Global bankers fly into Hong Kong amid US criticism

Some of the biggest names on Wall Street are descending on Hong Kong in their first trip since the pandemic began, defying criticism by US lawmakers amid growing tensions with China. 

Goldman Sachs Group Inc.’s David Solomon, Morgan Stanley’s James Gorman and Blackrock Inc.’s Rob Kapito will be among the 200 or so attendees at the Global Financial Leaders’ Investment Summit, which starts on Tuesday. Three top executives have dropped out, including Blackstone Inc.’s Jonathan Gray. 

The three-day event comes as ties between the US and China worsen, with the world’s two largest economies sparring in recent months over trade, human rights and Beijing’s aggressive moves against Taiwan. Chinese President Xi Jinping’s yearlong crackdown on private enterprise and the property market has sharply undermined investor confidence in the nation’s assets. 

The stakes are especially high for global financial institutions. Many banks and asset managers have been on an investment and hiring spree in mainland China and Hong Kong in recent years as the world’s second-biggest economy opened its US$60 trillion financial market. The combined disclosed exposure of the biggest Wall Street banks in China was about US$57 billion at the end of 2021. 

“Foreign banks are still keen to do business or explore opportunities in mainland China and Hong Kong,” said Lloyd Chan, senior economist at Oxford Economics. “However, banks will still have to grapple with a business environment that continues to be uncertain and challenging, as strained relations between US and China imply economic and financial risks, which they have to be watchful of.” 

The event, hosted by the Hong Kong Monetary Authority, is designed to show the city is back in business after years of isolation caused by Covid restrictions raised doubt over its future as an international finance center. Hong Kong’s crackdown on dissent has added to the sense of unease among foreign firms, as well as sparked outrage from Washington to London. While there’s been an exodus of residents and capital, global banks have largely maintained their regional headquarters in the city. 

Such a high-profile gathering has drawn criticism. US Senator Jeff Merkley and Democratic Representative Jim McGovern urged US bankers to cancel their visit, Reuters reported.  

Their attendance “only serves to legitimize the swift dismantling of Hong Kong’s autonomy, free press, and the rule of law by Hong Kong authorities acting along with the Chinese Communist Party,” McGovern wrote in a tweet last week. 

Since Beijing imposed a broad national security law on Hong Kong in 2020, the city has jailed dozens of opposition figures and overhauled the legislature to give Beijing virtual veto power in the selection of the city’s leaders. Current leader John Lee, who was sanctioned by the US along with other officials for his role in the crackdown, will give the first keynote speech at the summit. 

The summit comes as investors flee Hong Kong and mainland assets. The benchmark Hang Seng Index tumbled to its lowest level since 2009 last week as Chinese stocks tumbled amid concern over Xi’s increasing power. Shares of Hong Kong’s exchange operator have plunged 54 percent this year, reflecting a slump in daily turnover and initial public offerings. The local currency is near the weak end of its trading band against the dollar, showing capital outflows. 

Geopolitical risks aren’t the only concern dogging the summit. Blackstone’s Gray and Citigroup Inc. Chief Executive Officer Jane Fraser are missing the event after they both contracted Covid, while Barclays Plc Chief Executive Officer C.S. Venkatakrishnan scrapped his Asia trip. 

An approaching tropical cyclone is also creating uncertainty. Severe tropical storm Nalgae is expected to be close to the Pearl River Estuary adjacent to Hong Kong on Wednesday, according to the city’s observatory. 

Under the current plans, the executives will first attend a closed-door meeting with HKMA officials on Tuesday, followed by a welcome dinner at the M+ Museum overseeing the Victoria Harbour. The summit takes place the following day at the ballroom in the Four Seasons hotel, with moderators including Eddie Yue, chief executive of the HKMA.  

The first panel, which will address the current turbulence in global economies and markets, features Gorman, Solomon, UBS Group AG Chairman Colm Kelleher and Bank of China Ltd. President Liu Jin. 

On Thursday, top fund managers will take part in a forum at the main hall at the stock exchange, including Carlyle Group Inc. founder Bill Conway and Man Group Plc’s CEO Luke Ellis. The two panels are entitled “Creating Value Through Uncertainties” and “Managing Through Volatile Markets.” 

The conference will be followed by the international Rugby Sevens tournament, which starts on Friday in its first return to the city since 2019. 

The events are part of a series of measures aimed at reviving Hong Kong’s outlook. The city faces mounting competition from Singapore as a regional hub for global business and talent, while its economy has taken a hammering as the city delayed reopening.  

Gross domestic product plunged 4.5 percent in the third quarter, according to advance estimates released by the government on Monday. That was far weaker than economists’ forecasts for a 0.8 percent decline and is the worst contraction since the second quarter of 2020. 

While Covid curbs have been eased, attendees to the summit still face the following restrictions, according to the HKMA and the Health Bureau: 

Visiting guests will undergo Covid tests before departure, on arrival and throughout first three days; Participants will stay at designated hotels, and events will only take place at specific venues, to help ensure they are segregated from residents and appropriate control measures can be deployed; Attendees will be able to have meals with others in private rooms and visit certain venues that require active checking in the first three days, a tailored rule for the summit. Typically, visitors to the city are forbidden from dining out or going to bars in the first three days; Guests who test positive can leave by chartered flight. Otherwise, they will be subject to least seven days isolation, which can take place at home or in a hotel 

(Bloomberg)