FinanceAsia has already unveiled the winners of our China Awards this year for best banks, best deals, best transaction banks and solutions, and best service providers.
Today we provide more details on FinanceAsia's award winners for best service providers. These are the firms that helped make the deals happen between July 1 2018 and June 31 2019.
The role that ratings agencies is often ignored, but as we have noted with Fitch Ratings, they can be the canary down the economic mine. Law firms too are not always in the spotlight, but they ease the path for the bumps in the roads during capital markets deals.
FinanceAsia's China Awards 2019 are organised in conjunction with CorporateTreasurer, our sister publication.
Best Domestic Ratings Agency: China Chengxin International Credit Rating
China Chengxin International Credit Rating (CCXI) has maintained its dominant market share across the capital markets, undertaking almost all the first ratings of bonds and financing instruments in China.
Founded in 1992, CCXI was the first national credit rating agency in China approved by the People's Bank of China. It leads the market in its coverage of interbank asset-backed securities (ABS), non-banking bonds, Panda bonds, exchange ABS and commercial bank bond issuance with a greater-than-50% share of the market.
But what made CCXI stand out is the way it cleverly managed its business as defaults began to rise last year.
From the perspective of the number of defaulting bond issuers, the credit risk management and control ability of CCXI was better than that of other institutions in the industry. Indeed, the proportion of defaults by issuers rated by CCXI is significantly lower than the industry average.
CCXI also performs better at the advancement, continuity and accuracy of issuer risk management and control.
The ratings agency managed market expectations too. For all defaulting bond issuers, CCXI carried out negative rating actions in advance to suggest issuers may be at risk.
Hand-in-hand with this, CCXI has vigorously expanded its cooperation with industrial organisations, professional institutions, and media think tanks. In the first half of this year, it held and participated in 25 domestic and overseas brand events, covering nearly 10,000 investors, issuers, regulators, media friends, experts and scholars.
Offering evidence that the strategy is working, CCXI reported a 40%-plus increase in the number of new customers and a 20%-plus jump in revenues in the first half of the year.
Best International Ratings Agency: Fitch Ratings
The first international rating agency to set up a representative office in Beijing in 1997, Fitch Ratings's share of first-time cross-border China bond deals has led the market for the past four years.
It remains first in an enviable number of categories. To name just as few, Fitch has the largest market share of Chinese state-owned enterprises and China property and is the sector leader for Chinese financial institutions. And, by quite a large margin, it is the agency of choice for China public finance issuers, rating more than the other two international agencies combined.
Fitch is rated for its healthy scepticism and transparency. It was the earliest among its peers to warn how the trade war would drag on Chinese economic growth. It accurately priced in the 25% tariff hike and cut its China 2019 GDP growth forecast to 6.1% in September.
It was also the first credit rating agency to warn about China’s shadow-banking risks and had no qualms about calling out a competitor’s sector-wide upgrades on Chinese banks.
Its early, clear, consistent and actionable alerts have proved prescient. In contrast to its peers, it has maintained a clarity on China’s sovereign ratings. For example, in November it forecast that Chinese bond defaults would rise in 2019 in spite of policy easing.
It is significant that Fitch-only deals – China Everbright Bank, AVIC International Leasing and Guangzhou Industrial, to name just three – indicate high investor acceptance of the agency’s ratings. And it is as much the agency for top-tier issuers like Shimao Property, China Fortune Land and Beijing Capital, as it is for high-yield public finance issuers.
Part of its success, of course, is that Fitch has more analysts based in China (Beijing and Shanghai) than any international competitor. But it has also maintained its relevance thanks to innovation.
Fitch was the first rating agency to set up Chinese social media WeChat and the only agency using Weibo for distribution of Chinese-language content to market participants.
As well as technological innovation, it stands out from its competitors because of its work with environmental, social and corporate governance (ESG) issues. Fitch is the only international ratings agency to assign ESG relevance scores to more than 300 issuers in China and has championed why ESG issues are relevant and material to individual entity credit ratings.
