governance, but are equally keen to emphasise that it has taken steps to deal with those problems over the last two to three years. Rather than complain about the management, analysts now laud the company for its �rst class investor relations work and reputation for setting (and conveying) realistic goals and expectations for the company.




BEST LARGE CAP COMPANYAmorepaci�cKorea has a well-deserved reputation as a hub for companies in high tech industries, but this year the analysts’ favourite is in a rather di�erent line of work, with cosmetics company Amorepaci�c beating out more familiar names like Hyundai and Samsung.

Amorepaci�c may di�er from Mando in both size and industry, but both compa-nies have thrived in the Chinese market. Over the last 12 months the company has launched a number of new products aimed speci�cally at Chinese consumers and has been rewarded with a 30% uptick in sales in the country. Analysts expect the company’s Chinese adventure to continue successfully as the company begins to target China’s second tier cities — one ana-lyst predicts that Amorepaci�c could double its sales into the country next year.

A big part of the company’s success has been an understanding of just how impor-tant a recognisable brand is to consumers. The company has invested heavily in marketing and advertising in recent years, particularly as part of its push into China. Analysts are clear that this spending has provided the company with a loyal cus-tomer following and a solid base for future �nancial success.

The cosmetics maker is also hoping to emulate its success in China in other markets, most notably southeast Asia. How successful this next push turns out will o�er further insight into just how talented Amorepaci�c’s management is: analysts warn that the customer base and consumption patterns in southeast Asia di�er markedly from China and Korea, and the company will have to tinker with its formula in order to ensure quality product performance in the region’s more humid conditions.

TAIWANBEST SMALL CAP COMPANYSercommIt’s companies like Sercomm that pro-vide the groundwork for how modern businesses operate. The production of broadband networking hardware, so¢ware and �rmware isn’t particularly glamorous, but it’s vital to how companies do business in the modern age. Sercomm

has been established in this �eld since 1992 and while it may remain a small cap company, its reputation is global.

In a world increasingly focused on envi-ronmental protection, analysts note that Sercomm is looking to tackle this problem at the source. While routers and the like may not produce a whole lot of pollution in their operation, the production of them can and Sercomm is striving to cut waste and reduce pollution in its manufacturing process.

However, performance is also important and analysts are also pleased to see that Sercomm is able to live up to its green obligations without taking too big of a slice out of the bottom line. The company has been consistently pro�table and 2016 has been no exception, with pre-tax pro�ts for the �rst nine months up 13.3% on the back of sales revenues that are 8.8%. Those numbers suggest Sercomm is on pace to break the records it set in 2015 for both pro�t and revenues.

The company also earns praise for its extensive investor relations work, with its IR team singled out for their transparency and talent at outlining the company’s strategy and vision.

BEST MEDIUM CAP COMPANYMicro-Star International (MSI)MSI started out in the 1980s as a manu-facturer of motherboards and graphics cards for computers, at the time a rather specialist business that wasn’t of huge

interest to many people. The company has always had a reputation for quality, but its real genius was to specialise even further and tap into the soaring demand for vide-ogames and the (expensive) hardware that the hobby demands.

The company was quick to recognise and tap into the fact that, for many, vide-ogaming was making the transition from a hobby to a fully-¥edged subculture. Its products — now not just cards and chips, but specially tailored desktops and laptops — are all marketed on the basis of how tailored they are for the newest and most demanding o�erings from video game developers. The company also sponsors a number of teams in the increasingly popular �eld of eSports. Put simply, MSI is not in the business of selling you a laptop just so you can check your emails.

Analysts are highly complementary of this decision, praising the marketing direction the company has taken. Sales �gures agree: in the �rst 10 months of 2016 the company has almost equalled its full �gures for 2015, and the company is likely to record a substantial sales bump ahead of Christmas.

Revenge of the nerds, indeed.

BEST LARGE CAP COMPANYTaiwan Semiconductor Manu-facturing Company (TSMC)TSMC is a big deal, both in its �eld and in its country. The company is the world’s

Technology is top in Taiwan


largest semiconductor foundry — a product vital to the various technologies, most notably smartphones, that we use on a daily basis — and is by far the largest company by market cap in Taiwan. At the time of writing, TSMC is worth more than double the second largest corporate on the Taipei Exchange.

“It’s their consistency that’s been the key,” said one analyst. “And that when there’s a change in the industry, they’re always quick to catch on and to update investors.”

The explosion of the smartphone market over the last decade has been the key driver of growth at TSMC, with the smartphone segment accounting for around 60% of the company’s revenues. Analysts cite the company’s pro�table partnership with Apple, in particular, as key to its success — especially given the recent struggles of the US company’s main rival, Samsung.

However, analysts also express concern that the smartphone market may be nearing saturation and that future growth could be limited. Even so, the customer base for smartphones is likely to remain highly supportive for the company. Even if demand is likely to grow at a slower rate, TSMC is assured a solid revenue basis from repeat customers. Smart-phones, impressive though they may

be, aren’t exactly known for their long lifespans.

BEST EXECUTIVEJames Wang, CEO and president, SercommWang has been the chief executive at Ser-comm since 2000 and has presided over more than a decade and a half of �nan-cial and developmental success for the producer of networking hardware, so¢ware and �rmware.

Analysts praise the work that has been done at Sercomm under his leadership, particularly the strides the company has made in wireless connectivity and the business savvy of the management team.

Wang is a veteran of the technology sector, with a fresh face belying almost 30 years of experience. Before joining Sercomm, Wang worked for Emerson Electric, helping the company establish an Asian presence by setting up and manag-ing the company’s operations in Suzhou, China. Earlier in his career Wang headed up a number of research and development projects, making good use of his under-graduate and postgraduate quali�cations in mechanical engineering.

Wang is no stranger to awards, in 2014 he was named Ernst & Young’s entrepre-neur of the year for Taiwan for his work at Sercomm.

THAILANDBEST SMALL CAP COMPANYMajor Cineplex GroupMajor Cineplex has been the undisputed top dog in the Thai movie theatre busi-ness since 2004 when the group acquired the number two company, EGV Entertainment — owned by a rival branch of Major Cineplex’s owners, the Poolvaraluck family.

The group owns close to 500 cinemas across Thailand, including the coun-try’s largest complex

and its only IMAX screen. With the company’s presence across the country strongly entrenched, analysts have been pleased to see chief executive Kittsanan Ngamphathipong has turned his atten-tion to cost savings.

Major Cineplex is shi¢ing over from traditional 35mm projectors to modern digital systems, reducing the need for trained operators and cutting sta�ng costs. Similarly, the company is rolling out electronic ticket machines in cinema foyers. These cost savings allowed the group to report �rst half net pro�ts this year of Bt770m, up 12% on the same period last year.

The company has also began to look broad, in 2014 it opened a cinema in Cambodia, following up by opening two further locations in Laos and 2015 and 2016. It is now eyeing expansion into Myanmar, as well as further complexes in Cambodia.

Analysts note Ngamphathipong’s savvy when assessing foreign markets, emphasising his decision to focus on action-heavy and dialogue-light �lms that will perform better across cultural and linguistic boundaries. It may be a cliché to say that comedy but doesn’t translate well, but analysts’ expectations and Major Cineplex’s pro�ts seem to back it up.

Major Cineplex is going digital




BEST MEDIUM CAP COMPANYBumrungrad International HospitalNot many mid cap companies can boast a website as slick as Bumrungrad Hos-pital’s — fewer still can do so in more than 10 di�erent languages. Whether you speak English, Arabic or Khmer, the Bangkok based hospital has a version of its website to care for your needs.

