Unmatched opportunities: Why Hong Kong leads as Asia’s Wealth Management Capital
Hong Kong presents unique competitive edges to capture the accelerated wealth creation in China, across and even beyond Asia, creating unmatched business and investment opportunities for asset managers and high net worth individuals. With HK$9 trillion asset under management (AUM), Hong Kong ranked as the second largest wealth management booking center in the world. The annual report of Hong Kong Securities and Futures Commission recorded a steady growth in AUM with a 143[LJ1] % increase over the past decade. Here are the main reasons why Hong Kong attained the status as the leading destination for wealth management services.
1. Mature family offices catering to demand for sophisticated wealth management services
As the second largest economy in the world with a 1.3 million high net worth individual (HNWI) population, China offers tremendous demand for private wealth management services. China’s rapidly growing upper middle class are expecting an increasingly sophisticated services including intergenerational wealth transfer, diversification of investment portfolio and advisory services on alternative assets. In the meantime, international investors are eyeing on the economic opportunities in Mainland’s high-growth market.
Hong Kong’s international competitiveness in the family office industry is up and rising under the recent policy development, creating strong pull factors for Chinese and international investors alike to onshore to the city. Hong Kong has invested more than $100 million to establish the Hong Kong Family Office International Hub and launch the Capital Investor Entry Scheme to attract global family offices to move their wealth to Hong Kong[WA2] . Tax exemptions and incentives are offered to funds onshoring in Hong Kong through the Limited Partnership Fund System (LPF) which has attracted more than 600 LPF registered in Hong Kong by the end of 2022. [WA3]
2. A superconnector between China and the World
Hong Kong and the Central government of China has recently worked to further deepen economic connectivity and cross-border capital flow, connecting diversification need from both Chinese and international investors. Leveraging Hong Kong geographical proximity and the strong business and financial ties with China, Hong Kong serves as China’s leading conduit for foreign investment and its primary offshore capital-raising center. Unique access channels for cross-border portfolio investment flows to and from China, including Stock Connect, Bond Connect and the Mutual Recognition of Funds arrangement, enable overseas investors to access the Mainland capital markets with ease.[WA4] The government also worked to enhance talent flow and capital flow under the New Capital Investment Entrant Scheme (CIES), providing pathway of residency for investor interested in shoring in Hong Kong. In the span less three months, over 300 applications were filed with an expected investment amount to be brought to Hong Kong reaching over HK$10 billion.
Cross boundary Wealth Management Connect Scheme lowered entry threshold for southbound and broadened the investment options for investors, bringing more opportunities and dynamics to the wealth management industry in Hong Kong. The mechanism allows residents of Hong Kong, Macau and nine cities in Guangdong province to invest directly in designated wealth management products across borders. Since its launch, the scheme has attracted Chinese investors interested in capturing investment offshore. The amount of money traded under the scheme quadrupled to HK$ 54.5 billion in the first four months of the year, while the number of investors rose 60 % to 110,000. The individual investment quota of the scheme has been raised recently from HK$1.07 million (RMB 1 million) to HK$3.22 million (RMB 3 million) to serve the need of private banking customer, with ongoing consideration to further raising the quota to absorb the overflowing funds.
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Swap Connect is the world’s first derivatives market access scheme allowing international investors to trade and clear onshore RMB interest rate swaps in Mainland China without changing their existing trading and settlement practices. The scheme will act as channel for Northbound investment catering to the rising interest in Chinese bond markets.
3. Unwavering strength
Hong Kong's strategic position and unique investment opportunities continue to make it as the pre-eminent destination for wealth management services in Asia. As China's economic influence and the affluence of its population continue to grow, coupled with the city’s strong fundamentals and forward-looking initiatives, Hong Kong is poised to solidify its leadership in this vigorous sector for years to come.
[WA3]InvestHK: https://www.familyofficehk.gov.hk/media/axnnoujh/pub2.pdf