China ended 2020 with seven consecutive months of export growth, bringing it to a record trade surplus of US$78.18 billion last month. Goldman Sachs, Morgan Stanley, and JPMorgan will delist approximately 500 Hong Kong-listed structured products due to US sanctions. It has been a busy week for fundraising in Asia, with more than US$1.7 billion being raised by three healthcare-focused investment vehicles.
MAJOR HEADLINES IN ASIA
This section tracks major political, economic and business news from the key economies in Asia.
According to data from the Chinese government, China’s goods exports rose 18.1% year-on-year in December, exceeding analysts’ expectations. This is the seventh consecutive month of export growth, as Chinese factories continue to capitalise on coronavirus lockdowns in the West. The country’s trade surplus reached a record of US$78.18 billion last month.
The American Chamber of Commerce in Hong Kong released the findings of its latest “temperature-checking” survey, consistently showing members’ conservative views on the city’s economic recovery in 2021 and their concerns over the city’s weakened competitiveness, COVID-19, the National Security Law, and the rising US-China friction.
Australia blocked a Chinese construction company from buying out a domestic builder involved in several high-profile projects, citing national security concerns, reflecting the fact that tensions between the trading partners remain elevated.
The auto industry is facing a critical shortage of semiconductors as the rising use of chips in other products, such as gaming systems and personal computers, has sucked up supplies. Major automakers including Toyota and Honda are reducing production or shutting down production lines.
EQUITY AND DEBT CAPITAL MARKETS
This section highlights the biggest ECM and DCM developments in China and Hong Kong which are moving markets and grabbing headlines.
China Merchants Securities predicts that defaults by Chinese companies in 2021 will climb by 10-30% compared to 2020, which itself saw a record US$30 billion of defaults, as tighter monetary policy squeezes borrowers.
The world's largest PC vendor Lenovo plans to issue Chinese depositary receipts, representing newly issued ordinary shares, and to list them on the Shanghai Star Market. In the six months ended September 2020, Lenovo saw a 37% YoY increase in net profits.
Goldman Sachs, Morgan Stanley, and JPMorgan will delist some Hong Kong-listed structured products due to US sanctions. Products being pulled include warrants and callable bull/bear contracts on the benchmark Hang Seng Index, the Hang Seng China Enterprises Index, and China Mobile Ltd.
Kuaishou Technology, the main rival to ByteDance, has received approval from the Hong Kong stock exchange for an IPO of about US$5 billion, paving the way for one of the city's biggest listings of the year. The Tencent-backed short video startup plans to begin gauging demand for its IPO as soon as next week.
PE/VC DEAIL ACTIVITY
This section tracks the fundraising, deals and other activities conducted by the PE/VC funds in Asia.
CHINA AND HONG KONG
CICC Capital has reached a second close of US$650 million on its latest healthcare fund - the first in China to receive fast-track approval for its role in addressing COVID-19.
Hong Kong healthcare-focused VC firm ORI Capital has reached a first close of US$112 million on its second fund and exited its largest investment, UK biotech developer Kymab, as part of a US$1.1 billion deal.
Firstred Capital, a Chinese growth and buyout investor in healthcare, consumer products and services, and industrial technology, has closed its debut fund with US$1 billion in commitments.
Chinese dwarfism drug developer Visen Pharmaceuticals has raised a US$150 million Series B round led by Sequoia Capital China.
JAPAN AND KOREA
Tokyo-based private equity firm New Horizon Capital will establish a fund to support the reconstruction of businesses by purchasing nonperforming loans from financial institutions.
Korea’s Hanwha Asset Management has led a US$300 million Series A round for the financial services unit of Singapore-based ride-hailing and services platform Grab.
Touted as one of the largest Series A investments in Indonesia, investment platform Ajaib has raised a US$25 million Series A round led by Horizons Ventures, backed by Hong Kong billionaire Li Ka-shing, and Indonesia’s Alpha JWC Ventures.
Novo Tellus Capital Partners has invested US$17.7 million in Grand Venture Technology, a Singapore-listed provider of testing, assembly, and engineering services for semiconductor manufacturing.
This section highlights the major regulations, policy changes and political developments in China and Hong Kong that have implications for the business environment.
The China Banking and Insurance Regulatory Commission has created a trial framework for grading consumer finance companies as China clamps down on its rapidly growing consumer finance sector, citing systematic risk and customer complaints. The framework would judge companies on factors such as corporate governance, internal controls, capital and risk management, professionalism and technology.
In response to increasing US sanctions, China issued new rules to allow Chinese citizens or companies to sue for compensation in Chinese courts if their interests are damaged by someone else’s compliance with foreign restrictions, which could put global companies in legal jeopardy in China for complying with U.S. sanctions.
Hong Kong Broadband Network has blocked a website that publishes anti-government posts, to comply with the city’s national security law, marking the first censorship of a local website under the law.
ONE FOR THE WEEKEND
Each week we will select one or two articles which have caught our attention – long reads, institutional outlooks, analysis or interesting viewpoints.
Could 2021 be a watershed moment for stakeholder capitalism? As McKinsey observes in its 2021 outlook, COVID-19 has brought the interconnectedness of business and society into sharp relief. “Stakeholder capitalism isn’t about being the most woke or about fending off pesky activists. It’s about building the trust—call it the social capital.”
THE WEEK AHEAD
Next week, Donald Trump is expected to go out in a blaze of glory as he sets fire to the Lincoln bedroom and leaps into the flames. Also, the BoJ is to release its inflation figures for Q1 with many analysts forecasting a return to stagflation.
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