How keen is my rally

The Lehman Brothers minibond protesters set the benchmark in local activism, writes Stephen Vines

The protesters recently seen camping outside the Hongkong Bank headquarters had joined a global crusade against perceived corporate wrongdoing, known as Occupy Wall Street. But away from their demonstration, for several years now a local ad hoc protest group has been protesting against banks that sold defaulted Lehman Brothers minibonds.

Both movements have their supporters and detractors, but the minibond protests are an arguably more successful movement, and one that is all the more surprising for happening in the home of free markets and naked capitalism.

The problem for the global crusaders is that their targets, the elimination of market greed and reform of the banking industry, are too wide and imprecise to be met. They argue that this misses the point because the object of the protests is to raise awareness. But it begs the question of what comes next.

Other Hong Kong protests have been more sharply focused and far more successful in demanding - and getting - a result.

Most famous are the protests seen in Central over the past three years. They have been vociferous in calling for full compensation for the estimated 43,700 local investors, who bought so-called minibonds issued by the collapsed Lehman Brothers. They claim these complex leveraged products were anything but mini and certainly not bonds.

When Lehman collapsed in 2008 the investors faced a total wipeout of their investment (see Bonds Away).

These products had also been sold in Singapore and Taiwan. But there were only mass protests in Hong Kong. In Singapore, where protests are barely tolerated, the government told the bondholders they were on their own.

But it backtracked in the wake of the uproar in Hong Kong that forced the banks and the regulatory authorities into action.

Sixteen of Hong Kong's leading financial institutions had sold Lehman minibonds. Eddy Chan, the chairman of the investors group, has said many times, "the simple fact is these banks have deceived us".

This message of deceit attracted sympathy beyond the ranks of the bondholders. Legislators enthusiastically joined the clamour, media support also flowed and both the Monetary Authority and the Securities and Futures Commission launched investigations.

By 2009 the protesters managed to get some 60 per cent of their investments back.

But the tenacious demonstrators pressed for more, and last March a fresh offer was made, pushing up the recovery rate to a range of 85 to 96.5 per cent. Most of the bondholders accepted this settlement but a significant number continue to press for full recovery.

In the aftermath of the offer, The Economist magazine rather tartly commented that "the deal is seen as a consequence of shaming the financial institutions which sold the products into coughing up {hellip} Just how aggrieved investors had a right to feel is unclear: the products came with thick, and doubtless unread, prospectuses detailing the risks involved. But picket lines, clanging drums and acerbic signs focused the attention of bankers and regulators on the plight of people whose financial expertise amounted to spotting products with higher interest rates than low-yielding bank deposits."

The protests could hardly be described as lacking in self interest or "anti-capitalist". Indeed, as this commentary suggested, it was more a case of the so-called little man putting one over on powerful financial institutions.

But the minibond campaign caught a mood where suspicion surrounds big financial institutions and reflects a growing sense of unfairness in the way that the economy works.

No longer are the taipans of Hong Kong companies seen as heroes. Who now hears of Li Ka-shing being described as Superman, an admiring title that used to be frequently appended to his name?

Indeed, in recent times there have been unprecedented protests outside the offices of Cheung Kong, Li's parent company.

They also reflect the widespread sense of grievance that has been mounting over injustice in a society dominated by big cartels and an ever-widening wealth gap.

This summer the activists found an unlikely symbol of this injustice in the form of Ng Yuk-fai, an elderly egg waffle seller in Tai Hang who was repeatedly arrested for trying to make a modest living peddling his wares. Ng's case turned out to be rather more complicated than it initially appeared, but the image of a 74-year-old being repeatedly harassed by the government for trying to scrape together a subsistence living struck a definite chord with tens of thousands of people joining a Facebook group supporting his cause.

Earlier in the year the business community's decidedly most unpopular and most successful class of entrepreneur, property developers, took a direct hit when the builder of a luxury apartment block in Mid-Levels, called The Icon, was accused of supplying "rubbish dump" flats to the buyers. A litany of complaints was made over the state of flats when they were handed over to their new owners. These articulate middle-class buyers were quick to protest in a very public manner, attracting considerable media attention and support from members of the Legislative Council.

The voluntary guidelines for sales of new properties, laid down by the Real Estate Developers Association, were shown to be quite inadequate. In fact the developer, Winfoong International, was not a member of REDA and therefore not even covered by this form of flimsy self-regulation. As the dispute spread it soon became clear that the Estate Agents Authority, a statutory body regulating estate agencies in Hong Kong, was also powerless, or maybe simply not inclined to do anything.

But the storm of protest was growing and, in the end, the developer was forced to offer its customers the option of buying back their properties at 120 per cent of the original cost. Not surprisingly, most accepted and another victory for direct action was notched up.

There was less of a victory for residents of the Mei Foo housing estate, once a prime example of middle-class home ownership on a mass scale. Now they are up in arms over plans to build an adjacent complex, which they fear will degrade living conditions. It's an ongoing battle but the odds are heavily stacked against the protesters.

While property developers have long held pride of place in the pecking order of Hong Kong business, local people have also had an unusually high level of participation in the stock market and treated it with a mixture of awe and admiration, not least when new shares come to the market.

But even this halo is starting to crack. When Prada, the Italian fashion house, finally managed to secure a listing for its shares last June its debut was accompanied by small protests from women's rights groups proclaiming that "the devil is Prada", accusing the company of practising sexual discrimination.

It is impossible to say whether these protests had an effect on investors. But the IPO ended up priced at the lower end of its expected price range and experienced a weak debut, albeit in a weak market.

Protesters were also out on the streets at the end of last year for the debut of China Gold International Resources. The protest concerned its controversial activities in Tibet.

Unsurprisingly, most investors shy away from these protests and their success or otherwise is very hard to quantify.

But there is clearly a trend and it is changing the way that Hong Kong people view some of the icons of the local business world. In the case of Ng, the waffle seller even attracted the sympathy of the health secretary. Elsewhere, companies and their bosses are going out of their way to demonstrate their commitment to transparency and hearing the views of the public.

This is a sea change from the former emphasis on profits as the be-all and end-all of the story.

It is worth noting that not only were the Hong Kong anti-greed protests larger than in many other Asian cities that joined the global campaign, but in Leung Kwok-hung, Hong Kong has the only elected legislator who is a committed follower of Leon Trotsky.

But then again, Hong Kong is also home to a greater number of elected legislators who belong to the Democratic Alliance for Betterment and Progress of Hong Kong. The Alliance has its origins in left-wing politics and is one of the more enthusiastic cheerleaders for big business. In contrast, the predominantly middle-class, and decidedly non-socialist, Civic Party is more often than not on the barricades castigating big business. As ever, Hong Kong proves itself to be complex in interesting ways.

moneypost@scmp.com