Aviva Investors rebukes HSBC, Standard Chartered over decision to support Hong Kong national security law

Aviva Investors publicly rebuked HSBC and Standard Chartered on Wednesday over their support of the controversial national security law for Hong Kong, saying it was "uneasy" with the decision.

The asset management arm of UK insurer Aviva is the first major institutional investor to openly criticise the banks, which are two of three lenders authorised to issue currency in Hong Kong, over their show of support for the impending legislation.

"We are uneasy at the decisions of HSBC and Standard Chartered to publicly support the proposed new national security law in Hong Kong without knowing the details of the law or how it will operate in practice," David Cumming, chief investment officer for equities at Aviva Investors, said.

"If companies make political statements, they must accept the corporate responsibilities that follow," he added. "Consequently, we expect both companies to confirm that they will also speak out publicly if there are any future abuses of democratic freedoms connected to this law".

Aviva is the 12th largest shareholder of HSBC and the 10th largest shareholder of Standard Chartered, according to Bloomberg data.

Peter Wong Tung-shun, Asia-Pacific CEO for HSBC, signed a petition in support of the controversial national security law for Hong Kong. Photo: Handout alt=Peter Wong Tung-shun, Asia-Pacific CEO for HSBC, signed a petition in support of the controversial national security law for Hong Kong. Photo: Handout

HSBC and Standard Chartered both declined to comment.

HSBC's share price fell 1.5 per cent to close at HK$39.75 in Hong Kong on Wednesday, while Standard Chartered's shares rose slightly to end the day at HK$44.35.

Aviva has less at stake than other businesses who rely on Hong Kong as a profit centre.

As part of a restructuring announced last year, Aviva agreed to sell its stake in its Hong Kong insurance joint venture to private equity firm Hillhouse Capital, but retained its business in Singapore and a joint venture in China as part of its streamlined Asia life operations.

Beijing said on May 21 that it would tailor a national security law tailor-made for Hong Kong, sidestepping the city's legislature. Due to opposition, lawmakers had failed to pass national security legislation since its handover from British control in 1997. The details of the new law are expected to emerge in the coming months.

The move by Beijing came after months of anti-government street protests in the city. There are concerns the national security legislation could be used to restrict speech and assembly in the city.

It also sparked an outcry from Western governments, with the United States declaring that Hong Kong no longer maintained a "high degree of autonomy" and threatening to revoke Hong Kong's special status.

Hong Kong's biggest companies and most of the city's tycoons, however, have spoken out in favour of the law, including Jardine Matheson Group, the operator of the Mandarin Oriental hotel; and Swire Pacific, the parent of the city's de facto airline Cathay Pacific; and Li Ka-shing, one of Asia's richest men.

HSBC and Standard Chartered are both based in London, but their profits are heavily reliant on Asia and Hong Kong is their biggest market. The banks have generally avoided making public statements on political issues.

After China's top legislature, the National's People Congress (NPC), adopted a resolution on the law, HSBC, in particular, came under pressure from former Hong Kong Chief Executive Leung Chun-ying and mainland media to make clear its stance on the law as Chinese authorities went on the offensive to garner acceptance.

On June 3, HSBC posted a photo to one of its social media accounts in the mainland that featured Peter Wong Tung-shun, its Asia-Pacific CEO and a member of the Chinese People's Political Consultative Conference (CPPCC), signing a petition supporting the law.

"As a member of Hong Kong Association of Banks (HKAB), consistent with the statement issued on May 26 by HKAB, we reiterate that we respect and support laws and regulations that will enable Hong Kong to recover and rebuild the economy and, at the same time, maintain the principle of 'one country two systems'," HSBC said in the post. "We are fully committed to playing our part in supporting Hong Kong now and in the future."

Standard Chartered came out with its own statement later in the day following media inquires.

"We believe the national security law can help maintain the long-term economic and social stability of Hong Kong," a Standard Chartered spokeswoman said then.

HSBC should be ashamed https://t.co/nSnbqZs2Tn

" Andrew Adonis (@Andrew_Adonis) June 4, 2020

The announcements by both banks came a day before the June 4 traditional Tiananmen Square vigil in Hong Kong, which drew thousands to Hong Kong's Victoria Park despite a ban on mass gathering by police on public health grounds for the first time in three decades.

The rebuke by Aviva came on the same day that US Secretary of State Mike Pompeo criticised HSBC for the decision, calling it a "corporate kowtow."

"That show of fealty seems to have earned HSBC little respect in Beijing, which continues to use the bank's business in China as political leverage against London," Pompeo said.

Other politicians in the US and the UK also have also lambasted the lenders' decision.

Andrew Adonis, a Labour peer in the UK, said HSBC should be "ashamed", while US Sen Rick Scott, a Florida Republican, accused HSBC of choosing "profits over human rights."

Investors have mostly supported the share prices of HSBC and Standard Chartered since the announcements on June 3, with HSBC gaining 4.6 per cent in Hong Kong between June 3 and Tuesday's close. Standard Chartered advanced 11 per cent in the same period.

Top institutional investors in both companies, including Legal & General Investment Management, State Street and Vanguard, have declined to weigh in on the decision.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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