By Xie Yu
HONG KONG (Reuters) – Hong Kong funding merchandise reminiscent of insurance coverage and high-yield time deposits are seeing resurgent demand from rich Chinese language who’re aiming to defend returns from a home financial and property sector downturn and in addition a weaker forex.
The pattern turned evident final yr however has accelerated in current months after China relaxed funding guidelines for the ‘wealth join’ programme in February, Hong Kong wealth managers mentioned.
It’s sparking a scramble amongst monetary corporations in Hong Kong to grab the chance and may assist town burnish its standing as a wealth hub that has been hit in recent times by pro-democracy protests, Beijing’s tighter management, and geopolitical tensions.
These elements had pushed shoppers and wealth managers to foray into or broaden in rival Singapore.
“There are about 45 million affluent individuals in China, and increasingly they want more international exposure, education, and protection,” mentioned Maggie Ng, HSBC’s Hong Kong head of wealth and private banking.
“There is an increasing demand to manage wealth outside of China.”
Launched in late 2021, ‘wealth join’ permits residents of 9 cities within the southern province of Guangdong, which borders Hong Kong, to purchase funding merchandise bought by banks in Hong Kong and Macau, whereas permitting residents of the 2 offshore centres to do the identical on the earth’s second-largest financial system.
Beneath the programme, investments by mainland traders into Hong Kong and Macau hit a document month-to-month excessive of 13 billion yuan ($1.8 billion) in March, up practically eight occasions from February, information from the Chinese language central financial institution confirmed.
Inflows in April grew 70.5% from the previous month to 22.3 billion yuan, the info confirmed, whereas northbound investments in April by Hong Kong and Macau residents had been simply 14 million yuan, largely unchanged for the reason that programme was launched.
HSBC, a number one wealth supervisor in Hong Kong, noticed new account openings within the metropolis rise by greater than thrice in 2023 from the pre-COVID stage in 2019, pushed primarily by Chinese language mainland retail wealth shoppers, mentioned Ng.
The robust momentum has continued within the first quarter of this yr, she mentioned, declining to offer particulars.
Other than the mass prosperous who’re utilising the cross-border funding channels, extremely wealthy folks from China and Southeast Asia are additionally exploring their choices in Hong Kong, in accordance with executives at world wealth managers.
“If we look at the inquires (from potential family office clients) that we got last year versus the previous year, we’re talking about an 85% increase,” mentioned L.H. Koh, head of worldwide household and institutional wealth APAC, at UBS.
Greater than 60% of the inquiries in Hong Kong are about establishing household office-type entities within the metropolis by primarily Chinese language shoppers, he mentioned, including that the pattern has continued this yr.
‘SITTING ON CASH’
Whereas there are nonetheless tight capital controls in China, with a person allowed to remit a most $50,000 per yr, the tripling of the funding cap to three million yuan beneath the ‘wealth join’ programme in February has bolstered outflows.
China presumably is much less fearful about outflows beneath the programme as a result of the investments are ultimately required to be remitted again to the nation.
Wealth managers in Hong Kong are pushing the authorities to additional calm down the funding scheme to fulfill the demand of richer shoppers to maneuver bigger sums to Hong Kong, business executives mentioned.
The Hong Kong Financial Authority would “continue to explore further enhancement measures in due course, taking into account the industry’s feedback as appropriate”, town’s de-facto central financial institution mentioned in a press release to Reuters.
To capitalise on the momentum, some banks in Hong Kong have began providing as a lot as 10% a yr rates of interest on short-duration time period deposits as a part of the wealth hyperlink programme in comparison with about 2% provided by the banks within the mainland.
Apart from banks, Hong Kong-based insurers have additionally seen a surge in demand from mainland prospects since border controls beforehand put in to curb the unfold of COVID had been lifted in early 2023.
Horace Yip, Citigroup’s non-public banking head of Hong Kong and Better Bay Space, mentioned the financial institution noticed document new account openings in Hong Kong in 2023, and the momentum remained robust this yr, due to the demand from mainland Chinese language shoppers.
The surge in demand comes in opposition to the backdrop of Chinese language mainland traders going through restricted choices to park their money at dwelling, as yields of long-dated bonds have dropped to document lows.
China’s forex is hovering round its weakest since 2008. And shares and property have seen returns plunging.
“Many mainland people are now sitting on cash,” mentioned 51-year-old Ms. Wang, proprietor of an web agency in Shenzhen whose bets on opaque funding merchandise at dwelling soured after the collapse of a number one shadow financial institution late final yr.
Wang mentioned she has since parked her cash in a present account within the mainland, and is finding out the ‘wealth join’ programme now.
($1 = 7.2552 renminbi)
(This story has been corrected to repair the identify after the subhead to Yip, not Yep, in paragraph 7)