HKIA isn't what it used to be in the old days.
No crowds. Only a handful of shops open. Lounges are dead. HKIA used to a humdrum of travelers, both business and leisure. I used to look forward to the lounges (the Cathay ones especially) as they usually served free flow warm food, drinks, snacks, etc. The Pier at HKIA was a favourite go-to for its refreshing hot showers and Aesop scented shampoo and body wash. After that, I would settle into a bowl of hot wanton noodles from the noodle bar, extra serving of chilli, paired with either champagne or a can of Asahi. At times I would have someone from the dessert counter give me a scoop of vanilla ice-cream, then head over to the coffee bar and ask for a double shot espresso and pour it over to make an affogato. Then I would either get to work on my laptop at the bar area or just get some shut-eye on the couch. I could spend an entire day in transit at HKIA - and people would think I am crazy. Occasionally, I would even travel out of the airport into the city to meet with friends. Macau was also accessible straight from HKIA via a one-hour or so ferry ride. This was the Hong Kong that I was familiar with, at least from the perspective of an airport commuter.
So you can understand why I was slightly sad and somewhat disappointed when I saw the nearly empty aisles along the departure gates at HK airport. Aside from the crowd, nothing much about the facade has changed except for some additional seating areas with charging points.
The city struggles having to deal with conforming to mainland policies (which is totally understandable), but at the same time, facing pressure to open up like the rest of the world, especially Singapore, its closest competitor. It is not an easy task. Every month, business and investor confidence in the city is diminishing. Whether it relates to the perceived lack of freedom, uncertainty around propaganda from Beijing or the draw of spacious living, companies can always find a reason to jettison Hong Kong for Singapore.
It is odd for me, speaking as a Singaporean but I actually am rooting for Hong Kong, in a healthy competitive way.
Hong Kong is probably the last frontier for China's position as an international gateway. Despite its current sovereign ownership, it's colonial legacy and history is what gives Hong Kong its uniqueness - the ability to harness the vast potential of the Chinese market and combine this with the best (or widely accepted) practices of the West. And if you think about it, this is actually very similar to Singapore.
Singapore surely has Southeast Asia as its playground, but Southeast Asia as a market dims in size significantly to China. Its diversity of language and cultures, unlike China, makes it more difficult to penetrate and navigate the ground. As big as China is, its socialist-driven economy incorporating standardization and uniformity is probably one of its biggest selling points. For example, you could hire a Chinese-speaking person, parachute him/her anywhere in China, and can be assured that he/she will be able to navigate the ground with relative ease.
But you can't do the same with Southeast Asia. To master the Indonesian market you need a native from Indonesia who understands not only the language but the customs. Likewise for Vietnam, the Philippines and Thailand. The ASEAN bloc as a whole works well together because we collectively thrive on regional common interests. But to succeed in each market independently, we need to dedicate resources specific to each country. Besides, to win in Southeast Asia, you can't afford to focus just on one country. Even the biggest and most successful startups in the region have expanded their footprint beyond their home country. After Indonesia, GoTo has set its sights on Singapore, Malaysia and the Philippines. Despite making a name of itself in Malaysia, Grab has expanded into other key markets such as Singapore, Indonesia and Vietnam. Yet, even as successful as these startups go, Southeast Asia as a region still falls behind significantly in size to China. Over one billion people in China over the last few decades have been reading more, spending more, investing more, and consuming more. And in recent years, the flurry of venture capital and private equity money into Southeast Asia, lifting overall valuations, has just made it increasingly difficult to find a rich exit in a crowded market.
Everyone is waiting eagerly for COVID restrictions in China to open up and for trade flows to resume. Guess which city will be the biggest beneficiary of that? It is perhaps simply just all a matter of time.
Make Hong Kong great again.
In 2017, I flew to Riyadh for the first time ever to attend the Future Investment Initiative (FII) conference. This was Saudi Arabia’s largest and first ever nation-wide event orchestrated to bring in the largest and wealthiest investors, businessmen and celebrities from all over the world. Obviously a large budget had been set aside to fund these events, in exchange for sovereign publicity or to bring in foreign investment. Held at the Four Seasons, the whole thing was so high profile that it was dubbed “Davos in the desert” by the media.
Many governments have their own versions of the FII - the APEC summit, Boao Forum, Saint Petersburg as well as other relatively smaller but similarly symbolic events hosted by relatively high profile media and organizations including the Forbes, Fortune, etc.
In addition to rubbing shoulders with the who's who in the upper echelons of the business world., the people who travelled to these places often associate strategic importance with the cities that hosted these MICE events.
