Hong Kong Still A Vital Pawn in the Asian Law Scene

Despite initial fears to the contrary, the economic emergence of China since 1997 – the year Great Britain ceded sovereignty of Hong Kong back to China – has not diminished Hong Kong’s importance as a hub for Asian capital markets and M&A transactions.

In fact, since 1997, Hong Kong has emerged as a vital pawn in the global law firm chess game that seems to be changing the Australian and Asian legal market.

In 2012, no law firm could sell itself as being “global” without a Hong Kong office that has a top-shelf capital markets and banking and finance practice.

“A strong and robust Hong Kong office is very important to our status as a leading international firm, albeit one that started in the UK,” says Allen & Overy partner Gary McLean, the Hong Kong-based head of the firm’s Asia-Pacific corporate department.

A&O has been in Hong Kong for over 20 years, and now has 26 partners and 113 lawyers there; making it the firm’s largest Asian office, just ahead of Sydney.

However, its Hong Kong strategy is vastly different to its highly targeted approach as a new entrant in Australia, where the focus of A&O has been to target high-end M&A, banking and finance and energy and resources work.

“Our Hong Kong office is slightly more broadly based than that,” says McLean. “The Australian operation has been set up to be quite definitively more selective.

In Hong Kong, you have corporates who want you to do a wide range of commercial deals, and that is what you end up doing.”

In addition to having a broad-based corporate practice, A&O targets the lucrative capital markets and finance work that lured the large UK and American firms to Hong Kong in the first place.

“When you look at finance-related matters, many of the most significant players in the market, such as the investment banks, are based here or in Singapore,” says Andrew Harrow, the head of A&O’s Asia-Pacific capital markets group.

“Most of the global law firms base their regional capital markets teams in Hong Kong, but we often do a lot of work in India on both the debt capital markets and equity capital markets side, and also service the Philippines and Korea from here as well.”

Firms like A&O and its magic circle rivals in Hong Kong are also looking abroad forwork in addition to treating their Hong Kong offices as regional hubs.

Economic forecasts in February painted a damp picture for the Hong Kong economy in 2012. UBS predicts that Hong Kong’s economy would only expand by around 1.6 per cent this year, on the back of a slumping property market.

Throw global economic and market volatility into the mix, and the prospect of large scale initial public offerings (IPOs) the size of the record breaking $US22.1 billion Agricultural Bank of China IPO in August 2010 – on which A&O acted as the US counsel to the international underwriters – coming to the market in the present environment are slim, unless political imperatives push them through.

“The market is still pretty nervous, and I don’t think there would be many companies that would push through a large IPO at the moment, unless there was a policy reason for doing so,” says Harrow.

“That is always the big over-rider: even when the market appears to be shut, there will always be certain issuers that will come to the market.

“Typically, the Chinese will say that, in a sense; ‘We don’t really care about pricing.

This is going to happen’, and they will get support from the Chinese investment banks to underwrite it.”

Source: Lawyers Weekly