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					                                                        NEWS
                                                        thE iNStitutE

Insolvency course
The Institute will be conducting a new course

                                                        Council election results
focusing on the basic principles of insolvency
administration designed for those intending
to pursue a career in the field. The course will
be held on five Saturday afternoons starting
                                                        New president and vice presidents chosen
from 27 February and will be presented by
experienced insolvency practitioners.                                                               Wilson Fung was elected
                                                                                                    president at the Institute’s
Annual dinner                                                                                       37th annual general meeting
Some 700 members gathered for a Wild West-                                                          last month. Fung, a financial
themed night at the Institute’s annual dinner on                                                    controller for Jardine Matheson
7 December. Dressed as cowboys and cowgirls,                                                        Ltd., has served on the Institute’s
members enjoyed tarot reading and a game                                                            council for eight years and was
where members could shoot at cans bearing                                                           elected vice president in 2008 and
the faces of council members.                                                                       2009. Since joining the council,
                                                                                                    he has chaired the practice review
Institute calls for environ-                                                                        committee and the professional
mental standards                                        New President Wilson Fung (centre) and accountants in business com-
During the United Nations-sponsored climate             Vice Presidents Chew Fook-aun (right)       mittee, as well as the advisory
change conference in Copenhagen last month,             and Philip Tsai Wing-chung (left)           panel for the Best Corporate
the Institute joined 12 other accounting institutes                                                 Governance Disclosure Awards.
from around the world to call for a universally            Chew Fook-aun and Philip Tsai Wing-chung were elected vice presidents.
accepted accounting standard for climate                Chew, an executive director and group chief financial officer of Esprit
change disclosures in financial reports.                Holdings Ltd., joined the council in January 2004. Tsai is a partner at Deloitte
                                                        and has been on the council since December 2004.
Disciplinary findings                                      Seven council members were also chosen for a two-year term. They
Name: Chan Lai-cheung, CPA (practising)                 are Mabel Chan Mei-bo, Keith Pogson, Susanna Chiu Lai-kuen, Raphael
Complaint: Non-compliance with the Institute’s          Ding Wai-chuen, Wilson Fung Ying-wai, Ronald Kung Yiu-fai, and
Code of Ethics for Professional Accountants and         Horace Ma Chun-fung.
guilty of professional misconduct in that Chan              Edith Shih and John C. Poon were re-appointed by the government for
failed to report the breach by an insurance broker      another two-year term as lay members. Two other government-appointed
of the minimum requirements in respect of               lay members, Catherine K.C. Leung and Ambrose Cheung Wing-sum, will
keeping separate client accounts under section 73       continue with the second year of their terms.
of the Insurance Companies Ordinance (Cap.41).
Chan admitted to the complaints.
Decision: Chan shall be reprimanded and                 Consultation on auditing practices
shall pay a penalty of HK$5,000, and the costs
and expenses of the disciplinary proceedings            In a move to raise audit quality, the Institute has issued a consultation paper on
totalling HK$92,663.90.                                 proposed changes on how auditors are to be licensed. A previous consultation
                                                        paper in January last year attracted a significant amount of responses, with
Wallace Ko Yat-wing, CPA (practising)                   members divided over a number of suggestions.
Complaint: Non-compliance with the Institute’s              Proposals on residency requirements, audit experience for practising
professional standards in that Ko failed to report      certificate holders and the registration of firms that auditors work for elicited
breaches by an insurance broker of the minimum          the most comments.
requirements in respect of keeping separate client          As a result, when issuing a practising certificate, the Institute is now
accounts and maintaining minimum net assets             proposing to consider as ordinarily residents in Hong Kong individuals who
under section 73 of the Insurance Companies             have been in the territory for more than 180 days in the past 12 months prior
Ordinance. Ko admitted to the complaints.               to the date of their application, as well as individuals who have the right of
Decision: Ko shall be reprimanded and shall             abode in Hong Kong.
pay a penalty of HK$100,000. Ko shall also pay              The Institute is also considering accepting auditing experience gained in
HK$5,000 towards the costs and expenses of the          the mainland only if certain conditions are met to ensure that such experience
disciplinary proceedings.                               is of an equivalent standard to that acquired in Hong Kong.
                                                            Details of all the revised proposals can be accessed through the Institute’s
Details of disciplinary findings are available at the
Institute website: www.hkicpa.org.hk.                   website and comments should be sent by 1 March.

