Interview with the New HKVCA Chairman    
  Outperforming in a Challenging Capital Markets Environment


  H. Chin Chou
  Managing Director
  Morgan Stanley
  Hong Kong Venture Capital and Private Equity Association
HKVCA incoming Chairman, Chin Chou, remains upbeat about the Asian private equity industry, despite the US-China trade war.  Investment deal flow continues somewhat unabated, and Asian private equity remains an interesting and attractive asset class for international investors and the LP community overall, but nonetheless he advises portfolio managers to consider the more challenging capital markets environment when thinking through how their portfolios will perform. Chou, who is Chief Executive Officer of Morgan Stanley Private Equity Asia and a Managing Director of Morgan Stanley based in Hong Kong, says that the rhetoric regarding trade in mainland China will likely result in continued weakness in the region’s capital markets.
“Portfolio managers always need to recognize that within the timeframe of a typical investment there may be capital markets disruption. The key question is whether your portfolio is positioned from an operating point of view on key long-term secular trends, such as increasing disposable income, rather than being dependent on a buoyant capital markets take-out,” Chou remarks.
Chou joined Morgan Stanley in 1987 in New York and serves on the firm’s Asia-Pacific Executive Committee, which is comprised of its senior business leaders within the region. He leads a business that specializes in privately negotiated control and minority investments in Asian companies, typically targeting fast growing businesses with strong brands, sustainable competitive advantages and proven track records of financial performance.
He says that Hong Kong has been an excellent center for Morgan Stanley’s Asian private equity business. The firm started investing in Asia in 1993 and 25 years later Hong Kong remains its headquarters. As Chou notes, “Hong Kong is probably the most flexible of all the large cities in Asia Pacific in terms of overseeing a pan regional business, with respect to regulation, the business environment, the transport links and the quality of living.
“Hong Kong has done many things right. But other cities such as Singapore, Beijing, Shanghai, even Tokyo, Seoul and Mumbai are attracting interest from GPs, LPs and the advisor community. This is a competitive business and I hope that Hong Kong, its government and regulators will continue to interact with market participants as well as industry organizations, in particular the HKVCA, so that Hong Kong can continue its primary position within the Asian private equity industry.”
In his role as chairman of the HKVCA, he would like to make sure the organization’s momentum continues. “We are at record levels in terms of membership, but all of us, the Board, the committees and the Secretariat, believe that we can continue to grow. We are asking ourselves what else can we do on behalf of our members? How can we work with other similar regional organizations? Are there other areas where the HKVCA can be involved?
“For example, the Association is known for its private equity and venture capital emphasis. But there is a private credit business in Asia, a distressed debt business, a real estate business and an infrastructure business. Special situations and strategies are developing in Asia, so it’s important the HKVCA plays a role in addressing the requirements of members from these newly emerging strategies, which we are doing – and will continue to do - through our strategic-focused seminars and events.”
“We will also continue to work closely with Hong Kong’s government and other fellow professional associations by joining delegations to other countries and regions to engage on topics relevant to our industry”, he said. As it is, Chou noted, “we already devote considerable time interacting closely with the government, in particular the financial bureau and regulators. The FSTB has reached out to us as well and we have engaged in consultations with them on, for example, the rules around the tax exemption for funds and the establishment of the innovation technology venture fund. Going forward, we hope to have discussions with the government on the issues surrounding the onshore LP regime and indeed any other relevant matters that arise in the coming years.
Chou’s enthusiasm for Hong Kong underpins his excitement about the overall Asian private equity industry, which he describes as robust in most regions, with active deal flow both in the large cap buyout space as well as in midmarket private equity, which is more growth oriented.
“Long term, the key secular trends of increasing disposable income in the growth markets and the need for opportunities for major large cap buy outs focused on restructuring and operating improvements remain intact,” he says.
His optimism for growth markets also holds true for China, where the shadow of a mainland Chinese economic slowdown looms over the regional private equity industry.
“There have been downturns affecting the region in the past 25 years, be it SARS, the global financial crisis or, predating that, the Asian financial crisis. Today’s economic downturn is not necessarily unexpected, and there are strategies to employ in order to help mitigate any potential effects,” he says.
According to studies of listed mid- and large cap public Chinese companies listed in Hong Kong or China, the US market is not a large revenue destination for many of them. Chou points out that most GPs and fund managers have limited exposure to export markets. It doesn't mean that tariffs won't hurt the economy as a whole – there will likely be less liquidity in the financing markets, a strain on employment and diminished prospects, at least in terms of sentiment.
“But there are basic risk mitigation strategies to bring to bear,” he says. For example, for GPs managing dollar funds, tariffs might have a negative impact on currency so perhaps consider buying currency protection on portfolios. Be more careful about investing in businesses whose business plans are not completely funded because it's going to be more difficult to raise capital in the near term. And be mindful of those businesses that are either not generating profits today or are overly reliant on leverage, given the likely tighter liquidity in the region.
Chou’s fundamental point though is that the big opportunity in China, India and other markets in Asia Pacific, is rising disposable income and the businesses that will develop as a result of that.
“China continues to lead the world in terms of new business creation and entrepreneurship, so it will always be an interesting and attractive market. India is interesting for a key reason - over the past few years it has eclipsed the key inflection point for emerging economies in that its per capita income is above US$2,500. Once economies grow past this level there is an opportunity for businesses to scale from being provincial or regional into national enterprises. That’s what we saw with China in the early 2000s and with other countries before that.
“Within southeast Asia we are spending more time in Thailand. It has large, strong capital markets and a vibrant entrepreneurial sector combined with one of the top two consumer markets in southeast Asia. Thailand has also positioned itself now as the entry point into hinterland markets such as Myanmar, Cambodia, Laos and Vietnam.
“Asian private equity has come into its own over the past 20 years. The fundraising numbers speak for themselves: we are seeing the largest LPs in the world allocate more capital to Asian private equity than, for example, to European private equity. That has been both surprising and welcome,” Chou says.