Best Chinese Offshore Ratings Agency: Lianhe Ratings Global
Lianhe Ratings Global (Lianhe Global) rated $3.15 billion of US dollar bonds in the first half of the year, making Lianhe Global the largest China offshore credit rating agency. It rated substantially more Chinese US dollar bonds than any other Chinese rating agency.
The fact that it is snapping at the heels of the Big Three is even more impressive when you realise that it was only established in Hong Kong in September 2017.
What makes Lianhe Global stand out is that as a home-grown ratings agency, it has a deep understanding of China's economic systems and markets. It is able to analyse the risks of Chinese companies from an insider's perspective and use international ratings language to communicate with offshore bond investors.
That allows Lianhe Global to add real value and insight to issuers.
Take the $500 million three-year bond issued by Yuzhou Properties in January. To provide investors with a more all-rounded perspective, the property developer used Lianhe Global.
So successful was the bond that Lianhe Global was able to help two weeks later with another issue for Yuzhou Properties, in this case a $500 million four-year bond, and then for a third time, two weeks after that, with a $500 million five-year issue.
All of the bonds were rated BB by Lianhe Global and achieved a negative issuance premium, something rarely seen in China’s real estate high-yield bond market over the previous six months. Thanks to the additional insight provided by Lianhe Global, pricing came in 37.5 basis points tighter than guidance.
“Lianhe Global’s issuer rating reports provide a different perspective to those offered by the other credit rating agencies. This facilitates my investment decision making a lot,” said a portfolio manager in a testimonial.
Best Domestic Law Firm: Fangda Partners
Fangda Partners has become the leading law firm in China’s legal services market. Its client list reads like a 'Who’s Who' of business in China: Alibaba, Alipay, Ant Financials Services Limited, JP Morgan, Nomura, Morgan Stanley, UBS, HSBC, Credit Suisse, Deutsche Bank, Warburg Pincus, Shanghai Electric Finance and BGC Partners.
Fangda has represented Alibaba Group in several deals including its $9.5 billion acquisition of Ele.me, as well as its Rmb15 billion ($2.1 billion) strategic investment in Focus Media. It also represented the investor group comprising Anta, FountainVest and others in their $6.3 billion acquisition of Amer Sports Corporation, itself FinanceAsia’s Deal of the Year.
Its work in the capital markets is second to none too.
Last year it completed seven A-share initial public offerings with an aggregated offering size of around Rmb51.5 billion. Six of the seven mandates were ranked among the year’s top 20 largest A-share initial public offerings.
For example, it represented CICC in its role as the sponsor and lead underwriter on the global restructuring and Rmb27.1 billion initial public offering by Foxconn Industrial Internet. It was the largest A-share IPO by a foreign-invested enterprise; the largest A-share IPO in electronics manufacturing; and also, the first industrial internet IPO for mainland China.
And in the debt markets, it successfully closed more than 20 offerings, including high-yield bonds, investment grade bonds, private placements and panda bonds.
Highlights include representing BMW Finance on the establishment of its Rmb20 billion panda bond issuance programme and its Rmb3 billion debut panda bond offering on China’s interbank market (FinanceAsia’s Best Panda Bond).
What underpins its work is its regulatory knowledge and ability to guide clients through the regulatory risks.
Best International Law Firm: King & Wood Mallesons
One of the earliest partnership law firms established in China, King & Wood Mallesons (KWM) has distinguished itself by working on high-profile deals across a number of financial sectors.
It assists companies to raise capital at various stages of their development. It helped Beijing-based fresh produce delivery app MissFresh with its US$450 million Series E funding in September last year – acting for one of the investors. And it performed strongly with three headline-grabbing IPOs. It acted for both Qutoutiao, the fastest Chinese internet enterprise to go public, and for Starbucks rival Luckin Coffee in their Nasdaq flotations. And it advised Shanghai-listed Qingdao Haier on its €278.3 million (US$320 million) D-share listing in Frankfurt, marking the first A+D dual-listing deal.
