Lutfey Siddiqi

Between a rock and a hard place: HKEX's balancing act Hong Kong's capital markets remain an attractive place for PRC companies to raise funds from international investors, including through IPOs. Recent indicators and client requests suggest that after a somewhat slower period, interest in and demand for HK IPOs are picking up. Underwriters and potential issuers will likely remain cautious until after the US elections. However, as the US-China geo-political and geo-economic relationships are expected to remain tenuous, PRC companies and investors are exploring options beyond western capital. The HK IPO process can thus serve as an important indicator of how the financial sector and other market participants address the existing and future US-China conflict of laws, particularly around international sanctions and PRC countermeasures. Despite being stuck between a rock and a hard place, the HKEX has been able to strike a creative – albeit some might say, timid – balance between international banks' commitment to sanctions compliance and domestic rules. 1. Sanctions opinion This balancing act relies on the requirement for potential issuers to provide a sanctions memo from a qualified counsel. We have supported a number of recent successful IPOs and pending processes. We can therefore attest that HKEX takes this sanctions clearance very carefully – often through a number of detailed follow up queries and clarifications – before the disclosure terms are finalized. A legal opinion must address whether business activities within the track record period (3 years): (i) are subject to or may have violated any sanctions and export controls laws in applicable jurisdictions; and (ii) will result in any material sanctions risks to itself or other stock exchanges. Dealings in high-risk countries like Iran and Russia should therefore be carefully reviewed and sanctions risks should be efficiently mitigated. 2. Sanctions compliance The legal opinion is a "live" document and delays in listing will require the analysis to capture an updated track record period. This requires an applicant to continuously comply with ever-changing sanctions regimes. Indeed, the HKEX recommends all applicants monitor their business for exposure to sanctions risks during and after their listings. While international sanctions compliance might not always be a top priority, any company with HK IPO aspirations would be well-advised to enhance its sanctions compliance early to save legal fees and IPO delays. 3. Collaboration with regulators Listing applicants should also be ready to answer questions from the regulator and be flexible when circumstances change – eg SenseTime, a facial recognition developer, removed US investors from its IPO after being added to the CMIC List. Our sanctions and our IPO teams are happy to address any questions – Frank Bi, Li Jiang, Tom Cummins, Dr. Dr. Claus Zimmermann, Vicki Tang, Kenneth Lee

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Singapore asset manager Fullerton Fund Management with $40 billion AUM & United Nations Development Programme have partner to create a sustainability management framework to guide private equity climate investing in Asia, with the framework providing private equity firms a roadmap to accelerate net zero goals. Read - https://lnkd.in/gsjxQrfP follow Caproasia | Driving the future of Asia Singapore asset manager Fullerton Fund Management with $40 billion AUM (Assets under Management) & United Nations Development Programme have partner to create a sustainability management framework to guide private equity climate investing in Asia, with the framework providing private equity firms a roadmap to accelerate net zero goals. Huck Khim Tan, Deputy Chief Investment Officer and Head of Alternatives at Fullerton Fund Management: “As an investor of private capital in Asia, we recognise that sustainability issues have considerable implications for a company’s investment value, particularly for private equity, which has a long investment horizon. With the launch of this Sustainability Management Framework with support from the UNDP, we are committed to integrating sustainability considerations in our private equity climate investments. More importantly, we hope to share this framework and insights from real-world case studies with our peers, to enable them to evaluate the relevant sustainability aspects required to optimise decarbonisation in the region.” Haoliang Xu, UN Under Secretary General and Associate Administrator of the United Nations Development Programme: “The private sector has a significant role to play in accelerating Asia’s decarbonisation, including in collaboration with and alongside efforts from actors in the public and multilateral domains. Recognising this, we are delighted to collaborate with Fullerton Fund Management to develop this Sustainability Management Framework, leveraging the UNDP’s SDG Impact Standards for private equity funds. This framework is useful for climate investors who are looking to align their internal practices and decision-making to achieve their decarbonisation goals.” Fullerton Fund Management, United Nations Development Programme (UNDP)

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Perhaps encouraged by the slow but apparent move of some #Japanese companies to improve #shareholdervalue by divesting from some of it cross-shareholdings (https://lnkd.in/eX3Q2G_5), KKR is setting its sights on #Japan as a pivotal market for its ambitious goal to double its #aum in the next five years. Although the global investment firm has identified the Asia-Pacific region in general, which has contributed to 39% of its $47 billion investments since 2005, as key to this strategy, it’s Japan that stands out for KKR due to opportunities to buy undervalued but quality businesses at bargain prices. With successful investments like Kokusai Electric and Koki Holdings (former Hitachi Koki), KKR sees potential due to Japan's low #valuations and massive room for operational improvements - divesting from cross-shareholdings, amongst other possibilities - in its conglomerates. Moreover, KKR's interest in Japan is buoyed by a lack of competition for deals, with #alternativeassets comprising a mere 9% of the market, compared to 26% in North America and 16% in Europe. The firm is also capitalising on trends in Japan's nearly $3 trillion #insurance market, the world's second largest. KKR points to factors such as an aging population and sustained low interest rates, driving demand for retirement products, which is evident from the significant sales of annuities in Japan compared to the U.S. #kkr #japanesecompanies #japanbusiness #apac #asia