   Seasonal Greetings from the HKVCA Team   

   HKVCA Christmas Cocktails 2019   
The HKVCA held its annual Christmas Cocktails at the China Club on the evening of December 11, 2018. This always popular event was opened by HKVCA Executive Director, Wendy Zhu, of AlpInvest Partners. Close to 90 people, representing the many sectors of the private equity and venture capital community, enjoyed spending time with their professional colleagues. With Christmas music playing in the background and holiday decorations visible around the room, this year’s party was a truly festive and celebratory affair.
The HKVCA would like to thank both Ascent Partners and Latham & Watkins for their generous sponsorship. Thanks also goes to all the participants who helped to make this event a truly wonderful affair.

   HKVCA Official Wechat Account   

   Upcoming Events   
Date: January 16, 2019 (Wednesday)
Time: 8:30 – 17:30 (Followed by the Cocktail Reception)
Venue: Forum – S421, Hong Kong Convention and Exhibition Centre (Old Wing), 1 Expo Drive, Wan Chai, HK
Lunch – Chancellor Room, Hong Kong Convention and Exhibition Centre
Standard Rate
HKVCA Members with
Membership 2019 Renewed
  HKVCA Corporate Full Members
  One free pass per company 
  Additional passes: HK$4,800 per person
  HKVCA Corporate Associate / Overseas Members 
  First pass at special rate (HK$3,200)
  Additional passes: HK$4,800 per person
  HKVCA Member Special Package (Deadline: 27th December, 2018)
  Asian Financial Forum (AFF) + Asia Private Equity Forum
  HK$8,800 per person
Non-Members   Non-Member
  HK$10,000 per person
  Members of Supporting Organizations
  HK$6,640 per person
  Registrants for the Asian Financial Forum (AFF)
  HK$4,800 per person
6.5 CPT points can be claimed after attending the full-day event.
We have a limited number of free passes for pension funds, fund of funds, endowments, foundations, family offices, DFIs and sovereign wealth funds (subject to verification and a maximum of one pass per company).
If you would like to apply, please email
↓↓↓ Download the HKVCA app now to gain access to the event details ↓↓↓

Limited Seats Available | Members Only
Sponsored by  
Date: January 25, 2019 (Friday)
Time: 8:00 - 9:00
Venue: Victoria Suite, Hong Kong Club, 1 Jackson Road, Central, Hong Kong
Fee*: Full Member (Corporate): one free pass per company
Associate Member/ Full Member (additional pass): HK$300
*Note, free pass no shows will be charged full price
*An additional charge may apply to accommodate special dietary requests.

Sponsored by                 
Date: January 15, 2019 (Tuesday)
Time: 18:30 – 21:30
Venue: Dragon Room 1 – 5, The Hong Kong Bankers Club,
43 Floor, Gloucester Tower, 11 Pedder Street, The Landmark, Central, Hong Kong
Fees: Full Table (12 persons): HK$21,800
Half Table (6 persons): HK$10,900
Individual HKVCA Member: HK$2,180

View HKVCA Annual Golf Day 2018 Highlights here.

