| | ALB Insights February 13, 2018 |
| | ALB Insights #43: A $530 mln heist will not dampen Japan’s love for cryptocurrency
In this week’s ALB Insights, we look at how a recent cryptocurrency hacking in Japan is adding to regulators’ worries. We also chat with Madeline Leong of Watson Farley & Williams about her firm’s expansion plans in Hong Kong and examine Vietnam’s M&A scene, which broke records last year.
Please note that this edition of ALB Insights (#43) and the next two editions (#44 and #45) will be sent for free to all ALB subscribers as part of a Chinese New Year promotion. Should you wish to purchase an annual subscription to this newsletter, please contact Taranjit Kaur at [email protected] or +65 6870 3909 today.
Please also note that ALB Insights will take a break for the week of February 20 because of Chinese New Year. The newsletter will resume on February 27. |
| | | | A $530 mln heist might add to regulators’ headaches, but Japan’s love for cryptocurrency is real
Japan was recently rocked by a virtual currency hacking in which some $530 million of tokens were stolen. While this has only added to the woes of regulators who are struggling to rein in a volatile sector, the pace at which the country is embracing cryptocurrency means that they will have their hands full for the foreseeable future, finds Ranajit Dam, with additional reporting by Reuters.
Virtual heist: In January this year, hackers have stolen roughly 500 million NEM tokens, worth some 58 billion yen ($530 million) from the Japanese cryptocurrency exchange Coincheck. Launched in 2015, NEM stands for New Economy Movement and was the seventh-largest cryptocurrency in the world as of October 2017. The NEM blockchain software is used in a commercial blockchain called Mijin, which is being tested by banks and other companies in Japan and beyond. A Coincheck statement later attributed the hack to the fact that the coins were kept in a “hot” wallet, i.e. a method of storage that is linked to the internet. Much of the world’s digital currency holdings are offline, or in “cold” storage.
Deepening headache: The hacking has only served to deepen the worries of financial regulators, who fear not only the no-holds-barred speculation in cryptocurrencies, but also the risk that this new industry could be used for funding criminal groups. Besides, security remains a concern as this is hardly the first major hack in Japan – in 2014, Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing $470 million worth of bitcoins. The Mt. Gox heist resulted in legislators enacting new policies, which were passed into law in April. These covered the use of cryptocurrencies in retailing, and also the taxing of gains from trading in them.
Playing catch-up: The general feeling is that lawmakers and regulators have taken a passive approach to this fast-changing industry, with operators in part being allowed to come up with their own rules. For example, Coincheck wasn’t licensed to operate, and yet it was offering a wide range of services to customers under a rule that allowed it to keep functioning even as its license was pending with Japan’s Financial Services Authority (FSA). Currently out of the 32 exchanges in Japan, only 16 are registered—some 15 others are allowed to function while pending approval. Following the latest hacking, the FSA began launching on-site checks of several cryptocurrency exchange operators, including Coincheck and also asked them to submit a report on system risk management and storage of cryptocurrencies, according to Reuters.
True love: There is an argument that Japan could take the hardline stance of its immediate neighbours such as China, which has banned trading in virtual currencies and all initial coin offerings, or South Korea, which late last year threatened to shut down cryptocurrency exchanges. The fact that it hasn’t done so, instead choosing to regulate virtual currency, demonstrates how cryptocurrency has become an important part of the Japanese economy. For starters, Japan recognizes bitcoin as legal tender, and companies accept payment – and sometimes pay part of employees’ salaries – in cryptocurrencies. One major reason behind this is the clampdown in China, which boosted Japan’s image as a more welcoming place for cryptocurrency. But additionally, with interest rates really low, investors in the world’s third-largest economy have turned to virtual tender for higher returns. So heist or no heist, Japan’s love for cryptocurrency is here to stay.
Fun fact: Japan has a cryptocurrency girl band, according to Reuters. Named the Virtual Currency Girls, the band comprises eight members who dress in maid costumes and wear wrestling masks adorned with fuzzy pom-pom ears and cryptocurrency symbols. Hinano Shirahama wears the bitcoin mask, while Koharu Kamikawa bears the NEM logo. Songs include “The Moon, Cryptocurrencies and Me.” |
| | WFW in HK: ‘Our growth and expansion rate is progressing quickly’
Watson Farley & Williams recently moved to a bigger office in Hong Kong as the shipping specialist firm looks to grow in the maritime, energy and infrastructure sectors, as well as in the aviation space. John Kang speaks to office head Madeline Leong about the office’s expansion plans, where they’re looking to grow and how big they plan to be in the city.
ALB: How has WFW’s Hong Kong office grown since it was opened in 2012?
Leong: Over the years, we have grown not just in headcount and office size but also in market share and footprint in the region – we are now one of the leading maritime advisors in China with Band One rankings for ship finance. Furthermore, we have an association with LVN & Associates in Vietnam (established in 2015) to support energy projects in the country and the rest of the Southeast Asia region.
The firm recently moved to a new office to support the firm’s growth in Hong Kong. Where in particular is the firm planning on expanding?
The firm’s vision is to expand our line of services for all sectors we service in Hong Kong in order to continue capturing market share of legal work for North and Southeast Asia. In particular, we are actively growing our dispute resolution, corporate and finance practice for maritime, aviation, energy and infrastructure sectors.