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During the session "Accessing Financing for Sustainability & ESG Initiatives", Sang Lye See from DBS Bank, Di Mantell from Celsus, Nikki L. from Security Bank Corporation, Matthew Kasdin from Impact Investment Exchange (IIX), Helena Fung from LSEG (London Stock Exchange Group), and Marla Garin-Alvarez from BDO Unibank navigated the complexities of sustainable lending revealing both challenges and long-term opportunities: - Borrowers, especially in developing nations, often lack the capacity to meet ESG standards, making green financing more complicated. - Detailed frameworks and collaboration with multiple banks are essential for large-scale projects, with profitability often taking decades. - Gaps in data standardization and inconsistent regulations continue to hinder progress toward net zero. - However, as companies embrace green financing, long-term gains emerge, and those resisting will face higher borrowing risks. #ESG #NetZero #SustainableFuture #Decarbonization #GreenFinance #SustainableDevelopmentGoals #SustainabilityLeadership

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During the session "Accessing Financing for Sustainability & ESG Initiatives", Sang Lye See from DBS Bank, Di Mantell from Celsus, Nikki L. from Security Bank Corporation, Matthew Kasdin from Impact Investment Exchange (IIX), Helena Fung from LSEG (London Stock Exchange Group), and Marla Garin-Alvarez from BDO Unibank navigated the complexities of sustainable lending revealing both challenges and long-term opportunities: - Borrowers, especially in developing nations, often lack the capacity to meet ESG standards, making green financing more complicated. - Detailed frameworks and collaboration with multiple banks are essential for large-scale projects, with profitability often taking decades. - Gaps in data standardization and inconsistent regulations continue to hinder progress toward net zero. - However, as companies embrace green financing, long-term gains emerge, and those resisting will face higher borrowing risks. #ESG #NetZero #SustainableFuture #Decarbonization #GreenFinance #SustainableDevelopmentGoals #SustainabilityLeadership

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Saw this quote today: “Addressing climate risk requires a decarbonisation strategy that goes beyond merely considering emissions within the portfolio in isolation - it is crucial to also address the real-world economy’s transition. A thoughtful climate strategy should be complemented by active engagement and voting activities that support that transition. A pure passive investment approach on climate may prove inadequate and expose portfolios to inherent risks and biases, as shown by our latest research findings.” What a load of total bullshit. We run both index and active strategies. All our Article 9 strategies are index sustainable/impact strategies. Here’s why this assertion is a lie: 1) Engagement and Voting have nothing to do with the investment management approach; they’re about seeing yourself as a company owner AND a shareholder. It’s about stewardship, not whether you’re active or passive. 2) The “Active” in Active Engagement is a farce. The term has been hijacked by the active mutual fund industry. All engagement is active; there are just different degrees of active. What they’re doing is implying that there’s such a thing as passive engagement. Don’t buy it. It’s PURE marketing. 3) Our analysis shows that, on average, it’s active mutual funds that are constructed for portfolio decarbonisation score optimisation (i.e., gaming the system to rank higher on MSCI or Morningstar). Why? Because they can, and the temptation is too high. If I create a so-called “dumb” index, on the other hand, I’ll always be restricted by my index rebalance schedule. 4) Further, our research shows that it’s the exception, not the norm, that mutual fund managers focus beyond “available” ESG metrics to forward-looking impacts in water, soil, ecosystems, and biodiversity. Indeed, Rize ETF found success as a business PRECISELY because clients told us we’re actually “doing the work” and “charging less.” 5) The claim that “a pure passive approach may expose portfolios to inherent risks and biases” is laughable. The exact opposite is true. Our research shows that active mutual fund strategies exhibit the most extreme biases because no two people’s sustainability is the same. Take the food transition as an example. One well-known active manager is currently pushing a degrowth agenda through his portfolio, believing – we believe falsely – that smallholder farms and artisanal brands are the path to food utopia. Meanwhile, another (who shall remain unnamed) has adopted a purely pragmatic ecomodernist approach, balancing sustainability objectives with the practicalities of feeding a global population. For instance, synthetic fertilisers, gene editing, and crop science are critical to food security but may come with negative environmental externalities and ethical considerations. In a climate adaptation scenario, however, we won’t survive without them, and this underscores the trade-off between an environmentalist vs. ecomodernist approach to the food transition.