    Supporting Events 
23-24 January, 2019
New Members
Corporate Full Members 
Fosun Hani Securities Limited

Fosun Hani Securities Co. Ltd. (Fosun Hani) is a leading integrated, comprehensive investment banking platform from the Fosun Group in Hong Kong. Fosun Hani, formerly known as Hani Securities (Hong Kong) Limited, was founded in 1987 and acquired as a wholly-owned subsidiary of Fosun International (0656.HK) in September 2014. Fosun Hani has become an important investment on which Fosun has built an overseas financial platform, providing a key solution to the Fosun Group’s core strategy of creating wealth by opening up investment channels and significantly enhancing the company’s overseas asset management capabilities.
University of California Davis Foundation

The UC Davis Foundation is a nonprofit organization that plays an essential role in sustaining and enhancing the excellence of UC Davis by highlighting the impacts of philanthropy and stewarding private donations to the university. It is governed by its distinguished volunteer Board of Trustees. Doma Consulting is a privately held alternative investment firm.
Overseas Full Member
MainTrend Capital

Founded in 2016, MainTrend Capital (MTC) is a leading early stage venture capital firm based in Beijing. The firm’s partners, who were previously with SAIF Partners and Legend Holdings, have nearly 20 years’ experience in investing and 15 years in engineering. They have brought their collective experience to their work together over the last 7 years, and offer a unique resource on deal flow, with deep roots in technology and the venture capital community.
Corporate Associate Members
Bank of China (Hong Kong) Limited

Bank of China (Hong Kong) Limited (BOCHK) is a subsidiary of the Bank of China and a locally incorporated licensed bank registered in Hong Kong. It is a note-issuing bank and the sole Renminbi clearing bank in Hong Kong.
Canada Provincial Government of British Columbia Trade and Investment Office (Hong Kong)

Trade and Invest B.C. supports international organizations who want to do business with British Columbia’s innovative and competitive manufacturers and service providers. We help them discover how they can profit from our world-class goods and services in clean technology, life sciences, digital media and film production, as well as tourism, education, forestry and mining.
Goodwin Procter

At Goodwin, we use law to achieve unprecedented results for our clients. Our 1,000 plus lawyers across the United States, Europe, and Asia excel at complex transactions, high-stakes litigation and world-class advisory services in the financial, life sciences, private equity, real estate, and technology industries. We partner with our clients to practice law with integrity, ingenuity, agility and ambition.
Koh Vass & Co

Koh Vass & Co is a Hong Kong-based law firm, with particular expertise in digital business, fintech and related technology sectors. Globally, we operate as a member of the leading sector-specialist international law practice Osborne Clarke, which has offices in 25 locations in Europe, the US and Asia. We advise clients in Asia and internationally on doing business in the Asia-Pacific region, with a particular focus on Hong Kong and China. Our expertise encompasses venture capital, international M&A and joint ventures, commercial contracts and projects, employment, and data protection. We bring to bear to these sectors the amassed experience and resources of Osborne Clarke internationally. Our clients include some of the world’s leading digital business, technology, media, communications, luxury retail and distribution companies, alongside a full range of early-stage, challenger companies innovating in those sectors. We strongly believe in supporting entrepreneurs and young businesses through their growth plans.
Overseas Associate Member
IMPEX Lawyers & Advisers

IMPEX Lawyers & Advisers is a Melbourne-based Australian APAC Insider award winning multi-lingual and multi-cultural law firm. We are dedicated to helping our clients pursue international trade and investment opportunities between Australia, Asia and around the World. IMPEX is focused towards assisting Australian and Asian businesses to strategically transact in multilateral jurisdictions via Hong Kong as the "Super Connector" with a special dedication to assisting our clients to reap the opportunities unfolding from the regional roll out of the 'One Belt One Road & Greater Bay Area' initiative's which are now supported by the conclusion of the Australia-Hong Kong Free Trade Agreement (FTA) negotiations on 15 November 2018. IMPEX Lawyers & Advisers is your trusted guide for business with Australia in the Asian region.

Recent Events Report
HKVCA Brownbag Luncheon Talk: China Income Tax Reform
December 13, 2018
Michael Hong, director of EY China, delivered a luncheon talk on December 13, 2018 on China’s sweeping new individual income tax (IIT) law that comes into effect on January 1, 2019. Hong began by highlighting the differences between the old tax law and the new, noting in particular the introduction of a new definition of “resident” and “non-resident”, creating tax liability and raising double taxation issues for persons who spend an accumulated 183 days or more on the mainland. He also made clear that the 183-day determination is strict, and hence those who spent time in the mainland needed to keep in mind that it was irrelevant whether one’s presence was for business or personal interest – both will lead to China tax residency. Tax liability will also be on worldwide income, and not simply income created on the mainland. This gives Chinese tax authorities broad powers to demand financial information and documentation from individuals. However, it appears that the old “five-year exemption rule” will remain, so foreigners can escape tax liability on their non-China income, provided they have not lived in the mainland for more than five years.     
More than 70 people attended the luncheon talk, an indication of the importance of the topic to those in the venture capital and private equity industry. The HKVCA would like to extend our sincere thanks to EY, whose sponsorship made the event possible.
HKVCA ESG Luncheon Talk
Awakening Governance - the Current State of Corporate Governance in China

