Hong Kong Tension May Hasten Daiwa’s Shift to Mainland

Daiwa Securities Group Inc. may accelerate plans to scale back its presence in Hong Kong if the tension in the Chinese territory worsens significantly, according to the Japanese brokerage’s deputy chief.

Even before the Hong Kong security law was passed, Daiwa had been planning to shift some operations from the city to the mainland once it sets up a joint venture there, Deputy President Keiko Tashiro said.

“If facts emerge such as people getting arrested one after another, we may need to front-load it,” she said in an interview. “Once the joint venture is established, we can do China business in China.”

Hong Kong Tension May Hasten Daiwa’s Shift to Mainland

Hong Kong’s standing as one of the world’s top financial hubs has come into question as the security law threatens civil liberties and fuels tensions between the U.S. and China. President Donald Trump this month ordered an end to Hong Kong’s special status with the U.S.

More than a third of Japanese companies operating in Hong Kong are either reviewing their presence there or thinking about doing so, a survey by the Japan External Trade Organization showed this month. About 10% are shrinking operations in the city, it found.

Hong Kong’s status as a global financial center will wane after the introduction of the security law, Shigeharu Suzuki, chairman of the Japan Securities Dealers Association, said earlier this month. Firms may accelerate a shift to other hubs such as Singapore, he said.

Daiwa has already been slimming down its Hong Kong footprint, partly because its banking license in Singapore has made the nation a more convenient place to conduct debt-related business, Tashiro, 56, said. The Tokyo-based firm has about 2,000 staff abroad but doesn’t give a breakdown of their location. It has been in Hong Kong since 1970.

Hong Kong Tension May Hasten Daiwa’s Shift to Mainland

Still, Tashiro said there is a perception that Hong Kong will remain a “window to the world” for China. “I don’t think financial firms need to worry too much,” she said.

Daiwa is in talks with Chinese authorities about getting approval to start its joint venture by the end of the year, Tashiro said. Nomura Holdings Inc. and UBS Group AG are among global banks that already operate such entities as China opens up its financial industry to foreign competition.

For Nomura, Hong Kong remains a “key hub” and it doesn’t plan to review operations in the city, Japan’s biggest brokerage said last month.

Separately, Tashiro, who oversees Daiwa’s initiatives associated with the United Nations’ sustainable development goals, said Japanese companies need to add more outside directors with various backgrounds. Women could make up half of Daiwa’s board by 2030, from around 23% now, she said.

“Society is growing increasingly diverse, so if companies want to keep pace, they need to incorporate diversity into an official organization like the board,” she said.

©2020 Bloomberg L.P.

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