The Wealth Management Connect scheme will provide a whole swathe of Hong Kong investors with a new channel to tap mainland China’s growth story.
Each individual investors can invest up to 1 million yuan (US$155,259) in mainland Chinese mutual fund products through banks in the Greater Bay Area development zone. The initial total quota has been set at 300 billion yuan equally split between fund flows in both directions.
“I have invested in many different projects in different parts of China, as I strongly believe in the long-term growth of the country. As such, I welcome any new investment scheme, such as the Wealth Management Connect scheme, that will allow investors to participate and invest in the growth story of China,” Allan Zeman, the founder and chairman of Lan Kwai Fong Holdings and its namesake nightlife district in Hong Kong’s Central district, told the Post on Friday.
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The 72-year-old tycoon who first came to Hong Kong from Canada in 1970, added that he believed the new connect scheme would be popular.
Announced on Friday, the scheme also allows mainland Chinese investors to invest up to 1 million yuan in the about 300 fund products available through banks in Hong Kong. Unlike the cross-border investment links that came before it, the Wealth Management Connect is limited geographically to the Greater Bay Area. It enables residents in Hong Kong, Macau and nine Guangdong province cities to carry out cross-border investments in diversified wealth management products distributed by banks in the development zone.
A survey of more than 1,600 residents of the bay area conducted by HSBC in the fourth quarter found that 82 per cent of respondents were interested in the Hong Kong investment products that would become available through the new connect scheme.
Investors will need to wait at least another month to buy fund products, as Hong Kong banks need to conduct systems tests and submit applications seeking approval from the Hong Kong Monetary Authority to take part in the scheme.
“I would need to study the details of the scheme before I would decide if I would like to invest in the mainland fund products via the scheme,” Zeman said. “Obviously, the 1 million yuan cap for each individual investor is too small. However, I can understand that the scheme is newly launched. A small cap would be appropriate in the initial stage of operation, and we believe the authorities will gradually increase the limit in future to meet the needs of large investors.”
Hongkongers living in the development zone have also welcomed the move. A housewife who only gave her name as Mrs Chow, said her husband, an accountant from Hong Kong working in Shenzhen, received his salary in yuan and the couple could only invest in yuan time deposits and property.
“Since we are from Hong Kong, we cannot invest in any mainland fund products, as this would be considered cross-border trading even though we live in Shenzhen,” she said. Mainland Chinese time deposits offer an annual interest rate of about 2 per cent, far lower than the about 5 to 8 per cent offered by many fund products in China.
“I am looking forward to opening an account to trade the products once the scheme starts operations,” she added.
The move to strengthen cross-border investment capabilities within the Greater Bay Area was welcomed by Raffles Family Office, which has offices in Hong Kong, Singapore and Shanghai and invests on behalf of 150 wealthy families. “We welcome efforts … [that] will elevate the region’s position as a wealth management hub,” said Kwan Chi-man, founder and CEO of the family office.
“The scheme allows us to diversify our investment to China. For me, a 1 million yuan cap for each individual investor is a good starting point for the learning process about the new cross-border investment scheme,” said Sal To Wing-nin, director of the Yixin Catering Group. He said he was going to invest in mainland fund products via the new connect scheme.
Others were taking a more cautious approach. “I may invest in the scheme in the future, but not now. Beijing’s regulatory crackdown on technology and the private tutoring sectors has made the market very volatile,” said Alex, an engineer who wanted to be identified with only his first name. “I would like to wait until the market becomes more stable before I invest.”
The connect scheme presents significant opportunities for the asset management industry with new growth prospects for banking and wealth management, financial industry group Asia Securities Industry & Financial Markets Association said on Friday. With enhanced financial product variety for bay area residents, the connect could promote capital flows and expect deepened financial cooperation and connectivity between mainland China, Hong Kong and Macau.
“This is a major breakthrough, as it is the first connect scheme specifically designed for individual investors and provides Greater Bay Area residents with a convenient channel for cross-boundary investment in diversified wealth management products,” said Mark Austen, the association’s CEO.
Additional reporting by Iris Ouyang
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
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