Indeed, Bumrungrad’s multilingual approach is key to its success: the hospi-tal is perhaps the quintessential example of the growing popularity of medical tourism.

The hospital was the �rst in Asia to receive accreditation from the Joint Com-mission International, the overseas arm of US healthcare accreditor Joint Com-mission. In 2015 the number of non-Thai patients admitted to the hospital grew by 7.5%, helping to boost net pro�ts for the year by more than 25%.

However, while the hospital has thrived on its strong reputation with international patients, particularly from the Middle East, that reliance on foreign in¥ows also comes with a price.

Pro�ts have been less impressive in 2016 — pre-tax pro�ts for the �rst six months of 2016 are basically ¥at year-on-year— which analysts attribute to falling interest from Middle Eastern patients, a result of both a falling oil price and improving domestic healthcare markets.

Bumrungrad looks ready to face the challenge head on, bringing in new chief executive Ronald Lavater. Lavater, who took up the post in September, brings experience of the Middle East market, having spent the last two years as the chief executive of Emirati healthcare group Al Noor Hospitals.

BEST LARGE CAP COMPANYBangkok Dusit Medical ServicesIf Thailand’s best medium cap company, Bumrungrad Hospital, has historically thrived on its targeting of high income patients — particularly from abroad — the much larger Bangkok Dusit Medical Ser-vices has taken a very di�erent route.

Analysts love the hospital operator because of its focus on diversi�cation, with BDMS boasting a good mix of medium and high income patients. That

stronger domestic customer base has le¢ the company less vulnerable to the downturn in medical tourism that has made 2016 tricky for the more specialist Bumrungrad.

BDMS is comfortably the largest hospital operator in the country — it is expected to open its 50th hospital in the near future. The company aims to cover 20% of Thailand’s patients by 2018. A target that analysts see as completely realistic. Not only will this growth push cement BDMS’s place as Thailand’s largest hospital oper-ator, but it’s also keeping the competition in check. Experts warn that BDMS’s mass hiring of trained hospital sta� is acting as an inhibitor to its competitors’ own growth ambitions: there are only so many doctors to go around, a¢er all.

The investment in real estate, sta� and equipment needed for BDMS’s growth strategy has meant that pro�ts haven’t been as high as one might expect, but analysts are emphasising the silver lining that this strategy will only bene�t the hospital operator over the long term.

“Pro�tability is suppressed at the moment because of the huge growth push,” said one. “But that just means there’s more room for growth when it pays o�.”

BEST EXECUTIVEBanthoon Lamsam, chairman and CEO, KasikornbankAs the grandson of Choti Lamsam, who founded Kasikornbank as Thai Farmers Bank in 1945, the younger Lamsam’s career trajectory was always pointed towards the bank. Indeed, aside from a short spell in the Thai military, Banthoon Lamsam has spent his entire career at Kbank, starting out at its international banking division in 1979.

According to analysts, Kbank is streets ahead of the competition in terms of its business strategy — though they admit that a heavy focus on SME lending has not always translated into the best asset quality. In a company the size of Kbank, there’s only so much in¥uence that the chairman can have on day-to-day opera-tions and Lamsam’s real skill, according to analysts, is as a talent spotter and delegator.

In his role as chairman he has impressed analysts by assembling a large

and talented management team, assigning each member of that team a very speci�c focus, and making sure they stick to it.

While running one of Thailand’s largest banks is a time consuming a�air, Lamsam has been able to carve out time to pursue other interests. In 2013 he published a he¢y 608 page novel set in his adoptive hometown of Nan — sadly, Asiamoney was unable to obtain a copy to review.

VIETNAMBEST SMALL CAP COMPANYMobile World CorporationMobile World opened its �rst store in Ho Chi Minh City in 2004 and has since swelled to over 900 premises across all of Vietnam’s 63 provinces and cities. That makes the company around triple the size of its next largest competitor and, according to analysts, has given Mobile World unprecedented economy of scale and bargaining power when dealing with the large, foreign companies that produce the electronic products it specialises in.

The company has also began to expand across southeast Asia, now operating in Cambodia, Laos and Myanmar as well as Vietnam.

The growth in premises has been accompanied with impressive income growth: the company raked in a little over D1tr ($44m) before tax in the �rst six months of 2016, compared to a �gure of D587bn for the same period in 2015, suggesting that Mobile World will have little problem hitting its stated pro�t growth target of 30%.

As the name suggests, Mobile World began as a retailer of mobile phones and other handheld electronics, but later expanded to sell larger consumer appli-ances and in 2016 began implementing a strategy to expand into operating minimarkets, planning to open 200 such stores in the �rst quarter of 2017.

While this may seem a stark departure from the company’s previous operations, analysts believe that Mobile World’s experience in selling electronics through small stores in rural areas — not to men-tion its strong brand recognition — leaves it well poised to translate that expertise to other products.




BEST MEDIUM CAP COMPANYHoa Phat GroupThe talent of Hoa Phat’s management is re¥ected in the company’s market share in Vietnam, which has tripled over the last �ve years.

This growing market share is also translating into ever higher pro�ts for the company. It reported record pro�ts of over D3.2bn in 2015 and, with pre-tax pro�ts for the �rst half of 2016 over double what the company managed in the �rst six months of 2016, is on course to break that record.

That growth is particularly impressive given the competition that Hoa Phat, and other local steel producers, have faced from cheap steel imported from China. Indeed, Hoa Phat is taking steps to fend o� incursions from Chinese competition. It is currently planning a $2.7bn steel-works set to open in 2020 that could more than double its steel output. Hoa Phat is also looking at a smaller $170m mill to be located nearby.

Hoa Phat has an obvious talent for cost control. The company has divested itself of two iron ore mines owned by its sub-sidiary An Thong, correctly calculating that it would be cheaper to import iron ore rather than struggle with the costs of extracting ore with low iron contents from its own mines.

BEST LARGE CAP COMPANYVinamilkThe next few years are likely to be a time of ¥ux for Vinamilk, Vietnam’s largest company by market value and the largest milk producer in southeast Asia.

The company was formerly entirely state controlled — the country’s com-munist government established it in the 1970s by nationalising and amalgamating several private dairies — but the country’s state investment corporation now controls just 45.1% of the shares and that number is set to fall. The government announced in September that it would sell $900m — or around 10% — of Vinamilk shares and the company revealed in May that it would scrap its 49% foreign ownership cap.

Fortunately for Vietnam’s government, Vinamilk’s soaring pro�ts are likely to be enticing for potential investors. In the �rst nine months of 2016 the company racked up pre-tax pro�ts of just over D9tr, up 28% on the same period the previous year.

However, Vinamilk is also likely to face challenges in the near future. Analysts warn that rising milk prices could prove problematic for the company, which at the moment can only supply around 30% of its needed dairy product domestically. If milk imports rise in cost, the company will either have to face declining margins

or hike prices for consumers — and it has already committed not to do the latter.

Vinamilk is facing up to these problems and is stepping up its imports of dairy cows in order to boost domestic produc-tion, but while that may be good news in the long term, analysts warn that increas-ing domestic production will be very much a gradual process.

BEST EXECUTIVENguyen Duc Tai, chairman and CEO, Mobile WorldNguyen Duc Tai, the founder and chief executive of Mobile World Corporation, has been the driving force behind the compa-ny’s rise from a small scale purveyor of mobile phones to one of the country’s most impressive businesses. One analyst goes so far as to give him the credit for 90% of Mobile World’s successes — claiming that “any company with him would be a winner”.