December 6, 2018
Jamie Allen, Secretary General, and Nana Li, Senior Research Analyst at the Asian Corporate Governance Association delivered a luncheon talk on the current state of corporate governance in China. Held on December 6, 2018, the talk examined the differing perspectives on the meaning and requirements of corporate governance held by foreign institutional investors versus China listed companies. The speakers also stressed that, as China plays an increasingly larger role in global capital markets, it will be necessary to start to bridge the gap in expectations between domestic and foreign market participants. The importance of the topic was highlighted by the fact that over 50 attendees joined the event. We would like to extend our thanks to KPMG, whose sponsorship of the luncheon made it possible.
HKVCA Healthcare and Biotech Seminar
November 30, 2018
The HKVCA’s healthcare and biotech seminar was held on November 30, 2018 at the offices of Deloitte. The event kicked-off with an update by Edward Au on the IPO market and a discussion of the opportunities for healthcare and biotech companies. Au was followed by a panel discussion moderated by Judith Li of Lilly Asia Ventures and including panelists Vanessa Huang of BVCF Management and Bosun Hau of Sailing Capital. The panel engaged in a wide-ranging discussion on the investment outlook for healthcare and biotech. Both Huang and Hau spoke of their experiences investing in the sector and drew comparisons between the capital markets in the US and Asia. They also discussed the obvious benefits biotech can bring to Hong Kong and its entire ecosystem. They also gave their views on the most interesting and innovative technologies that have emerged in the past several years and how the overall regulatory environment (for example, CFIUS) will have an impact. The panel discussion ended with the panelists each offering their own advice on investing in healthcare. Close to 120 people attended the seminar and we would like to extend our thanks to Deloitte for sponsoring this very informative event.
HKVCA LP Luncheon Talk
November 27, 2018
An LP luncheon talk on the impact of the Committee on Foreign Investment in the United States (CFIUS) was held on November 27, 2018 at the China Club. Attendance was at full capacity with more than 30 LP and PE practitioners attending. The speakers, Lorna Chen, Head of Greater China and a partner at Shearman & Sterling, and Massimo Zannella, Managing Director of SS&C Private Equity Asia, delivered a concise presentation on how CFIUS is affecting overseas investments in the US. The event ended with a free-flowing question and answer session. Special thanks to SS&C Private Equity Asia, whose sponsorship made the luncheon possible.
HKVCA Members Breakfast Meeting
November 23, 2018
An HKVCA members breakfast meeting was held at the Hong Kong Club on November 23, 2018. This was the Association’s last breakfast meeting of the year, and as has been the case in previous months, it was significantly oversubscribed. With more than 90 members registering to attend, our breakfast events are proving to be among our most popular activities for members. Hosted by our Vice Chairman, Rebecca Xu, members took full advantage of this valuable opportunity for networking and connecting with industry peers and fellow practitioners. We would like to thank each of our members for their enthusiastic participation as well as our sponsor, KPMG, for making this event such a success. 
HKVCA Luncheon Talk: Strategic use of M&A insurance for PE and M&A Dealmakers
November 22, 2018
The HKVCA hosted its latest luncheon talk on November 22, 2018 at the China Club. Noting the trend toward the use of insurance in M&A transactions, Terence Montgomery, Head of Mergers and Acquisitions, Asia Pacific from Willis Towers Watson, spoke about how warranty and indemnity and tax insurance can maximize strategic outcomes in M&A. The discussion was focused largely on providing dealmakers with a greater understanding of how utilizing insurance products can improve outcomes in the M&A process. With over 40 practitioners in attendance, the event received much positive feedback. We would like to thank sponsor Willis Towers Watson for making the event possible.

Industry News
Hong Kong to Amend Unpopular PE Tax Exemption
December 11, 2018
Hong Kong plans to amend the tax exemption for private equity funds, which was introduced in 2015, with a view to making it easier for GPs to operate locally but has been criticized by industry participants as unworkable.
(link to the full article)
Lexington Leads $1b Stapled Secondary for TPG Asia
December 10, 2018
Lexington Partners has backed a GP-led tender offer for TPG Capital’s fifth and sixth Asia funds, taking out existing positions held by LPs and investing new capital into the firm’s seventh pan-regional vehicle. The transaction represents a total capital commitment of around $1 billion.
(link to the full article)
Hong Kong's Ion Pacific Raises $30m for PE Secondary Fund
November 30, 2018
Hong Kong-based merchant bank Ion Pacific has raised $30 million for a technology fund that will acquire secondary positions in venture and growth funds as well as take direct stakes in portfolio companies.
(link to the full article)
Hong Kong's EmergeVest Consolidates UK Logistics Assets
November 26, 2018
Hong Kong-based EmergeVest – a PE firm established by former executives from HSBC’s Asia principal investments division – has consolidated ownership of six UK logistics assets into a single platform with GBP850 million ($1 billion) in annual revenue.
(link to the full article)

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