4   January 2010
NEWS
iNtErNatioNal




U.K. slaps one-time bonus tax on bankers
European countries may follow, but little support for the move in the U.S.
Bankers in Britain are reel-         U.K. whether or not they have      partner in international tax      companies to disclose
ing after the government             received financial support         at KPMG U.K.                      more information on their
announced a 50 percent tax           from the government.                   Elsewhere in Europe,          executives’ pay and their board
on bonuses of more than                  On top of this, Darling is     French President Nicolas          members’ background, the
£25,000 – the first punitive         also raising the tax rate on       Sarkozy said his government       Financial Times reported.
measure against discretionary        incomes exceeding £150,000         would also introduce an               Starting from this year’s
executive compensation in a          to 50 percent from April.          equivalent tax on bonuses,        proxy voting season, the
developed country since the              Critics have expressed fears   while German Chancellor           Securities and Exchange
financial crisis broke.              that London’s financial centre     Angela Merkel described it        Commission said companies
   British Chancellor of the         status could take a hit as large   as an “attractive idea.”          need to explain in writing pay
Exchequer Alistair Darling,          businesses consider relocating         The tax, however, appears     practices that might adversely
the U.K.’s treasury chief, said      because of the tax.                to have little support in the     affect the company.
the one-time levy will raise             A KPMG poll showed that        United States. Wall Street            The new rules also require
more than £550 million and           more than half of the 57           giant Goldman Sachs has set       them to provide information
affect about 20,000 people.          large companies surveyed           aside at least US$16.7 billion    on the relevant skills of
   He said banks had                 – including 20 FTSE 100            for bonuses but will pay them     directors and whether they
generated excess profits             companies – said they have         in special stocks rather than     are involved in any litigation
directly or indirectly from          either studied the implications    cash. The investment bank said    or regulatory enforcement
the government’s bailout of          of moving out of the U.K. or are   shareholders will have a say      actions, as well as justify
troubled banks. The levy             actively considering it.           on pay, although such a vote      their board’s structure
will apply to all British and            “These initial results         would be nonbinding.              and disclose fees paid to
foreign banks, and building          present extremely worrying             U.S. regulators, meanwhile,   compensation consultants,
societies operating in the           findings,” said Chris Morgan,      passed new rules to force         the report said.



Dubai World, creditors turn to Deloitte and KPMG
Dubai World has appointed                                               of the company’s liabilities.     Barneys New York in 2007.
Deloitte to assist in its six-                                              Neighbouring Abu Dhabi            Meanwhile, Dubai World’s
month-long restructuring to                                             threw a US$10 billion lifeline    creditors have appointed
meet payments of US$26 billion                                          last month to help Dubai World    KPMG to help them recover
in debt. The government-owned                                           pay a maturing US$4.1 billion     their money. Emirates National
investment company rattled                                              Islamic bond and meet other       Bank of Dubai is the company’s
financial markets around                                                interest payments through the     biggest single creditor with
the world last month when it                                            end of April.                     outstanding loans of about
announced it would ask creditors                                            Dubai World has total debt    US$3 billion, but it is estimated
for a payment delay until May.       evaluate the extent of the         estimated at US$60 billion.       that U.K. banks have a total
    Aidan Birkett, managing          restructuring required,” a         The group includes property       exposure of US$5 billion.
director for corporate finance       statement from the firm read.      developer Nakheel, which             Royal Bank of Scotland
at Deloitte LLP, will act as chief      Dubai World’s troubles,         is behind ambitious projects      has between US$1 billion
restructuring officer working        which started in late 2008 when    such as the Palm Jumeirah         to US$2 billion, while
closely with the Dubai Financial     funding dried up following         and World Islands, and DP         Standard Chartered and
Support Fund and Dubai World’s       the global financial crisis, was   World Ltd., which acquired        Lloyds Banking Group PLC
executive management team.           exacerbated when the govern-       ports operator P&O in 2005        have US$1 billion each, the
“His first priority will be to       ment refused to guarantee any      and department store chain        Financial Times reported.