Debt market highlights include advising the Republic of Portugal on its inaugural issuance of Rmb2 billion Panda bonds in June this year and representing ENN Ecological in March on its issuance of $250 million 7.5% 2021s. Not only was it ENN Ecological’s debut offshore bond, it was also the first debut high-yield bond issued by a Chinese industrial company since January 2018.
In addition, KVM acted for China Southern Airlines as ICBC Financing Leasing (ICBCFL) sought to obtain financing for 12 aircraft leased to China Southern Airlines using a French tax lease financing structure.
KWM was at the forefront of M&A deals too. During Heineken’s $3.1 billion strategic investmnent in China Resources (FinanceAsia’s Best M&A Deal of the Year), it advised China Resources. And it helped state-controlled Chinese Guangzhou Automobile Group as it partnered with Tencent to establish a Rmb1 billion joint venture in the southern city of Guangzhou along with local public transport operator Guangzhou Public Transport Group.
Best Corporate Debt Issuer: Shenwan Hongyuan
The last of China's top-seven brokerage houses to list its shares on both the mainland and Hong Kong stock markets, Chinese brokerage Shenwan Hongyuan’s HK$9.1 billion ($1.2 billion) IPO in April was significant for a number of reasons.
It was the largest Hong Kong IPO to hit the markets this year and the largest FIG deal globally.
The IPO had been on the cards ever since the company, which is already listed in Shenzhen, was formed through a $6.4 billion merger between Shenyin & Wanguo Securities and Hongyuan Securities in 2015.
Having failed to catch the window between 2016 and 2017, when a number of Chinese brokerage houses, including Guotai Junan Securities, China Merchants Securities, Everbright Securities and Orient Securities, all sold H-shares in Hong Kong, it left nothing to chance.
Shenwan Hongyuan made sure the offering of 2.5 billion shares, or 10% of the enlarged share capital, was at a steep discount to where its shares in Shenzhen were trading.The indicative range was set at HK$3.63 to HK$3.93 per share, which was a discount of 41% to 45%.
In the end, the shares went at the bottom of the indicative range, which means the deal priced at 1.01 times its 2018 book value and 0.92 times its forecast book valuation for this year.
ABC International, Goldman Sachs, ICBC International and Shenwan Hongyuan HK were the joint sponsors.
Best Venture Capital Investor: Qiming Venture Partners
Qiming Venture Partners has made a name for itself over the past five years by backing unicorns such as Beijing-based smartphone manufacturer Xioami and Meituan Dianping, an online food delivery-to-ticketing services platform.
Founded in 2006, the venture capital firm has offices in China, Hong Kong and the US. It currently manages seven US dollar funds and five renminbi funds with $4 billion in assets under management.
Now it is focusing on medical services.
The group invested early in Hangzhou Tigermed when it was valued at $29 million. It's now valued at $5.1 billion.
Qiming Venture Partners also invested in recently listed vaccine manufacturer CanSino Bio-B, which is valued at $1.2 billion.
The firm has invested in about 80 companies within the medical-related sector, and it says that 99% of them are still growing.
It has been helping younger companies like Shanghai-based Antengene, which is developing anti-cancer drugs, and SinoUnited Health, which provides medical services for commercial health insurance policy holders.
But it would be wrong to think of Qiming Venture Partners as just a healthcare investor. In April it led the $45 million Series B funding for Singapore-headquartered budget hotel startup Reddoorz and participated in the $10 million Series B funding for Plum, the e-commerce platform for second-hand fashion products.
In a recent interview with FinanceAsia, managing partner William Hu revealed the secret of his success: “As a venture capitalist, we focus on early-stage investment and we take a big risk. But we hold one core value – be a good person. A good person can attract other good ones to be with you; like attracts like.”
