Peregrine collapses in East Asian turmoil

The collapse of the Peregrine Group, Hong Kong's largest home-grown financial conglomerate, was confirmed yesterday. Stephen Vines reports from the former British colony on the rise and fall of a high-flyer.

When the Peregrine Group was founded, just under 10 years ago, it was widely seen as being the brightest and best connected kid on the financial services block. In just a couple of years the group looked set to fulfil this early promise.

Picking up the pieces after the world-wide stock market collapse of 1987, Peregrine was a driving force in attracting international attention to the promise of Far East markets. It played a big role in the development of China's capital markets and helped generate the excitement which sent share prices surging in other Asian emerging markets.

Backed by some of Hong Kong's most prominent tycoons, notably Li Ka-shing and Larry Yung, the most powerful Chinese mainland businessman based in Hong Kong, Peregrine scooped up the cream of the initial public offering business and gathered a string of blue-chip clients. Before it collapsed yesterday, Peregrine had become the biggest home-grown Asian financial conglomerate outside Japan.

It was founded by Philip Tose, the son of a former managing partner in the blueblood stockbroker's Vickers da Costa, and Francis Leung, who is well connected with the mainland Chinese-associated companies which became the darlings of the Hong Kong stock market in the mid-1990s.

Typically Peregrine established itself in Asian countries by forming good relations with the leaders of these nations. Many of them liked the outspoken views of Mr Tose who declared himself to be a advocate of autocracy. He spoke the language authoritarian governments liked to hear. None more so than the rulers of Indonesia where Peregrine ultimately met its fate by advancing a short term loan to a transportation company called Steady Safe, which has connections with Indonesia's ruling Suharto family. The $260m unsecured loan to Steady Safe was equivalent to more than a quarter of Peregrine's shareholder's equity.

It is still not clear why Peregrine made such an extraordinary commitment. The loan was brokered in the fixed income department headed by Andre Lee, the Korean whizz kid, recruited from Lehman Brothers. Andre Lee was regarded as a star whose judgement was vindicated by the small fortune he earned for Peregrine. As a god of the bond market he was left to his own devices.

Outlook, page 19

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