6   January 2010
                                                                                                                                   A PLUS




E.U. unwinds liquidity support                                                                             U.S. Supreme
                                                                                                           Court weighs
Washington, however, extends bank rescue programme                                                         future of PCAOB
To scale back the massive          bank rescue programme known
liquidity support extended to      as TARP, saying the recovery                                            The U.S. Supreme Court began
banks since 2008, the European     of the financial system remains         TARP (the U.S.                  hearing arguments last month
Central Bank announced last        “incomplete” as banks continue          bank rescue                     on whether the Public Company
month it plans to gradually end    to post significant losses.             programme)                      Accounting Oversight Board,
cheap emergency loans and              “As we wind down many of            will be extended                set up under the Sarbanes-
tighten the terms of its final     the government programmes               until October.                  Oxley Act in 2002, violated the
12-month loans.                    launched initially to address                                           constitution because it lacks the
    “The improved conditions       the crisis, it is imperative that                                       presidential oversight required
in financial markets have          we maintain this capacity to        will spend another 7.2 trillion     for executive branch agencies.
indicated that not all of our      respond if financial conditions     yen to prevent the world’s              The PCAOB was created
measures are needed to the         worsen,” he said.                   second largest economy from         to regulate the accounting
same extent as in the past,”           Geithner said the government    slipping back into recession.       profession following accounting
said Jean-Claude Trichet, the      does not expect to use more than    A surging yen, which recently       scandals at Enron Corp. in 2001
ECB’s president.                   US$500 billion of those rescue      reached a 14-year high against      and WorldCom Inc. in 2002.
    The E.U. pulled out of         funds and that an estimated         the U.S. dollar, threatens          The board is a private entity but
recession in the third quarter     US$175 billion will be repaid by    Japan’s export-driven economy.      does government-type work,
and is expected to grow 1.9        financial institutions by the end       The new stimulus package        such as issuing accounting
percent this year, according to    of the year. Bank of America, for   aims to create jobs, fund           standards and undertaking
the Organization for Economic      instance, repaid US$45 billion      environmental initiatives and       disciplinary actions.
Cooperation and Development.       last month. He added that the       help rural regions.                     Lawyers for the plaintiff,
    But in Washington, U.S.        extension will help shore up            The Bank of Japan also          Free Enterprise Fund, argued
Treasury Secretary Timothy         lending to small businesses and     released a 10 trillion yen credit   that the board goes beyond
Geithner decided to extend until   prevent more home foreclosures.     programme for banks at near         other independent agencies
October the US$700 billion             In Japan, the government        zero interest to boost liquidity.   because the U.S. president
                                                                                                           doesn’t have the authority to
                                                                                                           appoint or fire its members.
Climate change funding debate                                                                              That power lies with the
                                                                                                           Securities and Exchange
Raising money for a US$100         after difficult talks among its     Stern of lacking common sense       Commission, which oversees
billion global fund to help        27 members. Japan pledged           and calling his comments            the board.
poorer nations tackle climate      US$15 billion for the next          “extremely irresponsible.”              Lawyers from the SEC,
change became a source of          three years if a global accord          Meanwhile, the United           whose members are appointed
friction at the United Nations     on carbon emissions reduction       States announced a new              by the president, argued that
Climate Change Conference in       is reached.                         US$350 million international        the president has sufficient
Copenhagen last month.                 The United States has yet       programme to fund clean             control over the board through
    Developing nations             to announce how much it             technology projects in poorer       the regulator. The court is not
demanded that industrialized       will pay. U.S. climate envoy        nations over the next five years.   expected to hand down its
nations pay up for their past      Todd Stern singled out China,           Separately, the United          decision until mid-year.
high carbon emissions, but the     saying the U.S. won’t let it tap    States, France, Australia,              In spite of the hearings, the
latter said they would have a      into U.S. funds for developing      Japan, Norway and Britain           PCAOB asked the SEC for a 16
hard time raising funds.           nations because China can           promised US$43.5 billion            percent budget increase to fund
    The European Union             afford to finance its own           over the next three years           more international inspections
eventually committed               projects. China’s envoy He          for reforestation projects in       and deal with increasingly
€2.4 billion a year until 2012     Yafei fired back by accusing        developing nations.                 complex accounting rules.

