Over the horizon

Even as regulation continues to increase, appetites in Asia for offshore investment continue to grow. China has long been a vanguard in this area, but other investors in Japan, South Korea, India and Australia, for example, are focusing more and more on further afield. Joanna Law reports

For Asian countries and investors who have their eye on tapping into foreign markets, offshore jurisdictions such as the Cayman Islands, British Virgin Islands (BVI), Jersey, Guernsey and Bermuda remain the most popular platforms. These offshore jurisdictions, with their relatively lax but efficient and transparent regulatory regimes, provide a favourable environment for Asian investors for doing business with each other via offshore centres.

“The M&A market continues to be active in Asia with Cayman, BVI and Bermuda remaining the top jurisdictions for offshore M&A transactions,” says Denise Wong, a partner at Walkers in Hong Kong. “We regularly advise on privatizations of Cayman-incorporated companies that are listed on the Stock Exchange of Hong Kong (SEHK). We receive a steady stream of mandates for fund formation transactions and we expect this to increase. The Cayman Islands remain the jurisdiction of choice for offshore fund formation,” she says.

On the equity financing side, Rachel Huang, legal manager at Ogier, says Cayman continues to be the most prominent choice for IPOs in Hong Kong. “A Cayman company as a holding company in the context of IPOs has long been familiar and accepted by the stock exchange and regulators in Hong Kong,” she says. “The legal infrastructure and expertise is readily available and well established in this area. Notably, we have also seen the use of Cayman structures by Chinese companies who seek for a listing in the [South] Korean stock exchange.”

David Lamb, a partner and co-chairman of Conyers Dill & Pearman in Hong Kong, says the first six months of the year have been particularly active. “For IPOs, the first half of 2017 has seen 53 Cayman companies launching on the SEHK, with their offerings totalling US$2.26 billion in value. The Hang Seng Index is currently over 27,000, its second-highest level since the global financial crisis, which should bode well for IPOs for the second half of the year. We are also seeing a number of our clients raising US dollar debt issuances directly or through MTN programmes,” he says.

However, Lamb sees a decline in deal volume and deal value in both global and US M&A markets, driven by a fall in strategic M&A activity. “Consortium bids led by PE [private equity] have offset some of this decline,” he says. “Cross-border activity also decreased in deal volume. This is not surprising given the geopolitical uncertainties.”

Cayman continues as pre-eminent global offshore jurisdiction