A¢er graduating with an MBA from the French-Vietnamese Center for Management Education, Nguyen spent a short stint working in real estate but ultimately made the transition to being an entrepreneur, founding Mobile World in 2014. Nguyen and Mobile World’s rise was impressive. By 2014 the soaring value of his shares had made him the eighth richest investor on the Vietnam Stock Exchange.

Analysts positively gush about the success that Nguyen and his company have achieved over recent years. Mobile World’s next step is making the move from a specialist electronics retailer to operating minimarkets. While such a drastic shi¢ is o¢en a cause for concern, ana-lysts are con�dent that Nguyen can shepherd Mobile World to further success.

They note that he has demonstrated a particular talent for understanding and predicting consumer behaviour and for assembling an impres-sive management team around himself. ◼

Vinamilk’s pro�ts are soaring



Corporate Governance Poll 2016

The global �nancial crisis was a com-bination of a failure of regulation, with the authorities too distant from common industry practices,

as it was of governance, with executives o�en grossly unaware of malfeasance in their own shop.

That experience has le� its mark, with reg-ulators since ramping up e�orts to increase oversight. The problems haven’t gone away: failures of governance since the subprime mortgage crisis have piled up to between $20tr and $25tr, according to consulting �rm Management & Excellence (M&E).

This has o�en come in the form of �nes for breaches, showing there is still a gap between introducing governance and enforc-ing it.

“This has meant that o�en investors have been taken by surprise by govern-ance-driven events,” William Cox, CEO of M&E, told Asiamoney. “Investors and executives just don’t know the extent of the governance risk in their compa-nies.”

Such lack of understanding can have a concrete impact on investments. Cox’s �rm has developed a governance discount rate to apply to company valuations. By his measures, most investors price in a discount that is only between a third and a half of what Cox estimates are the real risks for most listed companies.

That gap has been on display in some of the more recent cases to grab the headlines.

“If something happens it will hit the social media platforms within hours,” said Cox. “Volkswagen lost 30% of its market cap in days due to the emission so�ware scandal. And this was a lead-

ing company on the Dow Jones Sustainable Index, it was checking all the boxes. Nowa-days the speed with which you are hit by the consequences of bad governance actions is tremendous."

WHERE IS ASIA?While much of the attention has been on high-pro�le cases, mostly a�ecting �rms from developed markets, Asia cannot a�ord to gloat. Even the most sophisticated markets in the region are playing catch up with the standards enforced elsewhere.

And with rare exceptions, most emerging economies are just beginning or have made little e�ort to create a framework around what is known as environmental, social and corporate governance (ESG). In most cases, the fault lies squarely with regula-

tors, who have been slow in following best practice.

But with Hong Kong �rms winning three of the top �ve spots in Asiamoney’s annual Corporate Governance Poll, companies from the territory seem to be doing at least some-thing right in the eyes of investors across the region.

The Hong Kong Exchange (HKEX) issued changes to corporate governance, risk man-agement and internal controls practices in December 2014, with the new rules coming into force for accounting periods starting in January 2016.

PwC took a look the annual reports of some 230 listed �rms across the past two years to evaluate standards of corporate governance, with some 70% of the �rms covered being among the early adopters of the new disclo-

sure requirements set forth by HKEX.The study found that �nancial

services companies were outperform-ing real estate, retail and technology businesses, and also revealed that Hang Seng Index �rms were better prepared than Hang Seng Chinese Enterprise Index entities, PwC wrote in a report published on September 29.

"What we saw is that the �nancial sector is much more advanced than other industries," Eric Yeung, partner with PwC's risk assurance practice told Asiamoney. "And in terms of the disclo-sures, the other sectors have quite some work to do."

But the new HKEX measures will hardly do the job as they have been seen as rather broad and open-ended, allow-ing plenty of leeway for listed �rms in their application. This is made worse by an environment where few companies take the initiative.

Time to get seriousAsia has taken its time in improving corporate governance standards, with experts agreeing on the need for broader action. But Taiwan and Hong Kong �rms seem to be moving in the right direction, as shown in the results of this year's Asiamoney Corporate Governance poll. Paolo Danese reports.

ERIC YEUNGPwC

Corp Gov Poll mag-r2.indd 81 15/12/16 4:55 pm



"We see a lot of the listed companies here that are very regulatory and compli-ance driven, meaning that they need to be pushed into action. This means that they take action mostly when new rules or guidelines are issued,” said Vivian Chow, a Hong Kong-based senior manager for risk advisory services at BDO Financial Services.

TAIPEI SETS THE BARTaiwan �rms, meanwhile, have taken the lead, with �rst and second position in the Asiamoney survey going to Taipei-based companies.

Demonstrating its commitment, the Taiwan Stock Exchange held meetings in Hong Kong on November 24 to discuss changes to its ESG regime with local investors.

In terms of achievements, TWSE noted that 87% of listed companies have appointed independent directors, a 20% improvement over a year ago, and that 49% increased transparency by adopting a nomi-nation system for directors and supervisers, up 34%.

One �rm that has moved in that direction is Sercomm Corporation, a broadband tech-nology �rm listed on TWSE, and the winner of this year's Corporate Governance Poll.

Paul Wang, chairman of Sercomm, told Asiamoney that early input for the �rm’s approach came from his personal overseas experience.

"I have worked in the United States for over 20 years and the large �rms there are all very focused on corporate govern-ance,” he said. “So at Sercomm we wanted to implement it as one of the important

principles of our manage-ment."

Sercomm has seven board direc-tors, with four of them external. Wang stressed that the focus has been on appointing external board mem-bers such as lawyers with

expertise in the �eld, academicians, and industry leaders.

"We don't want to be like some other companies that use close friends as board members, we have chosen to appoint only reputable and knowledgeable board mem-bers that can give independent advice, play a check and balance role," Wang said.

PwC's Yeung agreed on the importance of making the right appointments.

"The changes that we are seeing are partly driven by independent non-exec-utive directors who have more personal accountability in the companies that are implementing these frameworks, and not just paying lip service to it," said Yeung.

Sercomm has also reinforced its audit committee, with the board reviewing opera-tions on a regular basis, Wang said.

The fact that the �rm has been keen to apply a strong framework does not mean that there were no challenges, however.

"We persist in our approach, but the concern is that the company has grown too fast. We have had a 30% annual compound growth rate for the past 16 years," said Wang. "The business expansion itself is the easy part, but a�er the expansion, the big challenge is how to continue to monitor operations that are far away."

And, when looking at a growing global footprint, Wang's answer to how to handle the unavoidable changes was an even greater focus on transparency.

"With so many o�shore companies and businesses, we will need to enhance and strengthen the communication channels within the company across market sales,

research, manufacturing, �nancing and human resources."

READY, STEADY, GO?For most �rms, however, the main risk is still that corporate governance rules will be looked at as something they do not have to take seriously.

"Companies need to pay attention to the spirit and substance of the rules that are put in place," said PwC's Yeung. "We o�en talk to companies that don't have a systematic and formalised approach to risk manage-ment and don't even understand the need for this systematic approach. If you don’t tie that mindset and embed it in the corporate culture, it doesn't really help the business."

M&E's Cox pointed out how steep the path ahead is if �rms and regulators in Asia want to catch up to jurisdictions like the US.

"In most sustainable companies in Asia, you look at their annual reports and don't �nd any statements on items such as cyber-threats, which is now recognised as a universal problem, for example. But they don't like to admit that it is a problem."

He noted that even broader investments in IT were not typically reported on, a practice that is already taking hold among US and European listed �rms. Another key issue, executive compensation, was also not on the radar in Asia yet.

"The reporting in Hong Kong is still very super�cial,” said Cox. “In Brazil and Europe it's already compulsory, with many �rms detailing compensation packages for executives. I just don't get that in Hong Kong reporting, much less in China or other Asian markets."