                                                                                                                             January 2010   7
                                               NEWS
                                               iNtErNatioNal


IASB seeks new chairman
The trustees of the International
                                               Lehman liquidation in
Accounting Standard Committee
Foundation are looking globally for a          Thailand challenged
successor to IASB Chairman Sir David           KPMG Hong Kong-led asset sale blocked
Tweedie when his term ends in June
next year. A decision is expected in the       KPMG’s liquidation of Lehman Brothers Commercial Corp. Asia has hit a
second half of this year. Meanwhile,           snag in Thailand after a group of counterparties filed civil and criminal cases
Columbia University law professor and          against the company and KPMG Hong Kong to stop the sale of the bankrupt
former U.S. Securities and Exchange            company’s assets in Thailand.
Commissioner Harvey Goldschmid and                 Destination Properties Co., a joint venture partner of the Lehman sub-
Yves-Thibault de Silguy, chairman of           sidiary in several hotel projects in Phuket and Hua Hin, has filed a criminal
construction conglomerate VINCI PLC,           suit against three KPMG executives for allegedly trying to take assets that it
were appointed as new IASB trustees.           claims belong to the joint venture.
They replace Philip Laskawy and                    “This is a criminal act in Thailand because basically you are absconding with
Bertrand Collomb who retired last year.        property that is really not yours,” Gary Murray, chief executive of Destination
                                               Properties, told A Plus during a visit to Hong Kong last month. KPMG Hong Kong
E&Y fined in the U.S.                          declined to comment.
Ernst & Young LLP agreed to pay a                  In a paid advertisement in The Asian Wall Street Journal last month,
US$8.5 million fine – one of the highest       Destination Properties warned any person against buying from KPMG assets
ever paid by an accounting firm in the         owned by the Lehman subsidiary in Thailand because such transactions can be
U.S. – to the Securities and Exchange          overturned by Thailand’s bankruptcy court. The company said potential buyers
Commission for allegedly issuing “false        of those assets will be added to existing lawsuits. The court already accepted a
and misleading” audit opinions of Bally        petition for the Lehman subsidiary’s bankruptcy in October.
Total Fitness Holding Corp. from 2001              Meanwhile, a U.K. judge has ruled that clients of Lehman Brothers
to 2003. Six current and former E&Y            International Europe, such as hedge funds, can get their money back as long
partners were also sanctioned for their        as it is held in accounts separate from the failed company’s house accounts.
roles in the audit. The regulator said the     PricewaterhouseCoopers, the estate administrator, had asked the court for
firm “knew or should have known about          guidance on which clients would be eligible to make claims.
Bally’s fraudulent financial accounting            The European arm of Lehman Brothers Holdings Inc. held US$2.1 billion of
and disclosures.” The Chicago fitness          client money in segregated accounts when it went into administration in 2008.
company filed for bankruptcy in 2007           The company owned some US$32 billion of client assets when it went bankrupt,
and was charged with fraud a year later.       but US$13.3 billion has since been returned. Clients have until 19 March to file
Each of the E&Y partners has settled the       claims on about US$19 billion held in trust.
charges against them.

KPMG’s U.K. profit down                        PwC replaces India chairman
Revenue at KPMG’s U.K. member firm
took a hit last year due to the financial      Ramesh Rajan, chairman of PricewaterhouseCoopers India, stepped down
crisis, slipping 1.6 percent to £1.9 billion   last month after a “challenging year,” which saw two of the firm’s auditors
in the financial year ending September         imprisoned following India’s biggest corporate fraud scandal.
2009 from a year ago. Operating profit             Rajan said in a statement that he is leaving to allow others to lead the firm
dropped 1.3 percent to £382 million.           “as it continues to address the various enquiries concerning Satyam.”
But the firm’s restructuring practice              Replacing Rajan is Gautam Banerjee, who has been executive chairman
grew 45 percent compared to 2008,              of PwC Singapore for the last six years. Amrish Shah, an executive director of
collecting £160 million in revenue.            the firm, also reportedly resigned, according to India’s Economic Times.
KPMG’s revenue across Europe fell                  The leadership shake-up in the firm came a year after Ramalinga Raju, the
0.4 percent last year. “This was a             former chairman of PwC client, Satyam Computer Services Ltd., admitted to
creditable performance against the             inflating the company’s assets and overstating the company’s balance sheet by
backdrop of the worst financial year in        more than a billion U.S. dollars.
almost 80 years,” said John Griffith-Jones         Two PwC auditors are in jail awaiting trial for their alleged role in falsifying
and Rolf Nonnenmacher, joint chairmen          the company’s books. In November, Indian authorities said the fraud at Satyam
of KPMG Europe LLP.                            is larger than the 71.36 billion Indian rupees Raju admitted to in January.

