Elliott’s HK exit reflects Asia activist reality

The Bank of East Asia

20/01/2021 01:47

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    HONG KONG, Jan 20 (Reuters Breakingviews) - Hedge funds are
prized for a cold-hearted ability to follow the money.
U.S.-based Elliott Management’s decision to close its Hong Kong
office has caused a stir in light of the city’s political
tensions, exacerbated by Beijing’s imposition of a sweeping
national security law in July. Yet an activist wave across Asia
in recent years has largely passed by China and its offshore
fundraising hub. That’s a good reason to concentrate resources
where they can matter. 
    The 44-year-old fund led by Paul Singer will run its Asian
investments from Tokyo and London in the future, Reuters
reported citing sources. Elliott’s Hong Kong base had been
without a head since 2018 and staff numbers had dwindled to some
20 from about 40 when former boss James Smith moved back to
London that year with some of his senior team. 
    In Hong Kong Elliott is best known for a six-year-long
ongoing campaign to shake up $6 billion Bank of East Asia
 0023.HK , a family-controlled lender whose shares have halved
in that time. The fund declared a partial victory last year when
the bank put a division up for sale but the battle to extract
value is still a work in progress. 
    More importantly, the focus of activism in Asia has shifted.
There were 66 public activist campaigns in Japan last year,
according to data provider Insightia, of which one was Elliott’s
efforts to shake up tech conglomerate SoftBank  9984.T , which
helped produce more than $40 billion in asset sales. There were
just 17 public campaigns in all of China and Hong Kong combined.
The Japanese number has risen nearly threefold in five years
while those in Greater China have dropped by a third.
    China’s concentrated shareholdings and corporate culture
that shuns criticism doesn’t suit the usually public efforts of
Elliott and other activists. Hong Kong’s national security law
has coloured all conversations about Asian staffing and
locations since its introduction. The fund manager’s exit will
add to a longer-term debate about the value of keeping regional
hubs in the city but it's easy enough to justify it in financial
terms alone. 
    On Twitter https://twitter.com/JennHughes13
    
    CONTEXT NEWS
    - U.S. hedge fund Elliott Management is closing its Hong
Kong office and shifting responsibility for its Asian
investments and campaigns to its Tokyo and London offices,
Reuters reported on Jan. 19, citing sources. 
    - The firm’s most prominent recent activist campaigns in
Asia have included pushing for change at Japanese technology
conglomerate SoftBank. Korean companies Hyundai and Samsung have
also been targets. 
    - The decision to close the office comes after its staffing
was reduced over the past three years to about 20 people from
more than 100, Reuters reported.     
    - For previous columns by the author, Reuters customers can
click on  HUGHES/ 
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Hedge fund Elliott Management to shutter Hong Kong office   
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BREAKINGVIEWS - Hong Kong lender tests Elliott’s patience anew  
  urn:newsml:reuters.com:*:nL3N2GL09N
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 (Editing by Una Galani and Katrina Hamlin)
 ((jennifer.hughes@thomsonreuters.com; Reuters Messaging:
jennifer.hughes.thomsonreuters.com@reuters.net))