The responsibility, ultimately, falls on companies’ boardrooms. With the largest global investors increasingly sensitive to failures of corporate governance and adopt-ing stricter criteria on how to allocate their portfolios, the window of opportunity for �rms to clean up their act is closing fast.

"The worldwide phase of compliance via box-checking is coming to an end," said Cox. "That's a static measure that does not tell investors or regulators how the com-pany will perform. A lot of companies that checked these boxes have failed over the last years. If the right measures are not taken in governance, sustainability, and compliance, they are going to hit a brick wall." ◼

PAUL WANGSercomm




CORPORATE GOVERNANCE POLL 2016

BEST COMPANIES IN ASIA FOR CORPORATE GOVERNANCERank Company Location %

1 Sercomm Corporation Taiwan 6.552 Wistron NeWeb Corporation Taiwan 5.203 Far East Consortium International Ltd Hong Kong 4.79

OVERALL

BEST FOR DISCLOSURE & TRANSPARENCYRank Company Location %

1 Sercomm Corporation Taiwan 8.03

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENTRank Company Location %

1 Wistron NeWeb Corporation Taiwan 5.21

BEST FOR RESPONSIBILITIES OF MANAGEMENT & THE BOARD OF DIRECTORSRank Company Location %

1 Wistron NeWeb Corporation Taiwan 5.26

BEST FOR INVESTOR RELATIONSRank Company Location %


BEST FOR CORPORATE SOCIAL RESPONSIBILITYRank Company Location %


ACROSS ASIA (ex Japan)

CHINABEST OVERALL FOR CORPORATE GOVERNANCE TCL Corporation

BEST FOR DISCLOSURE & TRANSPARENCY TCL Corporation

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT TCL Corporation

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS TCL Corporation

BEST FOR INVESTOR RELATIONS TCL Corporation

BEST FOR CORPORATE SOCIAL RESPONSIBILITY TCL Corporation

BEST OVERALL FOR CORPORATE GOVERNANCE Far East Consortium International Ltd

BEST FOR DISCLOSURE & TRANSPARENCY Far East Consortium International Ltd

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Far East Consortium International Ltd

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS Far East Consortium International Ltd

BEST FOR INVESTOR RELATIONS Far East Consortium International Ltd

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Far East Consortium International Ltd

HONG KONG




INDIABEST OVERALL FOR CORPORATE GOVERNANCE Mahindra & Mahindra Ltd

BEST FOR DISCLOSURE & TRANSPARENCY Oberoi Realty Ltd

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Mahindra & Mahindra Ltd

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS Eicher Motors Godrej Properties

BEST FOR INVESTOR RELATIONS Oberoi Realty Ltd

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Mahindra & Mahindra Ltd

BEST OVERALL FOR CORPORATE GOVERNANCE Surya Citra Media Tbk.

BEST FOR DISCLOSURE & TRANSPARENCY Surya Citra Media Tbk.

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Results not published due to insu�cient data

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS Results not published due to insu�cient data

BEST FOR INVESTOR RELATIONS Surya Citra Media Tbk.

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Unilever Indonesia Tbk.

INDONESIA

BEST OVERALL FOR CORPORATE GOVERNANCE IHH Healthcare Berhad

BEST FOR DISCLOSURE & TRANSPARENCY Media Prima Berhad

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT IHH Healthcare Berhad

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS IHH Healthcare Berhad

BEST FOR INVESTOR RELATIONS IHH Healthcare Berhad

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Media Prima Berhad

MALAYSIA

THE PHILIPPINESBEST OVERALL FOR CORPORATE GOVERNANCE Ayala Corporation

BEST FOR DISCLOSURE & TRANSPARENCY Globe Telecom, Inc.

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Results not published due to insu�cient data


BEST FOR INVESTOR RELATIONS Security Bank Corporation

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Results not published due to insu�cient data

KOREABEST OVERALL FOR CORPORATE GOVERNANCE Naver Corporation

BEST FOR DISCLOSURE & TRANSPARENCY Results not published due to insu�cient data

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Samsung Electronics Co., Ltd


BEST FOR INVESTOR RELATIONS Results not published due to insu�cient data

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Results not published due to insu�cient data

BEST OVERALL FOR CORPORATE GOVERNANCE Bumitama Agri Ltd

BEST FOR DISCLOSURE & TRANSPARENCY Bumitama Agri Ltd

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Bumitama Agri Ltd

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS Bumitama Agri Ltd

BEST FOR INVESTOR RELATIONS Bumitama Agri Ltd

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Bumitama Agri Ltd

SINGAPORE




TAIWANBEST OVERALL FOR CORPORATE GOVERNANCE Sercomm Corporation

BEST FOR DISCLOSURE & TRANSPARENCY Sercomm Corporation

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Wistron NeWeb Corporation

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS Wistron NeWeb Corporation

BEST FOR INVESTOR RELATIONS Sercomm Corporation

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Sercomm Corporation

BEST OVERALL FOR CORPORATE GOVERNANCE Kasikornbank Public Company Ltd

BEST FOR DISCLOSURE & TRANSPARENCY Kasikornbank Public Company Ltd

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENT Advanced Info Service Public Company Ltd

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORS Major Cineplex Group Public Company Ltd

BEST FOR INVESTOR RELATIONS Kasikornbank Public Company Ltd

BEST FOR CORPORATE SOCIAL RESPONSIBILITY Total Access Communication Public Company Ltd

THAILAND

VIETNAMBEST OVERALL FOR CORPORATE GOVERNANCEViet Nam Dairy Products Joint Stock Company

BEST FOR DISCLOSURE & TRANSPARENCYMobile World Investment Corporation

BEST FOR SHAREHOLDERS' RIGHTS & EQUITABLE TREATMENTFPT Corporation

BEST FOR RESPONSIBILITIES OF MANAGEMENT& THE BOARD OF DIRECTORSCotec Construction Joint Stock Company

BEST FOR INVESTOR RELATIONSFPT Corporation

BEST FOR CORPORATE SOCIAL RESPONSIBILITYViet Nam Dairy Products Joint Stock Company

2016 Corporate Governance Poll – MethodologyAsiamoney invited CEOs, CIOs and senior executives from fund management and hedge fund companies in the Asia-Paci�c region, as well as Heads of Research and senior analysts in brokerages across the region, to participate in the eighth Corporate Governance Poll.

Asiamoney received a total of 185 responses, 3 of which were disregarded as they failed to ful�ll the auditing requirements. The 182 valid responses were from 115 di�erent institutions.

In the questionnaire, respondents were asked to nominate their top two companies in Asia ex-Japan for the following:

DISCLOSURE AND TRANSPARENCY• Which companies make the most timely and accurate disclosure on all

material matters regarding the corporation, including the �nancial situa-tion, performance, ownership and governance of the company?

• Which companies produce the most informative �nancial reports and o�er the best disclosure of Corporate Governance information in their annual reports?

• Which companies have improved their levels of transparency and o�ered more frequent disclosure of information over the last 12 months?

• Which companies have ensured greater transparency regarding their board of directors, such as disclosing the directors' remuneration and improving the ratio of independent non-executive directors?

SHAREHOLDERS’ RIGHTS AND EQUITABLE TREATMENT• Which companies provide the best protection of shareholders’ rights and

ensure fair treatment of all shareholders, including minority and foreign shareholders?

• Which companies best facilitate shareholders’ meetings, providing thor-ough and complete information for prior consideration, ensuring ease of attendance and voting by proxy?

• Which companies have done the most to increase their awareness of shareholders’ rights over the last 12 months?

