Heading south — industry looks to Australia

Australia’s stock exchange can be an attractive place to list – as three Chinese companies have recently discovered.

“There is every reason why Australia should be a regional financial hub, continuing to engage with greater vigour in the global marketplace,” said Senator Nick Sherry, the Australian Minister for Superannuation and Corporate Law, last year. The Australian Securities Exchange hoped to become a financial hub in the Asia-Pacific; a dream which was quickly derailed by the deepening of the global economic downturn.

Yet the delay may have only been temporary, if the recent interest by Chinese companies in the ASX is an indicator. This year alone has seen three manufacturers from the mainland launch IPOs in Australia.

The ASX has been identified as an ideal listing environment for Chinese companies, in comparison to the options available in Hong Kong, Shanghai and New York. “The relatively straightforward ASX listing requirements makes it an attractive proposition for smaller Chinese companies, as in this aspect it represents a lower barrier of entry to listing,” said Pierre Lau, a senior associate at Chambers & Co.

In order to list on the ASX, the threshold for market capitalisation is a mere A$10m. In contrast, the HKSE requires approximately three times that amount (HK$200m). Similarly, the HKSE requires aggregated profits of HK$50m in the three financial years before listing, whereas the ASX only requires A$1m.

The listing rules of the Nasdaq are even more onerous, requiring up to US$11m in aggregated profits over three years.

Track record counts

The reputation of the Australian market is also appealing to Chinese companies, especially those that are not state-owned. “Australia presents a politically stable and relatively lowcost environment in which to base a corporate headquarter for Chinese companies wishing to operate internationally,” says Fai-Peng Chen, a partner at Minter Ellison’s Adelaide office. “Australia is also recognised for its strong corporate governance and has a transparent listing process.”

This compares to the SSE, where a listing halt was in place between September 2008 and July 2009. “Our sources tell us that there are currently more than 300 companies on the waiting list in China, which has created a backlog that could take up to two years or more to clear,” says Lau.

Similarly, the Chinese government has discretion as who is able to list on the SSE. “There is no level playing field since the government decides when you list, whether there has been enough companies from a certain province or a certain industry,” says Brendan Connell, a partner in South Australian firm Tindall Gask Bentley.

The reputation of the ASX market also precedes itself, and has excellent connotations in the Chinese economy. “The ASX has a reputation for honesty and reliability, and so there is significant kudos for a PRC company to say it is ASX listed – the inference is that it must be good,” Connell adds. However, although the opportunities may be ripe, there are still relatively few Chinese companies that have opted for an ASX listing.

“It is hard to say if there is a window of opportunity – everyone is probably waiting on more positive and consistent signals coming from the equities market in general,” says Jonathan Murray, a partner at Steinepreis Paganin.

Existing referral networks have played a role in Australian firms gaining Chinese work. Shenhua were referred to Chambers & Co for their IPO by AllBright Law Firm in Shanghai, as a result of the memorandum of understanding between the firms.

AllBright has also shortlisted another three Chinese enterprises interested in the ASX, which bodes well for the Exchange becoming a regional hub in Asia-Pacific.

“Australia represents a politically stable and relatively low-cost environment in which to base a corporate headquarters for Chinese companies wishing to operate internationally”

Fai-Peng Chen, Minter Ellison (Adelaide)

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Blake Dawson Wiki-peed off after web revelations

Australian firm Blake Dawson, recently discovered that its Wikipedia page had been hijacked by an unknown contributor, liberally disclosing details of the firm’s alleged job and cost cuts on the online encyclopedia.

The additional information to the reader-written webpage included information on alleged staff cuts to come, mentioned Allens Arthur Robinson and Freehills and even disclosed salary details for the firm’s partners. “The firm’s partners receive an average of A$850,000 each per annum,” the mystery scribe reported. The firm had not yet confirmed the accuracy of the reports at the time of going to press.

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Einfeld still undecided

Speeding kills – as many Australian billboards tell you – and it turns out it can also mangle your career.

It was believed that Marcus Einfeld, the former Australian Federal Court judge who was recently jailed for a minimum of two years for lying on statements to avoid a speeding fine, would agree to the NSW Bar Association declaring him not a fit and proper person to remain on the roll of legal practitioners. Thus having his name removed from the roll.

However, reports now suggest Einfeld may seek a six-week adjournment to decide whether to lodge a guilty plea for professional misconduct.

The matter is due to return to the Supreme Court next month and the NSW Bar Association will call witnesses, and ask for the matter to go to a hearing if Einfeld decides to dispute the point.

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Asia drives Australian growth

Australian legal services are increasingly targeting Asia as work on the region’s continuing development and the continent’s insulation from the worst of the economic downturn prove irresistable.



Asia has officially become the fastest growing market for Australia’s exported legal services, with lawyers saying Asia’s developmental needs will drive the growth further and see more law firms move into the region.

According to research issued this month by Australia’s International Legal Services Advisory Council (ILSAC), from 2006-2007 Australia’s exported legal services to Asia grew by 56.4%, compared to the 25.5% growth from the previous period (2005-2006). For the first time, China overtook the UK as the second largest market for Australian exported legal work, accounting for 16% of the total revenue generated. The United States remained Australia’s largest legal services market.

Although the research captures the market before the advent of the global financial crisis, Jim Dunstan, a Hong Kong-based partner heading Allens Arthur Robinson’s Asia operations, says the growth coming from Asia was likely to be sustained. He said the possibilities for legal work in Asia were almost “limitless”, and that the region will remain somewhat insulated from the effects of the financial crisis.

“The underlying demand for infrastructure and the increasing wealth throughout Asia will drive growth over the next 25 years,” Dunstan says. “The demand for those areas is almost endless and it will continue to grow as things sort out following the current crisis. In addition, the sophistication and rapid growth of middle-class wealth in Asia will provide more opportunities for the financial services industry to do more routine banking, [as opposed to] developed economies where they’ve come to the end of what they could do, [since] everyone has a bank or super account.”

John Corcoran, president of the Law Council of Australia – which cocommissioned the ILSAC report, has a similar outlook.

“I think the growth in exported legal services to Asia is likely to move forward even further despite the economic crisis, because the Asia economies, with some exceptions, seem to be maintaining their growth and activity, and perhaps are more likely to rebound from the crisis, particularly in China and Hong Kong,” he says. “Both of those economies will grow in the foreseeable future and, looking specifically at the sectors, Australia has been involved mostly in M&A and corporate transactions, and they are very consistent with the areas that China is likely to need legal services in.”

Corcoran says that Australian firms will continue to push further into the Asian market either by setting up offices, establishing joint ventures or through the “fly in, fly out” method.

“It’ll be interesting to see [more firms moving towards Asia] as Australian firms in Asia practice in different ways – some are involved in ‘fly in, fly out’ transactions; others have a number of offices in Asia. I think it’ll be combinations of both and possibly joint ventures with local firms,” he says.

As law firms look towards Asia in response to the downturn, it is likely that competition will become more heated in the short term. But Corcoran says that Australia’s links to the region will set its firms apart from competitors.

“Many law firms from the UK and the US have a significant presence in Asia, and I guess they are competitors with Australian firms in the area,” he says. “But there’s still a lot of upside for Australian firms in Asia as we understand the region well and we practice in the areas that are likely to meet the need in.”

The firm expects to meet more demand in practices such as litigation and insurance, as work filters down from the US towards the Asia-Pacific region.

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