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By Xie Yu
HONG KONG (Reuters) – Hong Kong funding merchandise similar to 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 foreign money.
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 stated.
It’s sparking a scramble amongst monetary companies in Hong Kong to grab the chance and may assist the town burnish its standing as a wealth hub that has been hit lately by pro-democracy protests, Beijing’s tighter management, and geopolitical tensions.
These elements had pushed purchasers and wealth managers to foray into or increase in rival Singapore.
“There are about 45 million prosperous people in China, and more and more they need extra worldwide publicity, schooling, and safety,” stated Maggie Ng, HSBC’s Hong Kong head of wealth and private banking.
“There’s an rising demand to handle wealth exterior 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 offered by banks in Hong Kong and Macau, whereas permitting residents of the 2 offshore centres to do the identical on the planet’s second-largest economic system.
Below the programme, investments by mainland traders into Hong Kong and Macau hit a report month-to-month excessive of 13 billion yuan ($1.8 billion) in March, up almost eight instances 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 have been simply 14 million yuan, largely unchanged because the 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 purchasers, stated Ng.
The robust momentum has continued within the first quarter of this yr, she stated, declining to offer particulars.
Aside from 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 line with executives at world wealth managers.
“If we take a look at the inquires (from potential household workplace purchasers) that we bought final yr versus the earlier yr, we’re speaking about an 85% enhance,” stated L.H. Koh, head of world household and institutional wealth APAC, at UBS.
Greater than 60% of the inquiries are about organising household workplace kind entities in Hong Kong by primarily Chinese language purchasers, he stated, 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 underneath the ‘wealth join’ programme in February has bolstered outflows.
China presumably is much less nervous about outflows underneath 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 loosen up the funding scheme to fulfill the demand of richer purchasers to maneuver bigger sums to Hong Kong, business executives stated.
The Hong Kong Financial Authority would “proceed to discover additional enhancement measures sooner or later, taking into consideration the business’s suggestions as acceptable”, the town’s de-facto central financial institution stated 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% supplied by the banks within the mainland.
In addition to 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 have been lifted in early 2023.
Horace Yep, Citigroup’s personal banking head of Hong Kong and Larger Bay Space, stated the financial institution noticed report new account openings in Hong Kong in 2023, and the momentum remained robust this yr, due to the demand from mainland Chinese language purchasers.
The surge in demand comes towards 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 report lows.
China’s foreign money is hovering round its weakest since 2008. And shares and property have seen returns plunging.
“Many mainland folks at the moment are sitting on money,” stated 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 stated 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 Chinese language yuan renminbi)
(Reporting by Xie Yu; Modifying by Sumeet Chatterjee and Muralikumar Anantharaman)
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