RESPONSIBILITIES OF MANAGEMENT AND THE BOARD OF DIRECTORS• Which companies have improved their accountability structures and

would take the most e�ective measures in the event of mismanagement?• Which companies have ensured greater transparency regarding their

board of directors, such as disclosing the directors’ remuneration and improving the ratio of independent non-executive directors?

• Which companies have ensured that their CEOs and CFOs sign o� on all �nancial reports to acknowledge the truthfulness and completeness of information?

INVESTOR RELATIONS• Which companies are the most pro-active in promoting themselves to the

market, communicating with shareholders and providing investor access to senior management via roadshows, press conferences, AGMs, etc?

• Which companies have done the most to improve their investor relations over the last 12 months?

CORPORATE SOCIAL RESPONSIBILITY• Which companies have strong commitment to corporate social responsibil-

ity, with proven track record of ethical behaviour in consumers' interests?• Which companies have the best practices in environmental protection?• Which companies are the most active in philanthropy?• Which �rms have the most outstanding record in labour practices?

For all the above questions, each �rst place nomination received �ve points, second place received four points, third place received three points, fourth place received two points and ��h place received one point. The rankings published are based on each company’s share of total points within each section. The ‘best overall for corporate governance’ rankings are an accumu-lation across the four sections.

Asiamoney would like to thank all respondents for taking the time to com-plete and return the questionnaire. For extended rankings please visit the Asiamoney website, www.globalcapital.com



Finance in the Middle East Awards

BEST BANK IN THE MIDDLE EAST AND BEST BANK IN JORDAN Arab BankServing the Arab diaspora since the 1930s, Arab Bank is the most regionally focused �nancial institution in the Middle East. The bank now has 600 branches across �ve continents, including a presence in Singapore and Australia. This makes it the largest Arabian banking entity, and the one that is the most deeply embedded in the region’s �nancial markets.

Having a pan-regional banking group has not been an easy proposition for the last few years, due to the political instability, and the fall in hydrocarbon prices. And yet Arab Bank has managed to maintain its tradition of sus-tainable growth, through hard times and good. The bank’s latest results reported that net pro�t a�er tax and provisions for the period ending Septem-ber 2016 came in at $617.9m, a little more than the $615.1m in the same period last year. Loans and advances grew by 3% to $24.4bn against $23.6bn in the third quarter of 2015.

Customer deposits grew by 2% to reach $35.5bn compared

to $34.8bn for the same period last year. Both loans and customer deposits grew by 5% and 4%, respectively. The bank also recorded a loan-to-deposit ratio of 69% and a coverage ratio of 108% for the value of collateral held against NPLs.

It is this ability to manage the bank e�ectively through di�cult times, while balancing the needs of customers, and shareholders, that makes Arab Bank the best bank in the Middle East.

In its home market of Jordan, the bank has a commanding presence with 119 branches and more than 3,800 employ-

ees. It is the largest listed company on the Amman Stock Exchange, representing around 25% of the total market capitalisa-tion. It is the largest trade �nance provider in the country, it has an extensive cash management product suite and channel o�erings, and it has an extensive corporate loan book for its blue chip Jordanian and international clients.

BEST BANK IN BAHRAINAhli United BankAhli United Bank (AUB) is the market lead-ing bank in Bahrain, with pro�ts almost

Best Banks in the Middle East 2016It has been another testing year for banks in the Middle East. A strength-ening dollar abroad, pallid economic growth at home and political instability still �aring around the region have hampered expansion plans and put a squeeze on pro�ts. But some banks have weathered this storm well and have proven once again how resilient the Middle Eastern banking market really is. To recognise the outstanding performances of these institutions, Asiamoney is pleased to announce the winners of our awards for best banks in the Middle East 2016.

Arab Bank is the standout in the Middle East

Middle East Finance Awards-6 pages.indd 86 15/12/16 3:17 pm

2016

BEST BANKIN KUWAIT

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three times those of its nearest competitor. It increased full year pro�ts in 2015 1.3% over those in 2014. And in the �rst half of 2016, it further increased them 8.2% over the equivalent period last year.

Like all banks in the region, it has been operating in a di�cult environment over the last few years. As a result it has adopted a strategy of balance sheet sweating as opposed to rapid growth of its asset base, which has only increased 1.6% year-on-year. Moreover, its NPL rate has declined to a level of 1.8%, while its provision coverage has increased to 182% — both extremely conservative num-bers and testament to its prudence.

The bank has undertaken an interna-tional expansion over the past year, with the opening of a subsidiary bank in Dubai. Through this bank, it o�ers the full range of banking products and services — corporate and private banking, trade �nance, wealth management and treasury products — to clients based all over the Middle East. It has also further cemented its position in the ban-cassurance markets, through the acquisition of the remaining 50% it did not already own of Legal & General Gulf. It has now renamed this Al Hilal Life.

The strongest signal of its �nancial strength is that the credit rating agencies —

S&P, Fitch and Capital Intelligence — all give the bank a higher rating than the sovereign. This is extremely rare and is a testament to the bank’s regional and diversi�ed business model.

BEST BANK IN EGYPTCommercial International BankIt has been a turbulent year for Egypt’s banks, with interest rates being hiked by the central bank to defend the value of the pound, only to be followed by a sharp devaluation and the establishment of control-free FX trading. There has been a short-

age of international currency to add to the economic woes that the country faces.

And yet within all this Commercial Inter-national Bank has produced third quarter results that show it has had an outstanding year. It has recorded a record net income of E£4.46bn, ($247m) up 24% from the previous nine-month period last year, from revenues of E£8.2bn, up 10% year-on-year. This has given it a return on average equity of 33.3% and a return on average assets of 3.07%.

Its balance sheet remains strong, despite the di�cult environment, with 95% of its funding coming from customer deposits. Its liquidity ratios for local currency and foreign currency are both more than double the central bank requirements. Its total capital ratio was 13.9%, of which 92% was tier one capital.

To the bank’s credit it looks as if its management predicted how the macro and regulatory environment would play out and it has planned accordingly. But the bank has also been client facing during this period of turmoil, and total institutional banking loans were up 5% to E£52.5bn. In the local capital markets, the bank’s brokerage won a 9% market share of trading, while its investment bank completed four transactions this year.

BEST BANK IN KUWAITNational Bank of KuwaitNational Bank of Kuwait is the oldest indigenous bank in both Kuwait itself and the wider Gulf region. And 64 years a�er its incorporation, it remains the largest bank in Kuwait, and the leader by some distance in terms of the services it o�ers its corporate clients.

It presence in East Asia extends from o�ces in Singapore and in Shanghai. It has regional coverage throughout the Middle East and global banking centres in London, New York, Paris and Geneva.

The bank is a trusted partner to many blue chip clients including the national oil company for whom NBK does all its bank-ing. It also banks some three quarters of the foreign companies that work in Kuwait. It also has a dominant position in the trade �nance market.

Its investment banking subsidiary NBK Capital, is the leading DCM player in the country, helping to arrange some $14.6bn of debt for companies since 2005. In the ECM arena, it is also a leading player, even though deal¥ow has been limited this year. And in M&A it is a trusted adviser to regional blue chip companies when they are looking to divest businesses or acquire new ones.

Due to the adverse operating environ-ment that many banks in the region are facing, NBK has used the past year to shore up its balance sheet, increasing its capi-talisation (tier one and two) to 17.2% from 15.7%. It has slowed its new loan growth from around 14% to 4% and increasing its provisions from 300% to 371%. Its NPL ratio has fallen to 1.22% from 1.41%.

