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Asia Outlook 2017

Navigating New Paths to Growth

Top Trends to Follow

This year has been marked by continuing uncertainty and shifts in market sentiment, creating complex challenges as well as some significant opportunities. As we head into 2017, our partners in Asia share their perspectives on the major trends and developments likely to impact our clients’ businesses across the region in the year ahead.

Hong Kong Capital Markets

Steven Winegar

Steven Winegar
Partner, Corporate Department
Hong Kong

Looking ahead to 2017, we predict that the Hong Kong market will continue to benefit from the closer coordination and cooperation between the Securities and Futures Commission (SFC) and the Hong Kong Stock Exchange (HKSE). The HKSE has consistently pursued a strategy of being the first choice for Mainland Chinese companies seeking to raise capital internationally.

Key to this strategy will be giving international investors confidence in the integrity of the regulatory environment. The SFC already has the power to object to listings, so steps to integrate the SFC more deeply into the IPO vetting process should help to give it a more informed basis for exercising this power.

Zhaoyu Ren

Zhaoyu Ren
Partner, Corporate Department
Hong Kong

I expect 2017 will be a year full of opportunities, as well as a few challenges, for the Hong Kong capital markets. While the re-opening of the A-shares market may attract some companies considering an IPO back to mainland China, the launch of the Shenzhen-Hong Kong Stock Connect will provide more liquidity and should have a positive impact on the valuations of Hong Kong-listed companies, making the Exchange here more attractive than before.

Financial institutions, including city commercial banks, trust companies, and insurance companies, are still eager for capital and we expect their appetite to continue to grow in the year ahead. From an industry perspective, I expect to see companies in the healthcare, education, and consumer sectors continue to be hot spots.

China Outbound Real Estate Investment

Vivian Lam

David Blumenfeld
Partner, Real Estate Department
Hong Kong

2016 has been another record-breaking year for Chinese outbound real estate M&A, in terms of both value and volume, with a significant number of large landmark deals. Despite the uncertainty caused by the U.S. election and the more restrictive Chinese rules on capital outflows, our Chinese clients still see the U.S. as a preferred outbound investment location because of its perceived stability and the strength of the U.S. economy. We expect this outlook to continue in the near to medium term.

 

Nan Li

Paul Guan
Partner, Real Estate Department
Hong Kong

In the past year, the Chinese government accelerated the liberalization of regulatory barriers to foreign investment, including foreign investment in domestic real estate. We believe regulatory liberalization with respect to inbound investment will continue in 2017, as long as the government does not face significant market or political pressure to curtail reform.

 

China Outbound M&A and Investment

Vivian Lam

Vivian Lam
Partner, Corporate Department
Hong Kong

2016 has been typified by Chinese investors and businesses grappling with the challenges posed by a slowing domestic economy, market volatility, and the devaluation of the yuan. Additional hurdles have also been raised thanks to some unprecedented regulatory interventions. These factors have driven Chinese enterprises to accelerate their investments abroad to diversify risks. In light of today’s international low-growth environment, we expect competition for quality investments to further intensify in 2017.

 

Nan Li

Nan Li
Partner, Corporate Department
Hong Kong

2016 was a record year for both outbound investments made by PRC companies and IPOs on the HKSE. Due to the recent depreciation of the RMB and the tightening of foreign currency controls in China, there is growing uncertainty around whether outbound M&A momentum will continue in 2017. On a more positive note, we witnessed a warming of the bond market and a pick-up of private equity investment into Chinese companies in Q4, which is expected to continue into 2017.

Although global capital markets are likely to be relatively turbulent in 2017, the HKSE remains the preferred destination for PRC companies going public and many companies stand to benefit from the consumption upgrade in China.

China Litigation

Zhaoyu Ren

Haiyan Tang
Partner, Litigation Department
Shanghai

2016 has been a notable year for corporate enforcement actions, with more launched than in any prior year in Foreign Corrupt Practices Act (FCPA) history. Looking ahead, companies should expect this surge of enforcement actions to continue well into 2017.

Comments from FCPA unit chief Kara Brockmeyer suggest that the healthcare and pharmaceutical industries in particular may continue to find themselves in the spotlight.

Korea Capital Markets

Dong Chul Kim

Dong Chul Kim
Partner, Corporate Department
Seoul

In 2016, we saw a steady flow of equity and debt offerings coming out of Korea. Although Hotel Lotte’s IPO was delayed, the market rebounded in the second half driven by a couple of large listings.

While the Korean capital markets face significant uncertainties as we start the new year, we still expect to see a steady flow of IPOs and other equity offerings, led by start-ups hungry for growth, as well as affiliates of conglomerates seeking a more transparent corporate governance structure.

Korea M&A and Investment

Daniel Kim

Daniel Kim
Partner, Corporate Department
Seoul

Following Samsung Electronics’ acquisition of Harman, we expect other Korean conglomerates and corporations to become more emboldened in their pursuit of overseas acquisitions in 2017. Many Korean conglomerates are still holding a lot of cash, but they are also more sensitive to global macroeconomic uncertainties and will therefore proceed with caution. They will not overbid for assets and this may result in a limited number of international deals being consummated.

Domestically, because of uncertainties surrounding the current political situation in Korea, as well as the presidential election in 2017, we may see less M&A activity especially in the “big deals” category. However, numerous domestic and international private equity firms have lots of portfolio companies that they plan to exit from, which could drive reasonable domestic activity.

Korea Litigation

Jong Han Kim

Jong Han Kim
Partner, Litigation
and Corporate Departments
Seoul

Korea has recently adopted a stringent anti-corruption law that restricts and prohibits the private sector from engaging in certain conduct with not only the regulatory agencies, but also some financial institutions, as well as the media. For international clients that are looking to make investments and engage in other commercial transactions in Korea next year, this new law is likely to pose significant challenges that will need to be properly considered and understood.

Japan Intellectual Property

Hiro Hagiwara

Hiroyuki Hagiwara
Partner, Litigation Department
Tokyo

Many technology clients are talking about how to extract value from the large IP portfolios that Japanese tech companies have built up over the years. There is significant interest among tech companies, the government, and investors in seeing successful monetization of these tech assets. This is one trend I will be following closely as we head into 2017.


To discuss these trends and how we can help you navigate new paths to growth, please contact one of the partners listed here or any member of our Asia Team