The bridge between emerging markets

Published: 26 May 2008

Over the past 20 years, China has grown to become a central player in the world's high-technology industries. Rapid industrialisation and economic growth, foreign direct investment and technology transfer have helped China become a highly attractive base for the development and provision of technology products and services.

While much of China's initial industrialisation was driven by demand and investment from the developed world, that pattern is changing. With many of the leading industrialised nations now experiencing economic downturns, the focus of China’s investments is increasingly turning to other emerging markets, where rising GDP, consumption and liquidity are driving strong demand for Chinese products.

Speeding up technological transfer

As a global bank with a long history of working in emerging markets, HSBC is well-positioned to connect potential investors with new markets and growth opportunities. Such is the case in China’s technology market, which has become a driving force behind the country’s manufacturing and export growth.

Since 2000, ASE Assembly and Test (Shanghai) Limited (ASET) has been a one-stop-shop offering outsourced semiconductor assembly and test services.

The company is a subsidiary of the ASE Group of Taiwan, which rose to become a leading integrated circuit back-end solution provider since 2003. Founded in 1984 in Taiwan, Advanced Semiconductor Engineering, Inc established its first overseas packaging and testing facilities in Malaysia in 1991and over the following decade, expanded its design, production and testing operations into China, Korea, Japan and the United States.

Last year, ASE integrated Global Advanced Packaging Technology (GAPT) in Shanghai, China, renaming the company ASE Assembly and Test (Shanghai) Limited (ASET). The subsidiary is expected to play an important role as China picks up production to meet the group’s expanding global business.

The right mix in a difficult market

ASET plans to set up two more outsourced semiconductor assembly and test (OSAT) services operations in mainland China. As the house bank of ASE’s China operations, HSBC played a key role in the financing of ASET’s expansion plans. The bank acted as joint mandated arranger and bookrunner for a USD147 million five-year syndicated term loan facility that was finalised early 2008.

Eight international and local banks participated in the transaction, demonstrating ASE Group's financial strength and high standing in the industry. Philip Lipton, managing director and head of HSBC Syndicated Finance, Asia-Pacific said the deal attested to HSBC's leading position in cross strait transactions between Taiwan and the mainland.

“We were working under difficult market conditions. Onshore liquidity had tightened in China and banks had to ration their lending. But we managed to get a good mix of international and local banks to invest,” said Mr Lipton.

“We had to come up with an arrangement that all the investors felt comfortable with. This underlines HSBC’s capability in structuring, executing and distributing syndicated loans.”

Sending the right signals

In another instance of HSBC helping to join up technology interests in both developed and emerging markets, HSBC acted as sole mandated lead arranger, facility agent and security agent in a USD228.5 million three-tranche financing for the procurement of a new telecommunications satellite by PT Indosat Tbk (Indosat).

The Palapa-D telecommunications satellite will be built by European satellite systems developer Thales Alenia Space. China is involved in the project through its export credit agency Sinosure and will deliver the satellite to orbit via its Long March 3B rocket.

The financing package, involving two tranches supported by Sinosure and France’s COFACE and a third commercial tranche, demonstrated HSBC’s joined-up approach in delivering multi-product, cross-border financing solutions between emerging markets.

The Palapa-D, which is expected to boost Indonesia’s telecommunications, television, internet and data communications industries, is scheduled to be launched in September 2009.

Benefiting from experience

As emerging markets increasingly look to one another to support domestic demand and manufacturing capacity, HSBC expects investment opportunities to continue to grow. And with HSBC’s established network reaching all the world’s key emerging economies, investors know that even in difficult economic conditions, HSBC can help bridge the gap between markets.