BEST BANK IN LEBANONBank AudiBank Audi continues to be a source of strength and stability in a country and a region that has faced years of turbulence. Its ability to grow its franchise, while minimising risks and producing excellent pro�ts is a source of considerable pride for the group.

Lebanon produces excellent banks and bankers, but Bank Audi stands out for the sheer professionalism and internation-alism of its operations. Indeed, activity outside of Lebanon counts for some 45% of its total assets driven largely by its

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operations in 10 di�erent Middle Eastern countries as well as Europe.

Within the country, the bank’s fran-chise is the broadest of any of the banks, with diverse operations across corporate, investment, commercial, retail and private banking via 200 separate products and services. All this adds up to an impressive array of �nancials.

A total $350m in pro�ts were generated in the �rst nine months of 2016, a 15% increase on the equivalent period in the previous year. This pro�t was generated from $45bn of assets and $37bn of cus-tomers’ deposits. Indeed, this deposit to asset ratio of 82%, marks it out as a leader where the regional average is around 70%.

It also has excellent liquidity due to its primary liquidity representing around 55% of customers’ deposits. All this has not come through excessive risk taking. With strong collateral and provisioning, the bank has a 3.2% NPL ratio, almost half the average NPL ratio for banks around the world. Having in-built resilience to the adverse trends that can a�ect banks in the region is the hallmark of Bank Audi’s success.

BEST BANK IN MOROCCOAttijariwafa BankAttijariwafa Bank is Morocco’s leading �nancial institution and a major player in the wider African banking market. The bank has 3,376 branches across 23 coun-tries. In Morocco, it is deeply embedded in the country’s �nancial life, not least by being controlled by the investment vehicle of the Moroccan Royal family, SNI.

It excels in several areas for its corpo-rate clients including foreign exchange, derivatives, trading, loan structuring and placement syndication. It has specialist subsidiaries in the M&A, brokerage, asset management and private equity busi-nesses. The brokerage has 30% market share on the Casablanca Stock Exchange. The private equity arm has set up three sectoral funds, while the asset manage-ment business Wafa Gestion, is a clear market leader with 75 separate funds sold to both institutional, retail and corporate clients.

It is by far the most international of Morocco’s banks with subsidiaries through-out Africa (Tunisia, Senegal, Burkina

Faso, Guinea Bissau, Mali, Mauritania, Côte d'Ivoire, Congo, Gabon, Cameroon, Togo and Niger) and Europe, as well as rep o�ces in Dubai, Riyadh, London and Shanghai.

It has enjoyed a strong year �nancially. In the �rst half, it reported net pro�t of MD2.49bn ($260m), a 7.9% increase over the same period last year. Its consoli-dated loan book rose 3.8% to MD264.2bn while its total deposits rose by 5.1% to MD393.6bn. At the same time, it has strengthened its balance sheet through MD1.4bn of extra provisions for the year. Despite this growth and prudence, the bank also manages a return on equity of 15.5%.

BEST BANK IN OMANBank MuscatBank Muscat is the Sultanate of Oman’s leading commercial bank due to its 35% market share of both loans and deposits. The strength of its franchise is perhaps best seen in the resilience of its balance sheet. Over the past year its deposits have grown by nearly 12% while its loan and other receivables have increased by 8%. It has also seen a 6.5% increase in equity. This strength is matched by its operating �gures which show net operating pro�ts a�er tax increasing by 7.5% to $455m.

This operating success has continued into this �scal year, with strong quarterly results announced in September, despite the strains on the Omani economy because of the fall in oil prices.

Bank Muscat has the leading equity, debt and asset management franchises in the country, allowing it to take a leading role in the country’s growing capital markets. The bank is also the most inter-nationally minded bank in Oman. It has branches in Saudi Arabia and Kuwait, as well as representative o�ces in Singapore and Dubai.

Moreover, the bank’s well regarded SME banking business — al-Wathbah — directly supports thousands of small business, especially in the construction, industry, trading, tourism, real estate and services, sectors. The al-Wathbah Business Women’s Forum also helps to promote female participation in the economy through a network of services and connections.

BEST BANK IN PALESTINEBank of PalestineWith 66 branches throughout the West Bank and Gaza, assets of almost $4bn and 1,600 employees serving around 780,000 customers, the Bank of Palestine is the largest banking institution in the Palestinian Territories of the West Bank and Gaza.

It is a bank that thrives despite the adverse conditions in which it operates. Now in the third generation of man-agement by the Shawa family, the bank brings the best in global banking to an underbanked population.

It has a strong relationship with the World Bank Group’s private sector arm IFC, which is not only a major shareholder, but has also helped the Bank of Palestine to institute a stringent risk management and governance structure.

The new systematic risk management structure is becoming an integral way in which the bank is being run. The bank’s �nancial performance has been strong over the past year. In the last quarter for instance, revenues were $127m, leading to pro�ts a�er tax of $38.2m. These �gures are 23% and 18% higher than the same period last year, respectively. Perhaps most impressively, over the past year, the bank has increased its total assets by 55% from $2.76bn to $4.25bn.

Listed on the Palestine Exchange, the bank now makes up 15% of the overall market capitalisation. In terms of its bank-ing services for corporates, it mainly banks SMEs, smaller contractors, and those �rms who require some trade �nance support. It also participates in larger project loans as well, when they materialise.

BEST BANK IN QATARQatar National BankQatar is one of the most outwardly focused countries in the Middle East and so its best bank should be one that is similarly inter-nationally minded. Qatar National Bank (QNB) is the leading bank in Qatar. And it is increasingly seen as a regional power-house, not just a national champion. This transition was further cemented this year when the bank bought Finansbank, one of the biggest banks in Turkey.

That acquisition comes a�er a few years of regional expansion, including the acqui-




sition of QNB Alahli in Egypt and other acquisitions in Jordan, UAE, Tunisia, Libya and Iraq. Over the last two years, the bank has also expanded its footprint in Asia with the opening of representative o�ces in Vietnam and Myanmar.

All this expansion shows strongly in its numbers. In the nine months up to September 2016, the group booked $2.7bn of pro�t, an increase of 11% over the same period the year before. Total assets, how-ever, increased by 37% to reach $196bn. Of this total, loans and advances grew by 38% to reach $139bn.

This kind of balance sheet strength is extremely attractive to clients operating regionally, especially corporates looking for investment banking services from QNB Capital, the group’s full service investment banking subsidiary. It also has a leading brokerage operation in QNB Financial Services, and a rapidly growing asset man-agement arm.

QNB Asset Management manages the high performance Watani Funds 1 and 2, that have delivered some 63% and 55% returns since their inception. This year it has also added a UCITS platform, allowing European and Asian investors to access regional and frontier products.

BEST BANK IN SAUDI ARABIASaudi British BankThe Kingdom of Saudi Arabia recently announced its National Transformation Programme, which will open the country up for new investment in several new sectors, such as mining, health, renewa-ble energy and education. Some sources suggest that it will bring $267bn of new business opportunities.

For foreign �rms looking to establish local banking operations, Saudi British Bank is excellently placed to help them, o�ering a full range of personal, com-mercial, corporate, private and Islamic banking; investment, treasury and trade services.

The Saudi British Bank is an associate bank of HSBC, which has a 40% equity stake in the business. With 99 branches based throughout the Kingdom, the bank is perhaps the strongest and best-run bank-ing operation in the country.

For its last full year results, it made Sr4.3bn ($1.1bn) in pro�t, a 50% jump on its numbers from �ve years ago. It has seen a similar jump in assets over the same period from Sr138.7bn at the end of 2011, to Sr187.8bn at the end of 2015. The bank has strong credit ratings from the

three leading rating agencies (BBB+/A-/Aa3), which testi�es to the quality of its asset metrics. It also o�ers a full suite of Islamic banking products, via the full backing and oversight of an independent sharia committee.

