It’s hard to recall now, but for more than 20 years Jardine Fleming was the name to beat in Hong Kong merchant banking. From its launch in 1970 as a joint venture between the ultimate British Hong Kong firm, Jardine Matheson, and Scottish asset manager Robert Fleming, to its sale to JPMorgan Chase in 2000, it was a pioneer, not only dominating markets but often inventing them in the first place.
Nobody was as influential in that journey as Alan Smith, who joined in 1972 and was later chief executive for 11 years and chairman for a further two.
Smith had come to Hong Kong to teach law in 1970.
“When I came here, it absolutely was not a financial centre,” he says over lunch in Tai Kwun, the redeveloped police station and barracks; in earlier days Smith, a justice of the peace, has visited its jail. “It was a place that made cheap toys and textiles. The fourth-biggest business here was human hair wigs.”
Finance didn’t come into it and, with the Cultural Revolution underway in China, there was no business from there.
Setting up a merchant bank was therefore a leap of faith for all involved. The founders went to see John Cowperthwaite, the financial secretary of Hong Kong, to tell him their plans and seek whatever permissions might be required.
“Jolly good,” Cowperthwaite told them. “But I don’t really know why you came to see me. As long as you don’t break the law, good luck.”
Smith was involved in Hong Kong’s first-ever contested takeover bid, helping Hong Kong Land buy Dairy Farm in 1972, “which at the time, largely, was a farm up in Pokfulam,” he says. “Of course our client’s interest was the real estate: they didn’t want cows wasting it.”
There weren’t really any rules for takeovers and there was talk of following the British code – “like playing mahjong to the rules of bridge,” Smith recalls – and Smith ended up being the principal author of Hong Kong’s takeover code himself.
Over the years many more British merchant banks appeared, but none challenged JF’s dominance, nous or ingenuity.
“Most people who worked there in that period felt it was tremendous fun,” he says. During his time as chief executive the average return on shareholder funds was 60% a year.
Looking back on the bank’s eventual sale, by which time Smith was vice-chairman at Credit Suisse, he thinks it “probably was inevitable”. By the end Jardine Fleming was making more money than Robert Fleming.
“There are two ways you can look at that. You can lie back and enjoy it and say: ‘Let’s hope this keeps going’ or you can say: ‘It’s quite a risk for our business.’”
The collapse of Barings probably didn’t help and neither did a scandal in the asset management arm in 1996. The bank was sucked up in industry consolidation.
So what is its place in history?
“Well, we definitely opened up the markets here,” says Smith. “We were a pioneer and an innovator in all sorts of things.”
Often he hears of people claiming to be the first to do things and recalls Jardine Fleming did them years before, “like depositary receipts. We were doing Japanese depositary receipts in the early 1970s. Takeover bids, convertible bonds, warrants – we were the first.”