China’s plan to turn the Greater Bay Area into a hub for wealth management products will help turbocharge Hong Kong’s fund industry, giving it an invaluable edge in warding off challenges from Singapore, market players said.
While Singapore is firmly entrenched in Southeast Asia, the former British colony could stake in a leading role in the broader Asian region with the opening up of the Greater Bay Area in the coming years, according to the Hong Kong Investment Funds Association (HKIFA).
“The Wealth Management Connect will expand the customer size of Hong Kong fund houses by 10 times,” Chairman Bruno Lee said in an interview with the Post. “This will be an important driving force to help Hong Kong to win over Singapore as a leading hub in Asia.”
The programme cannot come soon enough for the city whose future has been clouded by back-to-back turmoil, first from the anti-government protests last year and now the controversy over the national security law. Singapore, a perennial rival and a pillar of stability, is seen as benefiting from capital outflows from Hong Kong.
The new Connect programme will be the fourth China-Hong Kong cross-border financial plan, after the introduction of several stock and bond connections between 2014 and 2017. Mainland investors now contribute 5 to 10 per cent of daily stock transactions on the Hong Kong stock exchange, according to market data.
“These previous connect schemes have proven to be successful for their high turnover,” Lee said. “We expect the new wealth management scheme will follow the same growth pattern.”
The People’s Bank of China and financial market regulators first unveiled the proposal in 2019 and elaborated on the idea last month for a region that integrates nine southern Chinese cities with Hong Kong and Macau.
The plan seeks to reduce cross-border rules for 70 million residents in the 11 cities to access wealth products such as mutual funds amid an expected increase in the number of millionaires in a region with an estimated US$1.5 trillion (HK$11.6 trillion) in output, or as large as the Russian or South Korean economy.
Lee said the association has presented its “wish list” to the Hong Kong government. It includes allowing more than 2,000 products currently authorised by the Securities and Futures Commission to be sold to mainlanders.
“We also want to see a big quota for the whole scheme, and no cap on individual fund sales,” Lee added.
The southern Guangdong province, where the nine bay-area cities are located, has the second-highest number of mainland households with investible assets of over 6 million yuan (US$848,163), behind Beijing, according to the Hurun Institute.
The Wealth Management Connect will fuel assets under management in Hong Kong over the next decade, with global private banks and big players such as UBS and HSBC likely to tap into the bay area opportunities, according to a Bloomberg Intelligence report.
The Hong Kong Monetary Authority is working on the details of the scheme, according to the de facto central bank on its website. However, no tentative launch date has been announced.
About one-third of Hong Kong-based fund managers expect their assets under management from mainlanders to grow by 30 per cent between now and 2025, according to a survey by HKIFA and accounting firm KPMG last week.
There was US$3.25 trillion of investible wealth in Hong Kong in 2018, of which US$1.3 trillion came from cross-border sources, the Financial Services Development Council, a government body, said in February citing third-party data. The figures for Singapore were US$1.67 trillion and US$1 trillion, respectively.
As the first connect scheme for the Bay area becomes a test bed for financial integration, China may require Hong Kong-based fund managers to offer investment education and advisory services to mainlanders, said Christine Lin, a partner at consultancy firm EY.
BEA Union Investment, a Hong Kong-based fund house, is among money managers eyeing the growth potential, Chief Executive Eleanor Wan said.
“Wealth Management Connect has strategic importance for GBA to substantially increase opportunities for individual investors, industry players and talents,” she said. The programme can build on the existing strength of Hong Kong as a financial services hub, she added.
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