BEST BANK IN THE UAEAbu Dhabi Commercial BankAbu Dhabi Commercial Bank is a stand-ard bearer for international banking in the UAE. It has a 10.8% market share in loans and 9.8% market share of deposits. It serves over 690,000 retail clients and approximately 52,000 wholesale clients.

Its most recent results show that it has faced a challenging operating environment by building up its �nancial resilience. For the �rst nine months of 2016, its net prof-its were down 16% due to an increase in impairment charges. However, revenues were up 1%, while costs were down 2%.

It is also in the process of reshaping its ¥ow of business, with non-interest income now comprising 27% of total income. As a result of this, the bank has a return on equity of 16% and a return on assets of 1.66%, both of which are market-leading numbers. Moreover, the bank still has healthy asset quality metrics with a non

QNB: Regional powerhouse


EMBy Oliver West

Emerging m

arket bond markets m

ay be head-

ing for serious disruption in coming m

onths even

if the US Federal R

eserve raises interest rates

slowly and gently, bankers w

arned yesterday.

Banks’ retreat from

market-m

aking means

past experience will be no guide to how

the

market behaves this tim

e, they said.

When the Fed begins to hike rates, expected

next year, it may reveal w

hat the Institute of

International Finance this week called the

“illusion of liquidity” in fixed income m

arkets.

Even last year’s turmoil —

the so-called taper

tantrum —

when then-Fed chairm

an Ben

By Thierry Ogier

South Africa’s finance m

inister has hit

back at criticisms in W

estern financial

circles of the five Brics countries’ attempt

to create a New

Developm

ent Bank.

Nhlanhla N

ene said the ND

B, often

called Brics bank, w

as not a “stillborn”

institution, as Emerging M

arkets called

it on Thursday.

“We only concluded the establishm

ent of

the bank a few m

onths ago. So it would be a

By Jon Hay

For over a year, the European C

entral

Bank’s Asset Q

uality Review

has loomed

over the eurozone banking sector. Now

the results are just two w

eeks away —

but analysts still don’t know w

hether

FINAL WORD Europe’s banks w

ait for AQR:

release from jail or fresh torm

ents?

Tregidgo: Wall Street no w

arehouse of risk

WA

SHINGTON

DC, OCTOBER 11 2014

Rush for Russian

roubles

3

The year of LatAm’s

slump

4

Iran looks beyond

sanctions

4

Out of the Woods

4

Filling the

infrastructure hole6

Chile mines m

arkets6

Cote d’Ivoire’s

$1bn bond

6

UK says OK to RMB

8

Venezuela fuels a row8

Bangladesh

shelves bond

8

Andreas

Dombret

Page 63

SPECIAL DA

ILY EDITION W

ORLD BAN

K/IMF

Citi proudly supports Progress Makers.

People with ideas that are im

proving

lives in cities around the world.

citi.com/progress

RESTLESS

PASSION,

MEET

RELENTLESS

SUPPORT.

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itibank, N.A

. Citi and C

iti with A

rc Design are registered service m

arks

of Citigroup Inc. The W

orld’s Citi is a service m

ark of Citigroup Inc.

PUBLISHEDSINCE

1988

EMERG

INGM

ARK

ETS

ww

w.em

ergingmarkets.org

INDIA

Modi’s m

oment

PAGES 18-20

CEEUkraine

fallout

PAGES 34-35

Continued on page 3

NEWS

ww

w.em

ergingmarkets.org

Even a gentle Fed could

savage EM bonds as banks’

liquidity vanishes

Bernanke first indicated quantitative easing

would be tapered m

ight not prove to have been

a useful rehearsal for the coming volatility.

“Wall Street is now

here near the ware-

house of risk it used to be,” said Paul Tregidgo,

vice-chairman of debt capital m

arkets at

Credit Suisse. “The impact of this on m

arket

liquidity is a major unknow

n.”

He said that precedent w

as “of limited

value in helping us predict what w

ill hap-

pen if US rates do rise today”.

Macroeconom

ic conditions, demograph-

ics, technology, global connectivity and the

Continued on page 63

they will bring celebration or w

oe.

High hopes are riding on the C

om-

prehensive Assessm

ent, which also

includes stress tests by the European

Banking A

uthority. Optim

ists believe

Continued on page 3

—CHARLES DALLARA,

Partners Group Holding

SEE FULL STORY PAGE 16-17

““Argentina isfinding itself

increasingly in

a corner of its

own making”

Nene: give NDB time

IMF

Purpose

in question

PAGES 12-14

ExclusiveSouth Africa rejects

brickbats thrown at

Brics development bank

Covering the global economy for 28 yearsCovering the global economy for 28 years

www.emergingmarkets .org news, analys is and opin ion onl ine

By Anthony Rowley

Haruhiko Kuroda insisted today that he would stick

to his monetary policy course, despite mounting

criticism of the Bank of Japan governor as the early

gains from Abenomics appear to have petered out.

Kuroda’s massive surge of quantitative and

qualitative easing, launched in March 2013 —

seen around the world as a brave but risky

experiment — has boosted the Japanese stock-

market, ended deflation and got GDP rising.

But growth has slowed, and even fell nastily in

the second quarter of 2014.

By Thierry Ogier

The world should not fear the Federal

Reserve’s plans to raise interest rates,

current and former policymakers from

three continents have argued. Agustín

Carstens, Jean-Claude Trichet and Henry

Rotich said they trusted that the US cen-

tral bank would move “progressively”.

The Bank of Mexico governor, former

European Central Bank president and

Kenyan finance minister all argued that

rising rates would be a sign of faster

American economic growth, which

would benefit the global economy and

enable other countries to take the tight-

ening in their stride.

Carstens said the global economy

could avoid what IMF managing direc-

France is preparing to issue a renminbi

bond, three banking sources have told

Emerging Markets. Luxembourg is also

considering a deal, one said.

The deals could come quite soon, fol-

Don’t fear rate hikes — US

growth can beat ‘the new

mediocre’

France, Luxembourg eyeing up

RMB bonds after UK’s trailblazer

Kuroda: monetary policies ‘quite justified’

WASHINGTON DC, OCTOBER 12 2014

SPECIAL DAILY EDITION WORLD BANK/IMF

Citi proudly supports Progress Makers.

People with ideas that are improving

lives in cities around the world.

citi.com/pro

gress

200 YEARS OF

TRANSFORMING

THINKERS

INTO DOERS.

© 2014 Citibank, N.A. Citi and Citi with Arc Design are registered service marks

of Citigroup Inc. The World’s Citi is a service mark of Citigroup Inc.

PUBLISHED SINCE 1988

EMERGINGMARKETS

www.emergingmarkets.org

BASEL III

Asia’s banks

PAGES 14-16

KAZAKHSTAN

Nazarbayev’s

final push

PAGES 20-21

AFRICA

DCM

PAGES 22-23

Continued on page 3

NEWSwww.emergingmarkets.org

Kuroda’s not for turning:

resilient BoJ governor shrugs

off QE criticismIn an interview with Emerging Markets,

Kuroda shrugged off allegations that the Bank

of Japan’s policies were hurting, rather than

helping the world’s third largest economy.

He also defended the divergence in mon-

etary policy by the world’s four largest cen-

tral banks, which has been seen as a dan-

ger, and insisted the global financial system

was not on the verge of crisis.