Dispute resolution partner Marcus Gordon joined us recently to provide added service to our clients across sectors, while Linh Doan, our of counsel specialising in energy, and corporate partner Rosa Ng joined us in 2015, thereby growing our energy and corporate practices significantly. These practices are core to our firm strategy and we will continue to strengthen our brand for these areas in Asia through our Hong Kong office.
We are also keen to expand our aviation practice through the Hong Kong office as we see the potential of this East-meets-West city as being the future hub for aviation transactions, especially with the direct access to the massive and growing China market.
In addition, we strive to keep developing our established maritime practice. There are plans to expand the Hong Kong office further in this space as it services a large maritime client base located in Hong Kong, China, Taiwan, Korea and Japan.
How big does the firm hope to be by next year?
We have recently recruited more lawyers to join us and, currently, the Hong Kong office has 28 fee-earners, including four partners. Our growth and expansion rate is progressing quickly and we are continuously looking to recruit talent to join our Hong Kong office as the firm’s outlook for Asia is positive. We target to have 40 to 45 fee-earners in the next couple of years.
Our move to Jardine House ensures we have the capacity to accommodate approximately 55 fee-earners, which is about double of our present size. We aim to maintain our existing ratio between the number of fee-earners to partners, which we believe is a key element to successful growth.
On a transactional basis, however, we will adjust our ratio of partners, senior associates and associates according to market and client needs so that we can ensure quality service will be upheld and not compromised. We will reassess our growth against our market share at the end of two years to evaluate whether further growth is warranted and if it makes economic sense.
What is the firm’s strategy in Hong Kong?
The firm’s strategy in Hong Kong is aligned with our global strategy which is core to our business. We are a sector specialist law firm providing the full range of legal services in certain industries broadly encompassed by the five categories: energy, infrastructure, natural resources, real estate and transport (including maritime, aviation, rail and roads). We are not adopting the strategy to be a full-service law firm advising on all sectors which many of our peers in the city are. This positioning allows us to provide outstanding services to our clients due to our possession of specific, in-depth knowledge and expertise required for these highly specialised and regulated sectors. |
| | Divestments drove an M&A boom in Vietnam in 2017, and 2018 should be no different
The year 2017 was a banner one for mergers and acquisitions in Vietnam, fuelled by a wave of divestments in large state-owned companies. And lawyers say that as the trend of liberalisation continues, 2018 will see much of the same, finds Ranajit Dam.
Vietnam last year cemented its reputation as one of Asia’s most exciting destinations for mergers and acquisitions after racking up some truly impressive numbers. Deal value in the country hit a record $10.16 billion in 2017, and notable among that was the frequency of deals worth more than $100 million – there were some 20 of these last year, according to data platform Stoxplus.
According to lawyers, the divestments of stakes in state-owned companies played a big role in driving this. In November, a unit of Singapore-listed Jardine Cycle & Carriage, a Jardine Matheson company, said it had raised its stake in Vinamilk, Vietnam’s biggest-listed company, to 8 percent, with the share worth some $911.5 million. And in December, Thai Beverage partnered with a local company to buy a $4.8 billion stake in Vietnam’s largest brewer, Saigon Beer Alcohol Beverage (Sabeco).
“I think the state’s divestment from a number of mega public companies including Sabeco and Vinamilk made a significant contribution to this record high value,” says Vo Ha Duyen, chairperson of Vietnamese law firm VILAF. “Vietnam has continued to implement its commitments for global integration as well as its commitments for privatization of major industrial sectors. These, amongst others, may have increased foreign investors’ confidence in the economic potentials of the country.” Additionally, “active trading of foreign investors on the stock market, which in part helped set the VN-Index to a decade-high in 2017, also played an important role to the impressive figures of M&A deals,” says Viet Nguyen, an associate at Freshfields Bruckhaus Deringer.
Out of these major deals, there was also interest in a wide range of sectors. Yee Chung Seck, a Baker McKenzie partner based in Ho Chi Minh City, says that some of the most popular industries were consumer products, retail, real estate and technology. Duyen cites the finance and real estate sectors as being particularly active. “We also saw a strong interest in renewable energy projects, retail, consumer goods, and regulated service sectors such as education and e-commerce,” she says.
MORE OF THE SAME IN 2018
The good news for lawyers is that the positive trend in Vietnam’s M&A space is set to continue into this year as well. “A number of large state divestments are scheduled to occur in 2018, such as PV Power, PV Oil, Dung Quoc refinery, Genco 3, Sawaco and so on,” says Duyen at VILAF. “It is anticipated that similar divestment structures as those which occurred in 2017 may be repeated.”
Agrees Nguyen at Freshfields: “State divestments will continue to be on the spotlight as stakes in key aviation, energy, and telecommunication may be offered in 2018.” She adds that real estate, retail – with a brand new regulation entering into force in 2018 – energy, infrastructure, banking & finance, and pharmaceuticals companies will offer plenty of choice for foreign investors.
Additionally, lawyers expect to see increasing investment from companies in other parts of Asia. “The strong signs in the business environment and the policies encouraging foreign investors are helping Vietnam become an attractive M&A market in the region,” says Seck at Bakers. “We also expect to see continued interest and investment by investors in the region, in particular, South Korea, Japan, China, Thailand and other ASEAN investors.”
This is echoed by Duyen: “As with the growing trend in other markets, we are seeing investors from Singapore, Japan, Korea and China as the most active in Vietnam, with the presence of Chinese investors being increased dramatically during the last two years.” |
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