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Japan's largest online broker SBI says it may downsize in Hong Kong as city's financial future comes under threat by security law

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Chad Bray chadwick.bray@scmp.com
·3 min read
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SBI Holdings, Japan's largest online broker, is considering whether to downsize its Hong Kong operations in the next one to two years, becoming the first Japanese financial institution to retreat from the city amid rising concern about the city's financial role under China's national security law.

The company is considering a retreat from the city as Hong Kong's status as an international financial hub is likely to decline in the future, a spokesman at the Tokyo-based brokerage said, confirming earlier reports by Japanese media. SBI may help set up an international financial hub in western Japan's Kansai region which encompasses Osaka, the Nikkan Kogyo reported earlier, citing the broker's chief executive Yoshitaka Kitao.

SBI, which operates a licensed brokerage in Hong Kong's Admiralty, employs between 50 and 100 people in the city, the spokesman said.

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The move by SBI comes as Japan's government is undertaking efforts to recruit financial firms following Beijing's adoption of a controversial national security law for Hong Kong, which critics say threaten freedoms in the city. Prime Minister Shinzo Abe, who recently announced plans to resign due to health reasons, said in June that Japan could potentially take in financial workers and other Hong Kong residents with specialised skills following the law's adoption.

Japan's top financial regulator, the Financial Services Agency, also announced plans in August to undertake potential tax reform and other measures to help attract more financial firms to the country.

More than a third of Japanese companies operating in Hong Kong said in July they were considering reducing their operations following the passage of the national security law, according to a survey.

China's new security law, enacted in July, has also become a flashpoint between Washington and Beijing as relations between the world's two largest economies deteriorated to their lowest point in decades.

Nearly 40 per cent of the members of the American Chamber of Commerce in Hong Kong said they were considering relocating from the city in a poll released in August.

Last month, the United States placed sanctions against 11 Hong Kong and mainland officials, including Chief Executive Carrie Lam Cheng Yuet-ngor, leaving financial services providers in the city in a delicate position and making day-to-day life more challenging for sanctioned officials.

Foreign financial providers could potentially face US sanctions themselves if they engage in significant transactions with individuals who have eroded the city's autonomy, whilst the national security law prohibits the imposition of sanctions, blockades or other hostile actions against Hong Kong or the mainland.

In August, Vanguard, the world's second-biggest asset manager after BlackRock, said it planned to close its Hong Kong and Tokyo offices and exit its exchange-traded fund business in the city following an "extensive review" of its international operations.

Vanguard, which had US$6.2 trillion in assets under management globally as of January 31, said at the time that the decision followed an extensive review of its international business to better align with its individual-investor driven strategic focus. The company's future focus in Asia will be mainland China, with its primary regional office in Shanghai, a Vanguard spokesman said.

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.

Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.