“The Fed and the Bank of England have

already started [monetary] normalisation,

whereas on the other hand the European Cen-

tral Bank and the Bank of Japan continue

their [accommodative] policies, reflecting dif-

ferences in their economic situations,” he

Continued on page 31

Exclusive

Exclusive

lowing the UK’s inaugural transaction,

announced in September, which could

be issued as soon as next week for up to

Rmb2bn ($326m). Bank of China, HSBC

Continued on page 3

—NICK COUSYN, BDSec

SEE FULL STORY PAGES 18-19

““Policymakers are sending

Mongolia strong signals

that the lengthy dispute

surrounding OT is over and

that they are ready

to move forward with

Phase 2 financing”

Carstens: normalisation ‘desirable’

Joseph

Stiglitz

Page 31

FINAL

WORD

By Jon Hay, Steve Gilmore

Toby Fildes and Tessa Wilkie

Brics bank doesn’t

scare ADB

3

Kiciloff defiant on

default

4

Arab Spring rerun

fear

4

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$2bn for Myanmar8

Serbian growth to

resurface

8

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performing loan ratio of 2.6% and provi-sion coverage ratio of 133.1% as at the end of September.

The bank has a strategic growth plan, that is centred on expanding in the United Arab Emirates, before moving overseas. But it does have a representative o�ce in Singapore, as well as London, and a long established subsidiary in India, serving the needs of Indian nationals working in Abu Dhabi.

BEST ISLAMIC BANK IN BAHRAIN Al Baraka Islamic BankAl Baraka Islamic Bank is the Bahraini ¥agship of the Al Baraka Banking Group, which operates throughout the Middle East and North Africa. In Bahrain, the Al Baraka Islamic Bank is the leading Islamic institution, having been at the forefront of the development of the industry since its inception in 1984.

It has pioneered many new products, while also extensively supporting the development of the Islamic banking sector

as a whole. These products include the Murabaha, Wakala, Istisna, Diminishing Musharaka, Mudaraba, Salam and Ijarah Muntahia Bittamleek.

The Al Baraka Banking Group has performed strongly this year. In its �rst half results it reported that total operat-ing income was up 7% to $538m against the �rst half of last year. Net operating income was up 4%, although total net income was down 5% due to the costs of opening more branches, higher provisions and higher tax charges. The bank’s assets, comprising �nancing and investments were $19.1bn, while customer accounts totalled $20.4bn.

Islamic banks that do well should be close to their clients, and Al Baraka’s mantra of ‘partners in achievement’, requires the best of international banking technology but also the deepest under-standing of Islamic �nance products, both of which the bank possesses. Its full suite of corporate and commercial products from Murabaha and Istana to letters of credit and guarantee for trade, are matched by an

equally full product line up for individual clients.

BEST ISLAMIC BANK IN JORDAN Jordan Islamic BankJordan Islamic Bank is the Jordanian Islamic subsidi-ary of the Al Baraka Group from Bahrain. It is the oldest and largest Islamic bank in the country, having been founded in 1978.

The bank manages to achieve strong growth and customer retention, while at the same time adher-ing to high standards of shariah compliance and undertaking extensive sha-riah quality analysis. For instance, the bank has set up an independent shariah oversight function, which strengthens its governance structure. Crucially this has been established separate from the internal audit department.

Despite the di�culties that have beset the Hashemite Kingdom of Jordan over the past year, the bank has grown strongly. It recorded a 19% increase in pro�ts in the �rst nine months of 2016 over the same period last year. Over the same period, total assets were up by 6.1%, deposits by 6.4% and shareholders’ equity by 6.3%.

Increasingly in Islamic banking having a strong branch network is key, and JIB now has 95 throughout the country with plans to increase this to 117. There have been some questions about the concentration of its business with the public sector, a�er the government instituted its investment drive. But its asset quality metrics have remained �rm and its liquidity provisions are strong.

BEST ISLAMIC BANK IN KUWAIT Boubyan BankUnder new control by the National Bank of Kuwait, Boubyan Bank has made impres-sive strides. It has refocused its activities on building its retail banking activities in

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Kuwait, while at the same time servic-ing its corporate client base through the provision of new and innovative Islamic banking products. As a result, it is grow-ing quickly and now has a 6% market share of deposits, double what it was �ve years ago.

Alongside the growth in deposits — up 20% in the last year — has come an 11% increase in assets and a 13% increase in loans. The growth in volume has also lead to a 13% increase in pro�ts.

The bank’s product o�ering also shows that Islamic banks can be forward look-ing and creative. One such innovation is the introduction of the �rst mobile banking platform that comes with a biometric touch ID support, as well as the �rst mobile banking platform on the Apple Watch. It has also introduced new products such as health �nance, automou-sawama, overseas Murbaha, education �nance and qard hassan.

It has also greatly expanded its number of branches up to 37, so that it can get as close as possible to its clients. It has also doubled its headcount over the past �ve years.

By focusing on growing its domes-tic retail o�ering, the bank is making amends for some of the global expansion it undertook before the global �nancial

crisis of 2008. Much of this success can be attributed to the work of Adel Abdul Wahab Al-Majed, vice chairman and chief executive o�cer of the bank, and the excellent team he brought with him from NBK.

BEST CEO Ali Al-KuwariQatar National Bank The adverse operating conditions that the Middle East has faced this year — geopo-litically and economically — caused most banks in the region to hunker down, focus on building up a defensive balance sheet, keep strict controls on costs and try to eke out more revenue from existing custom-ers, rather than acquiring new customers.

But QNB stands out for proceeding — at pace — with its internationalisation policy. For this, the bank can thank the leadership of its CEO Ali Al-Kuwari. At the helm of the bank since 2013, although a member of sta� since 1988, he has pushed through a strategy that aims to see some 40% of the bank’s revenues come from its non-Qatar business by next year. Its biggest deal this year was the purchase of Finansbank, Turkey’s ��h largest private sector bank.

His moves continue the global expan-sion policy set up by his predecessor, Ali

Shareef Al Emadi who was promoted to be the Qatari minister of �nance, setting up Al-Kuwari’s move into the CEO position.

Al-Kuwari, takes an active role in the running of the bank’s growing international subsidiaries, includ-ing being the chairman of QNB Capital (the investment banking advisory arm of QNB Group) and the chairman of QNB Kesawan, a subsidiary in Indonesia. He is vice chairman of NSGB in Egypt and CBI in the UAE. He is also the chairman of MasterCard Advisory Board for the Middle East and Africa and board member at Milaha and Qatar Exchange.

OUTSTANDING CONTRIBUTION TO FINANCE Nemeh Sabbagh Arab Bank

Nemeh Sabbagh is one of the outstanding bankers of his generation. He has guided Arab Bank through some particularly di�cult years through his technical skills, vision and prudence. As a result, the bank is strongly placed at a time when the region seems to be emerging from the twin problems of geopolitical instability and low oil prices.

Sabbagh has been at the helm of Arab Bank since 2010, but before that he ran BankMed in Lebanon and Arab National Bank in Saudia Arabia and spent a total of 19 years with the NBK Group. He cut his banking teeth in the US with First Chicago and then with the World Bank, starting his career in 1974.

Over the last half decade in charge of Arab Bank he has reduced the cost income ratio from 59% to 44%. He has upped the return on equity from 6% to almost 10%, and the return on assets from 1% to 1.6%. He has reduced NPL ratios and maintained a strong level of capital. He has also de�ly handled some potentially di�cult legal issues in the US, surrounding anti-terror-ist �nance cases.

Prudent and measured, Sabbagh has made an outstanding contribution to the banking and �nance industry of the whole Middle East region over a near 45 year career. ◼

Boubyan is rebuilding its retail network


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