Hong Kong was always known to be the top MICE destination for such events. Accessibility was one of the biggest draws. No one needs to plan ahead to be in Hong Kong. There are basically at least a hundred flights in and out from the city every day. The 20-minute commute from the airport to the city centre means that one can fly in the morning and get out by night. Besides, there was always something to do in town: Cultural festivals, concerts, business conferences, food and the shopping.
And there would always be investors to meet and friends to catch up with. All you have to do is book your tickets and go. Almost every company with a meaningful global presence in Asia has an outpost in Hong Kong. At one point of time the city was even leading the charge in convening the "most brilliant minds in international tech" via the RISE conference - a must-go for any technology company with a serious interest in Asia.
But there is less reason to get into Hong Kong today.
Aside from the fact that many companies and conferences have shifted away, a string of covid testing procedures awaits upon arrival at the airport. Travelling into Hong Kong today has become a meticulously curated trip.
Despite the recent inaugural policy address by the new chief executive in Hong Kong to reclaim the city’s historic position as a premier financial center and to step up talent acquisition and retention, people seemed to have somewhat lost confidence in what the future holds for the city.
To stem the further outflow of companies and talent, the government had also in recent months very publicly unveiled a high-level banking summit to host the titans of finance back in its city center. Yet inbound quarantine measures and restrictive health monitoring continue to weigh on travel.
Unlike the FII in Riyadh, never in my wildest imagination, did I expect a city like Hong Kong to have to host a large summit in order to convince high profile bankers, businessmen and investors to come to its shores.
If you wanted to raise capital in Asia, Hong Kong was definitely one of the cities you had to stop by. No questions asked. During the "peak season" of investor roadshows and conferences, it was even common to bump into some of the bigwigs when you were in town (I remembered sharing the same lift with David Rubenstein once in HK at a conference).
The reality that Hong Kong now has to go out at length to advertise a high profile banker summit reveals how much its economic environment has deteriorated over the last few years.
Aside from the exodus of companies and talent, the debt and equities market has basically also dried up.
Companies that wanted the largest and most jumbo offerings almost always came to the HKEx because of the size, depth of liquidity and diverse pools of capital. People go to Hong Kong for the riches - and it was not uncommon to find multi-bagger companies listed on the Hong Kong Exchange as compared to Singapore, which in my view, the latter is more suited for those who seek stable returns and the preservation of wealth.
In order to justify and maintain its leading role as an IPO destination for Asia, the Hong Kong exchange had also initiated waiving revenue requirement for tech IPOs in an effort to revive the IPO market.
Singapore is quite the classic example of how efforts in positioning itself as a listing hub has proved relatively futile. Its tie-up with NASDAQ and Tel Aviv has been questionable - none of which has produced any signficant tangible results. Even, the newly launched SPAC framework, which was probably meant to be an avenue for VCs and early tech investors to cash out, has yet to see outstanding results with only three listings to date. Part of this was probably also due to bad market timing.
Hong Kong has enjoyed much success in priding itself as the go-to Asia Pacific regional hub for business and equities market over Singapore largely attributed to China. It is undeniable that China played a part in creating the huge ecosystem of listed companies. The sheer size of the market breeds liquidity, which drives more brokerage and trading activity, more research coverage, more investor awareness, drawing in more capital for companies. Globalization (i.e. China opening up its doors) also played a big role in that process.
As such, Hong Kong didn't really need to sell itself as a prime destination or lower its standards in order to attract the influx of capital and large companies. Maybe not until recently.
But once we start to compromise on quality and start doing things like waiving revenue requirements for tech IPOs, things can start to get dangerous. And if not careful, this shift could end up being permanent and structural.
Before 2020, I had been able to plan and book overseas trips up to Hong Kong, Shanghai, or virtually anywhere in the world within 24 hours to a week’s notice. Things are probably going to be slightly different now.
A lot of people are saying that travelers and flights will come back when a vaccine is found. After reading what’s going on in the rest of the world and experiencing first-hand the situation at home, I think this is going to be challenging.
Pent up travel demand can only go so far in driving the economic rebound. Fundamentally, both business and leisure travels are probably going to be less “frivolous”. What this means is that less people are going to be able to say:
“Let’s book a ticket to city XXX tomorrow”
“Let’s do a day trip to XXX”.
Cross-border traveling is going to be subject to mandatory immigration health checks, both in the departing and destination cities. And the lead time to make any travel plans could easily be extended by up to 48 hours at least. This creates a lot of friction for any travel planning and also provides a convenient excuse for unwilling jet setters who might now prefer to stay put.
No more spontaneous trips. Going forward, there's going to be a group of people who will think twice before making impulsive or short term trips to anywhere in the world.