Wealth converging on GBA: FS

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Financial Secretary Paul Chan

For Hong Kong’s asset and wealth management industry, it remains strong and resilient. Although we saw a drop in assets under management (AUM) last year – though still at US$4 trillion  it was consistent with the market returns in 2022.

 

And we continued to be Asia’s premier booking centre in terms of cross-border asset flows, with AUM totalling US$2.2 trillion in 2022.

 

The number of ultra-high-net-worth individuals in Hong Kong last year reached 12,500, making Hong Kong the world’s top city in which wealthy individuals manage their investment portfolios.

 

I take heart in this year’s “Hong Kong Private Wealth Management Report,” produced by the Association in concert with KPMG. The report notes, and I quote, “despite the challenges posed by COVID-19 restrictions and external headwinds, the city’s many advantages as a private wealth-management hub remain intact.”

 

Family Offices

I know that family offices are a key part of that business, and I am happy to share some exciting progress here in Hong Kong.

 

We welcome family offices from around the world to set up in Hong Kong, to tap into our unique advantages and far-reaching opportunities. To this end, in my Budget this year, I have allocated HK$100 million to support Invest Hong Kong’s team in attracting and serving more family offices.

 

Our Wealth for Good in Hong Kong Summit, in March, made that clear. On that occasion, we released our Policy Statement on Developing Family Office Businesses in Hong Kong. It outlines a range of measures to develop a favourable and competitive environment for global family offices and asset owners.

 

They include a new Capital Investment Entrant Scheme. It’s expected to channel substantial funds into Hong Kong’s capital market. We are actively pursuing it, and are finalising its details.

 

Our efforts include enabling regulatory measures. For example, amendments were made in May to provide profits-tax exemptions for family‑owned, investment-holding vehicles managed by single family offices in Hong Kong.

 

Our financial regulators also issued a circular on streamlining the suitability assessment for sophisticated professional investors, addressing a major regulatory pain point faced by the industry.

 

Regulation aside, we are nurturing a vibrant ecosystem to help the family offices sector prosper. In June this year, InvestHK launched its Network of Family Office Service Providers. The network offers members mutual business referral opportunities and facilitates concerted efforts in promoting the industry to target markets.

 

No less important, it also enables representation of the industry in policy advocacy, and allows the Government to brief the industry on our latest thinking and policy developments.

 

People are central to the wealth and asset management sector. That is why we have stepped up the development of Hong Kong’s talent pool. The Financial Services Development Council is setting up a new Hong Kong Academy for Wealth Legacy. Working with the Government, industry, and academia, it will offer talent-development services to industry practitioners as well as next-generation wealth owners.

 

Speaking of training talent for the sector, we appreciate the efforts of the Private Wealth Management Association (PWMA), in particular your training programme co-organised with the Hong Kong Monetary Authority to provide internships for our university students.

 

Hong Kong’s appeal to family offices also rests with our ambition to become the philanthropic centre for global family offices. Our recent initiatives in this direction include facilitating applications for charitable tax-exemption status. We have also increased, for the purpose of tax concessions, the beneficial interest a qualified charity may hold in family-owned investment-holding vehicles.

 

Besides, with the wonderful lifestyle that embraces the best of East and West – from children’s education, food and sports, to hiking trails, cultural life and much more – Hong Kong is the city in which people from all over the world would like to work, live and raise a family.

 

Yet, ladies and gentlemen, beyond the family offices sector, there are indeed good news, encouraging developments for the industry.

 

Opportunities brought by strategic enterprises

They include the opportunities brought by the coming of strategic enterprises. The Government of this term is keen on attracting strategic enterprises to settle in Hong Kong. These are companies in the fields of life and health science, artificial intelligence and big data, fintech, as well as advanced manufacturing and new energy. Just a couple of days ago, we welcomed around 30 such enterprises to settle or expand their business in Hong Kong. Together, they will bring some $30 billion in investments and create 10,000 jobs in Hong Kong, the majority of which are research and management positions. Coming with these enterprises are their founders, innovators and high-ranking executives. All the more so, a circle of companies in the ecosystem, the related industry chain and their management as well. This would mean more business for our asset and wealth management sector.