8   January 2010
NEWS
grEatEr chiNa




China’s recovery gathers pace
Government curbs hot money flow, rising debt and property speculation
Despite vowing to continue                                                                            monetary policy to boost rural        Foreign Exchange has limited
government stimulus, Chinese                                                                          development and domestic              the number of bank accounts
leaders dropped hints at an                                                                           consumption.                          used by individuals for foreign
important economic planning                                                                               Chinese banks are expected        exchange transactions;
meeting last month that the                                                                           to cap lending at approximately       individuals and institutions
government might rein in                                                                              8 trillion yuan this year, accord-    overseas are now required
                                    Photo: Bloomberg/Getty Images




capital spending, the biggest                                                                         ing to China Daily, down from         to send foreign currency to
contributor to overall growth                                                                         total loans of more than 9 trillion   no more than four Chinese
last year.                                                                                            yuan last year.                       individual accounts for yuan
    Top policymakers at the                                                                               Li Fuan, a director at the        conversion on the same day or
Central Economic Work                                                                                 China Banking Regulatory              consecutive days.
Conference stressed the need for                                    Li Fuan, a director at the China  Commission, said mainland                 To prevent the property
a more balanced growth, which                                       Banking Regulatory Commission banks will need to raise as much          sector from overheating,
analysts interpreted as a sign of                                                                     as 500 billion yuan this year to      the State Council raised the
future policy fine-tuning to curb                                   the smallest drop in 13 months.   boost their financial positions.      minimum holding period for
potential risks. The government                                     Consumer prices rose 0.6 per-     He said the banks would issue         newly bought property to five
said new investment projects                                        cent after falling for 10 months. 300 billion to 400 billion yuan       years from two years. Property
would be strictly controlled – a                                    The government is aiming for      in equity or bonds, with the          owners who sell their homes
slower pace of approvals may                                        8 percent GDP growth this year,   Agricultural Bank of China            within five years of purchase
lead to an easing of capital                                        said Li Yizhong, the country’s    raising 100 billion to 200 billion    will have to pay a 5.5 percent
spending, Reuters reported.                                         industry minister.                yuan from its initial public          sales tax, reversing a 2008
    Latest official figures show                                        Following a lending           offering later this year.             decision to reduce the taxable
a rosier economic picture:                                          boom last year, the People’s          Regulations governing cross-      period to two years. The
Industrial production jumped                                        Bank of China said it would       border transfers by individuals       government also raised the
19.2 percent in November from                                       keep credit expansion at a        have also been tightened to           down payment requirement
a year earlier and decline in                                       “reasonable pace” but would       control the flow of hot money.        for land purchases to at least
exports slowed to 1.2 percent,                                      continue a moderately loose       The State Administration of           half of the total price.



Chinese cities are hot property, according to PwC survey
Shanghai is ranked as the most                                          “Chinese cities dominate        been buying more land and           propped up prices, but there has
attractive market in Asia for                                       the rankings this year, which       demand for the city’s retail and    been little follow-through in the
real estate investment this year,                                   is a reflection of a remarkable     residential sectors is growing.     rest of the market. More than
while Hong Kong clinched                                            resurgence in Chinese com-          Shanghai’s hosting of the World     35 percent of survey respon-
second place, up one spot                                           mercial real estate as the          Expo in May – expected to draw      dents said they believe it is time
from last year, according to a                                      government-mandated                 some 70 million visitors – will     to buy residential apartments
survey released last month by                                       liquidity boom lifts markets        give the market another boost.      and nearly half of them think it
PricewaterhouseCoopers and                                          across the country,” said K.K.          Hong Kong slipped four          may be better to hold.
the Urban Land Institute.                                           So, Asia Pacific real estate tax    spots to 10th place in terms of         The survey is based on
    Beijing jumped nine places                                      leader at PwC.                      development prospects because       the views of more than 270
to third, with respondents                                              Shanghai also took top spot     of a lack of new development        investors, developers, property
saying they are interested in                                       within the region in terms of       projects. The survey said           company representatives,
the capital’s residential and                                       development opportunities           a few large transactions in         lenders, brokers and consul-
manufacturing sectors.                                              because developers have             commercial property have            tants across Asia Pacific.