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𝐓𝐍𝐅𝐃 𝐢𝐧 𝐚 𝐁𝐨𝐱 is a downloadable capacity building tool that supports the adoption and implementation of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations, giving corporates and financial institutions guidance on how they can identify, assess, manage and disclose their #nature-related dependencies, impacts, risks and opportunities. 💡It has five modules covering key aspects of the TNFD’s recommendations, plus a high-level overview aimed specifically at boards. You can download it here: https://lnkd.in/e8JP7jXU #ESG #Sustainability #Biodiversity

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📰 Check out my latest article on Decarbonization Partners Fund I Inaugural Launch. This ambitious initiative, a joint venture between BlackRock and Temasek, successfully raised $1.40 billion, aiming to accelerate the global shift toward a net-zero economy. Discover why the fund is strategically focused on late-stage venture capital and early-stage growth capital. #Decarbonization #Sustainability #netzero #energyinvestments #SustainableInvesting #ESG #ImpactInvesting #GreenTech #VentureCapital

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The FTSE ASEAN 40 Index has indeed traded higher, successfully surging past our initial resistance levels at 11,350 points and 12,000 points and is now trading at 12,251 points — within reach of its all-time high of 12,430 points, set in May 2013. Despite entering overbought territory, we anticipate the index may challenge this key resistance level in the near term. However, we expect some profit-taking activity around these levels, although any downside is likely to be limited, as the long-term bias remains upward. We expect the index to test the key resistance and the all-time high in the near term.

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As AI reshapes finance, which governance challenge do you believe is most critical to address: data privacy, explainability, accountability, or ethical outcomes? Ravi Menon, Ambassador for Climate Action and Senior Adviser to the National Climate Change Secretariat, Singapore outlined these 4 key governance issues in his plenary address at the Point Zero Forum. Playback this session on our Forum App. Register for a digital pass to unlock access: https://hubs.ly/Q02GH3C30

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I look forward to seeing the conclusion to BoJ’s Broad Perspective Review, but if Gov Ueda’s opening remarks are anything to go by, I am not optimistic that the review will dramatically change BoJ operating targets. Perhaps we could celebrate the point highlighted on need to move early & large, a frequent criticism back in the early days of QE, but there is no guarantee that would have changed much. Ueda’s opening remarks couch the assessment within narrow confines of independent & limited monetary policy tools, which is typical of G7 Central Bankers trained to not prescribe policy outside their domain (https://lnkd.in/dwEfd7gJ). The problem is that causes of what Ueda called ’zero inflation trap’, and the solutions required, were multi-disciple policies, that required not only an early & large monetary policy response, but a coordinated one with fiscal, taxation, industrial, & corporate cultural policies. If the Broad Review focuses only on monetary policy decisions - all other things equal - then it will not bring Japan any closer to a macro solution for its subpar growth & productivity story. Integration of Japan (the first emerging market) into the G7, followed by global integration of previously bifurcated Communist countries, a global push for maximalist interdependence, and the subsequent rise of Asian Tigers, followed by China, presented an economic environment that was destined to produce disinflation, regardless of domestic conditions, which were unfortunately . . . bank failures & asset deflation. Without a counterfactual, it is difficult to critique the BoJ’s response throughout this period. If the Broad Review is to successfully reorganise the BoJ’s MO for the next three decades, I hope analysis of the environmental factors receives greater weight. It is not for the BoJ to dictate to policy makers at the MoF, METI or Cabinet Office, but sharing broad analysis of the environmental factors with implied policy offsets can benefit all. What Japan needed throughout the 90s was an aggressive opening of its economy to FDI and import substitutes. The corporate culture, acting in a paternalistic way, argued that Japanese consumers had either stubborn or delicate tastes that would be offended by aggressive import substitution. Japan’s Zaibatsu corporate culture resisted foreign integration via cross-share holdings and any other means necessary. The Government refused to purge the banks and write-off bubble-economy debts for far too long, for fear that high unemployment in Japan would destroy societal harmony. Japan’s economy doesn’t look like any other G7 country for a reason. The BoJ needs realistic operating targets and a sound money approach, which I’m sure the Broad Review will produce, but that will fall short of solving Japan’s fundamental problem: a low potential growth rate. #boj #monetarypolicy #yen https://lnkd.in/dc3gqeik

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This week at #RIJapan2024 Head of Sustainable Investment for Japan, Atsuhito Mori, along with a panel of experts, will discuss the importance and use of social data and the lagging on the ‘S’ and disclosure in Japan under the theme ‘Social disclosure in Japan’. Come and join Stream B-2 to learn more. https://lnkd.in/d3w-TGza #SustainableInvestment #SocialDisclosure #ESG #SustainableGrowth