 

Wealth Management Connect

Then, the Greater Bay Area (GBA) Cross-boundary Wealth Management Connect Scheme. As you all know, last week the financial regulators of the Mainland, Hong Kong and Macau jointly announced enhancements to the scheme, to allow more residents and securities firms to participate, enlarge the scope of eligible investment products, increase individual investment quotas, and enhance promotion and sales processes. These will certainly bring new impetus to the growth of the asset and wealth management sector. With the GBA growing in affluence, the room for further growth is huge. We will continue to work hard to deepen the connect scheme.

 

Enhancing the securities market

In fact, a vibrant financial market, with a broad range of investment products, is crucial to the attractiveness and competitiveness of Hong Kong as an asset and wealth management centre. On this, we have never stopped moving.

 

One priority area is our securities market. Over the past few years, we have been working hard to enhance the competitiveness of our listing platform. I am sure you are aware of the various initiatives, and I am not going to recap here.

 

I would just like to highlight the recent setting up of the Task Force on Enhancing Stock Market Liquidity. Among other things, the task force will review the listing regime and the market’s structure and trading mechanisms. It will also explore how to broaden fund flows, attract more quality enterprises to list in Hong Kong, promote product innovation and diversity, and enhance price discovery and trading efficiency.

 

The task force will submit its report to the Government very soon.

 

Broadening fixed income assets

Another focus would be broadening Hong Kong’s fixed income asset offerings. This, of course, includes the bonds issued by the Hong Kong Special Administrative Region Government to the order of about HK$65 billion in each of the coming years. 

 

Indeed, the Hong Kong Mortgage Corporation is also one of the largest bond issuers in Hong Kong, with total outstanding debts amounting to HK$157 billion as at August this year. It has been extending its product variety to satisfy the investment community’s need for portfolio diversification and yield enhancement. For example, it has issued social bonds since last year, with a total issuance amount of around HK$31 billion equivalent.

 

Hong Kong has also seen a remarkable growth of renminbi and green and sustainable bonds. Last year, the volume of offshore RMB bonds issued in Hong Kong reached RMB330 billion, nearly 10 times the amount in 2010. Last year, the total amount of green and sustainable debt arranged or issued in Hong Kong exceeded US$80 billion, up more than 40% compared to the year before, with green bond issuance accounting for about one-third of the market share in Asia.

 

The launch of Swap Connect’s northbound trading, in May this year, also enables investors holding Mainland Government bonds to manage their risks.

 

More RMB product offerings

Speaking of RMB products, Hong Kong is making bold steps to boost the liquidity of offshore RMB, enhance the relevant infrastructure, and offer more investment and risk-management products denominated in the currency.

 

That, of course, includes deepening and expanding the connectivity with the Mainland’s financial markets. Through Hong Kong, investors are having convenient access to the Mainland’s stock, bonds, and now ETFs and derivatives. And vice versa for Mainland investors for products available in Hong Kong.

 

Another recent step forward was in June this year, setting in motion the Hong Kong Dollar-Renminbi Dual Counter for 24 major stocks listed on the Hong Kong Stock Exchange.

 

Concluding remarks

Ladies and gentlemen, there’s more, lots more, in the pipeline. Let me just say that Hong Kong is committed to sharpening our competitive edge in asset and wealth management, and no less so, in reinforcing and elevating the status of Hong Kong as an international financial centre.

 

Through it all, I know we can count on the support of the PWMA. The association, as Amy (Chairman of the PWMA’s Executive Committee Amy Lo) noted, is celebrating its 10th anniversary this year – a decade of working closely, and well, with its members, the industry and the Government for the long-term development, and flourishing, of Hong Kong’s asset and wealth management industry.

 

May I conclude by referring to this year’s Hong Kong Private Wealth Management Report once again. It says: “While geopolitical tensions are a concern for members and clients, what is often lost is the strength of Hong Kong as a wealth management hub. There is a need for a more proactive articulation and marketing of Hong Kong’s strengths, including the advantages of the ‘one country, two systems’ framework, the US dollar-exchanged rate and the free flow of capital…”

 

Financial Secretary Paul Chan gave these remarks at the Private Wealth Management Association Wealth Management Summit 2023 on October 6.



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