You've been at Citigroup now for just over a year. How does it compare with Peregrine?

Leung: The main difference is that I've been able to leverage a global platform to serve my major Francis Leungclients like Cheung Kong and Hutchison. This was one of the main attractions coming here. When I was at Peregrine and then BNP Paribas Peregrine, it was difficult to compete with some of the global investment banks on the international deals. But since I've been here, I've done a number of international deals for the Cheung Kong/Hutch group. For example, we've done two fund raising deals for Hutchison in Australia and one M&A deal for Cheung Kong Infrastructure. We did a bond issue late last year and then recently we completed a convertible for Hutchison Telecom. Also we did a $400 million bond issue for Husky Oil about a month or so ago. So I've been able to use a global franchise to serve clients that have a global presence. CK Life is another example. I was able to draw on biotech expertise from other places to serve the company. Biotech is a new area in Asia, so it would have been difficult to find the expertise here.

When I was with BNPP I got a large share of the domestic business from Cheung Kong/Hutch. But outside of HK, it was difficult and in 2000, for instance, Cheung Kong and Hutch weren't doing that much local fund raising except for tom.com. Other than that, most deals were outside of HK, like the disposal of Orange and so on. I'm now quite confident that with the strength of our product capabilities here and our global platform, I can serve my clients much better.

Do you think Hutchison will become an active issuer again in the near future? The company's spread levels seem to be on a downward trajectory at the moment.

No, I don't think so as Hutchison has a lot of cash sitting in the bank. And I don't think they will make any major acquisitions in the telecom sector. They will focus on 3G. On the retail side, they might look for some acquisitions in Europe and with the ports division I think they'll continue to make acquisitions if the price is right.

I'm not a fixed income expert, but part of the spread widening has been due to the fact that all Asian corporate spreads have widened, although the absolute level hasn't increased because Treasury rates have come down. The other reason is because of their telecom exposure, which isn't really justified as their telecom projects are already fully funded.

What's your take on the IPO for CK Life you recently completed?

To have that kind of oversubscription in these kinds of markets is a big achievement. To a certain extent it was due to Mr Li's good name. But CK Life also has strong management. Victor Li is chairman, HL Kam is CEO and Edmund Ip is also a senior director.

But how much time do any of them devote to CK Life? It's a very small part of the empire at the moment.

That's true, but in terms of growth potential, Mr Li and Victor consider CK Life to be a very important company in the group. Mr Li told me that one day in the future, he believes CK Life might become as large as Cheung Kong. And I think he was quite serious. Cheung Kong's other businesses are quite steady. Even the property market is quite steady. In terms of earnings potential, in terms of geographical coverage, in terms of scope of business, CK Life is the one.

Do you really think so? Biotech is very new in Asia and many believe there are no proper foundations for it to grow.

You have to look at Mr Li's career, to see how he's been successful in the past. In the 1950's and 1960's he was a hard working entrepreneur. He had little education and he worked in a factory. But at that time he recognized the rich resources of Mainland China. He saw that all the immigrants coming across the border to Hong Kong would provide an abundant labour pool. So he made use of the cheap labour to manufacture plastic flowers and then export them.

From there he diversified into property during the late 1960's and 1970's when the economy picked up. He saw that the immigrants would want to buy houses and improve their living conditions. So he made money in the boom. Then in the late 1970's he took advantage of an opportunity to acquire Hutchison Whampoa from Hong Kong Bank, which was under receivership. Hutchison was a conglomerate, which had nothing to do with plastic flowers or property. But Mr Li had the vision to build a business upon this flagship, although admittedly one of the initial attractions was to get hold of Hutch's land bank. But he went on to use this platform to diversify into ports, telecoms, retail. He tried new things.

But these industries already existed. Biotech is completely new to Asia.

When he diversified into telecoms that was totally new. He originally invested in a distant kind of technology under the brand name of Rabbit in the UK. That one lost money, so he closed it down and started Orange. Subsequently he sold Orange and made a lot of money.

He's not trying to create a whole new business. In China there's a lot of expertise in the biotech area and a lot of research that's already been done. He's tapping into this pool and wants to use his expertise to commercialise it and develop new business.

Do you think CK Life will grow organically or be quite acquisitive?

I think it will be both. If you look at CK Life, it's focusing on five product streams, but they're all based on the same technology platform. So the company will stay focused on this technology stream. But I would not rule out some acquisitions, particularly on the distribution or manufacturing side. CK Life will take a global view and it is their mission to become a global biotech company. But with certain products, they may start in Asia first.

How did you experience as an underwriter compare with tom.com?

Honestly speaking tom.com did not have much substance at the time of listing. It was only a portal, but now it's become a solid multi-media company.

And I heard that from concept to listing, the whole process only took about six weeks.

No, no, it wasn't as quick as that. You're probably talking about the time from application to listing. But basically, there are not that many comparisons because we're talking about different companies, different strategies, different markets. But what I did learn was to avoid long queues of retail applicants at the receiving banks. That's why we used three receiving banks this time rather than one and opened 50 branches. A lot of people also applied for shares through the internet this time. About 40% of retail applications in dollar terms came this way.

But in the press there were some comments that the response must be very lukewarm as the queues weren't very long. In HK, some investors seem to like to see queues. When they see long queues, they think the issue is hot and pile in. It's very sensational and sends the wrong message. We shouldn't judge the success of an issue by the size of the queue.

Why do you think Li Ka Shing turned up to the press conference himself?

He just wanted to make a toast to the board of directors. He really loves this company and really hopes it will become a major entity within the Cheung Kong empire.

How would you describe your China strategy? Some people have said your aim is to find the next Li Ka Shings and then stick with them as they grow their companies in the hope of capturing most of their future business.

Actually we have a two-pronged approach. On the one hand, we're still focusing on the elephant deals like Bank of China and China Telecom. At the moment, this is the area where most of the revenue will come from. But what's also important for China's overall economic growth is the development of the private sector. Its development will help solve the country's unemployment problems, for example, and speed up economic growth and reforms too. In the future, some of these entrepreneurs will become very successful businesspeople.

Have you discovered any of them yet?

We need to be patient. But I do think the change in leadership will herald another period of fast growth. This year growth has been quite respectable. But because of the 16th party congress, which is being held in the last quarter of the year, a lot of decisions have been put on hold and reforms have slowed down.

Are you targeting particular industries?

No, it's a very broadbrush approach. What's important is the quality of the entrepreneur not the industry he or she comes from.

So are you optimistic that the China market is coming back after a very quiet year?

I definitely think we'll see more IPO's in the second half of the year. China Telecom is working very actively towards its flotation, but other than this, most deals will only be medium-sized offerings. They should be around the $200 million mark or so.

In terms of the big elephant deals, I don't think many mandates will be awarded for the rest of the year. Progress restructuring the SOE's has been affected by the imminent change in leadership. Major decisions have been postponed. For example, we saw very little progress in the power sector restructuring. An industry structure was announced, but implementation has been very slow because key appointments haven't been made yet.

And when will we see Citigroup's first big deal out of China?

Ah, big elephant deals need to be worked on for at least two to three years.

Perhaps I should say, 'when will we hear about your first big restructuring mandate'?

Next year, I think depending on the market. Yes, hopefully next year.