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Our Deputy CIO and Head of Fixed Income, Angus Hui was on DBS Bank’s “Asia Macro Mid-Year 2024 Outlook: Resiliency Amidst Volatility” panel session. He provided his perspectives on the outlook for the fixed income markets, and insights on how investors in Asia are positioning themselves for income and alpha opportunities ahead. #fixedincome #interestrates #income #opportunities #Asia Taimur Baig Archana Parekh Zhen Li

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Last week - per colleague and former Monetary Authority of Singapore (MAS) regulator Angela Ang and the MAS' Ian Lee - MAS dropped its 2024 risk assessment. I thought the moment presented an opp to compare MAS' latest with the U.S. Department of the Treasury risk assessment when it comes to crypto. 🇸🇬 MAS 2024 Risk Assessment: 🔍 Primary Focus: The interplay between fintech innovation and risk management, particularly in the crypto space. 😟 Key Crypto-Related Risks: ✔️ Digital Banking Integration: Explores the risks associated with incorporating cryptocurrencies into traditional banking systems and potential systemic and financial instability risks that come with it. ✔️ Cross-Border Flows: Highlights challenges in monitoring and regulating cross-border crypto transactions, which can facilitate capital flight, money laundering, and regulatory arbitrage. ✔️ Operational Resilience: Emphasizes the need for financial institutions to maintain operational resilience amid rapid changes in the cryptocurrency market. 🏦 Regulatory Response: ✔️ Balanced Framework: Advocates for a regulatory environment that supports fintech innovation while safeguarding financial stability. ✔️ Proactive Measures: Encourages financial institutions to adopt practices to enhance monitoring, compliance, and risk management capabilities. ✔️ International Collaboration: Stresses global partnerships and cooperation. 🇺🇸 US Treasury 2024 Risk Assessment: 🔍 Primary Focus: Mitigating risks associated with illicit activities and ensuring regulatory compliance within the crypto sector. 😟 Key Crypto-Related Risks: ✔️ Illicit Activities: Focuses on the risk of crypto being used for money laundering, terror financing, ransomware, sanctions evasion and other illicit activities. ✔️ Regulatory Compliance: Emphasizes the importance of ensuring that exchanges and other crypto businesses comply with existing AML/CFT rules. ✔️ Market Volatility: Addresses investor protection and broader financial stability. 🏦 Regulatory Response: ✔️ Strict Compliance: Promotes strict regulatory measures to enforce compliance and mitigate risks. ✔️ Enforcement: Highlights importance of enforcement actions against non-compliant entities to maintain the integrity of the financial system and deter bad actors. ✔️ Interagency Collaboration: Stresses need for interagency and global collaboration. 🇸🇬 🤝 🇺🇸 Key Similarities: ✔️ Cybersecurity: Both emphasize the need to fortify cyber defenses. ✔️ International Collaboration: Both stress the importance of harmonized regulations and information sharing. 🏦 Key Differences: ✔️ Regulatory Approach: 🇺🇸 US: Advocates for a strong focus on regulatory compliance and enforcement. It prioritizes stringent controls and rigorous enforcement. 🇸🇬 MAS: Strives for a balanced approach, fostering innovation within a robust risk management framework and ensuring operational resilience. Cover art? Gotta go with Treasury 💵 Read both RA's in the comments 👇

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EMPOWERING ASEAN As the world faces increasingly concerted, localised challenges independent of geo-political developments, I strongly believe that ASEAN needs to increase its focus on enriching trading activities between member countries, and work to conspicuously increase the value of intra-ASEAN trade. Intra-Asean trade today stands at only 20% of the total trade (by value) of all member countries. The real potential of ASEAN, of course, lies in its population of more than 670 million people, with an economic size of more than USD3 trillion. The fact is, the basic infrastructure required to increase intra-Asean trade already exists: mechanisms such as the CEPT, AFTA and AEC frameworks are up and running, and are fully capable of providing for a unified market and facilitate the required increase in intra-ASEAN trade. What must to be done to realise this potential is to collectively strengthen the infrastructure towards intra-ASEAN trade. This means drawing up long-term plans for ASEAN’s economic development that must, crucially, include parallel industrial development. This is to ensure that ASEAN builds the capacity needed to meet the needs of its population and economy as a whole. Of course, as a trading region ASEAN will always need external trading partners; the ultimate goal here is to reduce ASEAN's external trade composition to more sustainable, balanced levels, and achieve self-sufficiency where it needs to be. Its existing network of roads, ports and railways - while extensive - can still be improved, especially in terms of connectivity between ASEAN's main industrial and cosmopolitan centers, serving as catalyst for more holistic economic development. If this can be achieved then ASEAN’s reliance on external currencies and its related volatilities can be managed more realistically, with the possibility of a currency union in the horizon. The potential benefits of an ASEAN currency union – or at least a basket of regional currencies to start – as a means to facilitate intra-ASEAN trade is clear, particularly in terms of macroeconomic structure and market development, as well as the overall well-being of the ASEAN populace.

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