10   January 2010
                                                                                                                                          A PLUS




Asset bubble danger lurks
Official says hot money is pushing up property prices
Two top Hong Kong officials           monetary policies around the                                              asset price cycle could take
warned investors last month           world and the large inflows                                               hold, ultimately leading to
of the looming risks of asset         of funds provide the ideal                   HK GDP                       macroeconomic volatility,”
bubbles – which are described by      conditions and ingredients for                                            said an IMF report.
                                                                                growth forecast
Hong Kong Monetary Authority          Asian asset bubbles to grow,                                                  Tsang said Hong Kong’s

                                                                            3.3%-3.5%
Chief Executive Norman Chan           so the potential risk of asset                                            financial system is sound
as the number one threat to           bubbles is not small,” Chan said.                                         and can cope with capital
financial stability in Asia.              He believed raising interest                                          movements, adding that the
    “We are very concerned,”          rates would not fully address        property prices by reducing          economy was expected to grow
Financial Secretary John              the risk. “Hong Kong cannot          the maximum amount banks             in the fourth quarter of last year,
Tsang told the Legislative            raise interest rates as it wishes,   can lend for properties worth        but will shrink 3.3 percent for
Council. “The risk is there           and even if we could, this would     HK$20 million and above.             the whole of 2009.
but it is not apparent.”              attract more hot money with              The officials’ warnings came         Hong Kong’s GDP contracted
    Chan told the Hong Kong           undesirable consequences,”           weeks after the International        2 percent year-on-year in the
Economic Summit that more than        Chan said, adding that the           Monetary Fund urged Hong             third quarter of 2009, but
HK$640 billion has flowed into        monetary authority will keep         Kong to tighten bank lending to      Hang Seng Bank forecast the
Hong Kong since October 2008,         a watch on the growth of             rein in asset price inflation.       economy will grow 3.3 percent
which helped drive up housing         mortgage lending.                        “With substantial liquidity      this year, while the Asian
prices for 10 straight months.            The monetary authority           in the system, there is a            Development Bank put the
    “The current extremely loose      intervened in October to cool        prospective risk that a credit-      figure at 3.5 percent.



Chinese banking regulator warns of bad loans
The China Banking Regulatory          bad loans from these borrowers       banks and regulators in 2010         the Basel II global banking
Commission warned last                may take time to emerge              will be balancing continued          regulatory standard. The
month that mainland lenders           because of loan roll-overs and       brisk growth amid accelerating       regulator has also asked large
will face bad loan problems           long project durations.              capital burn.”                       banks to increase their capital
following excessive lending to            Wang’s warning echoed                A Bank of International          adequacy ratio to 11 percent.
specific sectors.                     similar concerns voiced by           Settlements report last month            Meanwhile, a Chinese
    Wang Huaqing, disciplinary        the Bank of International            warned that a tightening of credit   official has blamed foreign
commissioner of the CBRC,             Settlements and Fitch                may lead to unfinished projects      investment banks for
said the concentration of loans       ratings agency.                      and an increase in bad loans.        “fraudulent practices” that cost
to big clients in infrastructure,         “Credit growth of this               Despite such concerns,           68 state-owned companies
real estate, energy and trans-        magnitude places a strain            Wang said capital adequacy           11.4 billion yuan in derivative
portation poses “long-time”           on banks’ internal risk              ratio of Chinese banks stood         contract losses in 2008.
risks to mainland banks,              management and raises                at 11.4 percent at the end of            Li Wei, vice chairman
according to Bloomberg.               concerns about a future              the third quarter last year,         of the State-owned Assets
    Mainland banks lent an            deterioration in loan quality,”      well above the international         Supervision and Administration
estimated 9.6 trillion yuan           Charlene Chu, senior director        standard of 8 percent.               Commission, pointed the finger
last year. Two-thirds of loans        and head of China bank ratings           The CBRC said banks would        at Goldman Sachs, Merrill
granted by the 19 largest banks       at Fitch Ratings (Beijing)           have to start disclosing their       Lynch, Citigroup and Morgan
in the first 10 months of last year   Ltd., told a banking seminar         capital base quarterly from          Stanley in an essay publised last
went to clients with credit lines     in Beijing. “The foremost            January next year, as part           month in Study Times, an official
of at least 50 million yuan. Any      challenges facing Chinese            of efforts to conform with           Communist Party newspaper.

                                                                                                                                  January 2010   11
NEWS
grEatEr chiNa




Hong Kong ranks No. 1 in IPOs
More companies lining up to tap liquid market
Hong Kong led the world in                                            2009. The company is already       strategic growth markets.
terms of new share listings last
                                   2009 IPO listings                  listed in Shanghai and is partly      Several companies are
year, raising US$17.7 billion as                                      owned by U.S. private equity       rushing to join the queue.
of November, but Shanghai was                                         firm, The Carlyle Group.           Hong Kong Exchanges and
trailing close behind, according                                          Another big mainland           Clearing Ltd. said it received
to Ernst & Young and the World                                        company listing was China          eight new listing applications in
Federation of Exchanges.                                              Longyuan Power Group Corp.,        November alone, while ChiNext,
    Mega listings such as that                                        which raised HK$17.5 billion in    Shenzhen’s new second board,
of Metallurgical Corp. of China                                       Hong Kong last month. The top      approved eight companies for its
Ltd. and China Minsheng                                               Chinese wind energy company,       second batch of listings.
Banking Corp. boosted Hong                                            which has a quarter of the            Among the companies
Kong’s initial public offering                                        mainland’s wind power market,      wishing to list in Hong Kong
market last year, as Chinese                                          attracted big investors such as    this year are UC RUSAL, the
companies stayed closer to                                            China Investment Corp., the        world’s biggest aluminium
home after markets like New           Hong Kong – US$17.7 billion     sovereign wealth fund, which       company. If the IPO application
                                      New York – US$16.9 billion
York and London tanked                                                bought US$400 million worth        were approved, RUSAL would
                                      Shanghai – US$16.1 billion
following the financial crisis.                                       of shares, and U.S. private        become the first Russian
     Despite recent lacklustre     IPO for 2009. Shanghai raised      investor Wilbur Ross, who          company to list in Hong Kong.
debuts, Chinese companies          US$16.1 billion in IPOs as of      invested US$100 million.           In preparation for its share sale,
continue to push ahead with        November, taking third place           “The principal exchanges       the company appointed two
listings in Hong Kong and          after New York.                    in China, India and Brazil and     well-known Hong Kong
Shanghai, taking advantage            In Hong Kong, China Pacific     other emerging markets are         figures to become its inde-
of high liquidity.                 Insurance (Group) Co., the         now mature enough to source        pendent non-executive
    Last month in Shanghai,        country’s third largest insurer,   funding for the very largest       directors: Elsie Leung, former
China Shipbuilding Industry        raised HK$24.1 billion last        companies seeking listings,”       justice secretary, and Barry
Co. raised 14.7 billion yuan       month in Hong Kong’s second-       said Gregory K. Ericksen,          Cheung, chairman of the Hong
in the country’s third largest     largest public share sale in       E&Y’s global vice chair of         Kong Mercantile Exchange.


China ranks high on green energy investment
China is the world’s No. 2         energy needs from renewable        order for them to qualify for          At the UN Climate Change
location for renewable energy      sources in 10 years.               carbon credits, an allegation      Conference in Copenhagen
investments after the United           But Chinese wind power         that China denied. The mech-       last month, China led develop-
States, according to an Ernst &    projects have hit a snag after     anism was formed as part of        ing nations in lobbying
Young ranking.                     the United Nations agency          the 1997 Kyoto Protocol to         industrialized nations for
    China, which ranked fourth     in charge of managing the          encourage private investments      concessions on carbon
in 2008, has been “steadily        carbon trading system, Clean       in emissions reduction projects    emissions reduction and
improving its position as          Development Mechanism,             in developing countries –          funding for climate change-
one of the powerhouses of          suspended approvals for such       China has been the biggest         related initiatives. China
the renewable industry as it       projects because of alleged        beneficiary of the CDM so far,     pledged to cut 40 to 45 percent
increases its commitments to       manipulation of state subsidies.   earning 153 million carbon         of its carbon intensity – the
reduce emissions,” the firm            UN officials said last month   credits worth, more than a         amount of carbon dioxide
said. China aims to generate       they suspect China of reducing     billion U.S. dollars, according    emitted for each unit of GDP –
at least 15 percent of its total   subsidies for those projects in    to the Financial Times.            by 2020, from its levels in 2005.

12   January 2010
                                                                                                                       PluS
                                                                                                                     aA PLUS




                                                                                  Ex-Grant Thornton partner
                                                                                  faces third lawsuit
                                                                                  China Construction Bank (Asia) has
                                                                                  sued former Grant Thornton partner
                                                                                  Gabriel Ricardo Dias-Azedo, seeking
                                                                                  HK$3.48 million for a loan made to the

Chinese M&A rebounds
                                                                                  senior accountant in July, the South China
                                                                                  Morning Post reported. The case brings
                                                                                  to three the number of writs against
Foreign strategic buyers are expected to return                                   Dias-Azedo with a total claim of more
                                                                                  than US$14 million. The bank said it lent
Domestic mergers and acquisitions in China will jump more than 20 percent         HK$3.3 million to Dias-Azedo to be repaid
this year, according to a PricewaterhouseCoopers report released last month.      monthly over three years, but he allegedly
    Foreign strategic buyers – who were largely absent last year because of the   failed to make any payments. Two clients
global crisis – are expected to return with larger deals by the second quarter,   have accused Dias-Azedo of fraud and
the report said.                                                                  demanded the return of US$13.65 million
    Domestic and inbound M&A deals in China, including Hong Kong and              in assets. Grant Thornton International,
Macau, in the second half of last year returned to near 2008 levels, signalling   which was also held liable in the former
optimism among dealmakers in China’s domestic economy.                            partner’s actions in two writs, said
    PwC estimated that the number of deals in 2009 reached 3,200, just            Dias-Azedo appeared to have used the
15 percent shy of the 2008 figure. Close to 90 percent of the deals last year     firm’s name in an “unauthorized and
were intra-China or from Hong Kong to the mainland, the report said.              inappropriate” manner and that it will
    “First-half 2009 saw deal volumes fall by a quarter, but the number           defend itself against all charges.
of transactions in the second half of 2009 reveals that this has quickly
recovered,” said David Brown, a PwC China transactions partner based in           Mainland pension fund to
Hong Kong.                                                                        invest more overseas
    Deal activity for domestic financial buyers last year was expected to reach   China’s National Social Security Fund
a record high of 171, up from 147 in 2008, as mainland investors like China       said it would raise its cap on overseas
Investment Corp., which has mainly been acquiring overseas, turned their          investments to 20 percent from 7 percent,
attention to the local market. CIC bought minority stakes in Noble Group Ltd.     China Securities Journal reported. The
and GCL-Poly Energy Holdings Ltd. for US$1.6 billion.                             move comes as the government continues
    Deal volume involving foreign buyers, however, dropped 40 percent             to encourage outbound investment to help
last year compared to 2008, declining for a second consecutive year as they       dampen pressure on a yuan appreciation.
continued to shy away from expansions. Only 25 foreign financial buyer            The fund has some US$80 billion in assets.
transactions were announced last year, the lowest since 2006.
                                                                                  HKEx allows BVI
                                                                                  companies to list
Four jailed in Hong Kong’s biggest                                                Hong Kong’s stock exchange has allowed
market-rigging case                                                               companies registered in the British Virgin
                                                                                  Islands to apply for listing. BVI-registered
In what regulators described as Hong Kong’s “largest market manipulation          companies have lobbied for access, but
case,” four people have been jailed after being convicted of rigging the          concerns over banking secrecy in the tax
market by trading among themselves HK$190 million worth of shares of              haven have been a stumbling block in
Asia Standard Hotel Group Ltd.                                                    allowing companies incorporated there to
    Chan Chin-yuen was sentenced to 30 months in jail for financing the           list in Hong Kong, according to SCMP.
transactions, while his sister-in-law Elaine Au, brother Chan Chin-tat and
friend Chui Siu-fung were imprisoned for 26 months. The four of them were         China auto sales leap
ordered to each pay the Securities and Futures Commission HK$288,400 in           China’s automotive sales jumped
investigation costs.                                                              42.39 percent in the first 11 months of
    During the hearing, the court heard that they conducted more than half        2009 to 12.23 million, Xinhua reported,
of the hotel group’s total share trading volume between 1 August and 5            overtaking the U.S. as the world’s biggest
September 2005, causing its share price to jump 78 percent and its market         auto market. Auto sales received a boost
capitalization to increase by HK$4 billion during the period.                     following a 50 percent cut in purchase tax
    Mark Steward, the SFC’s executive director of enforcement, said that the      on passenger cars. China’s auto production
sentences sent the “clearest possible deterrent message to those who wrongly      also rose 41.59 percent to top 12.27 million
think they can get away with defrauding the market and the investing public.”     units in the first 11 months last year.

                                                                                                               January 2010   13