According to the content of the framework of wealth management link jointly released by the peoples Bank of China, the Hong Kong Monetary Authority and the Macao monetary authority in June this year, individuals of Guangdong, Hong Kong and Macao Greater Bay area can invest in the financial products sold by banks in Guangdong, Hong Kong and Macao. According to the identity of the purchasing entity, they can be divided into southbound and northbound. This means that for the first time, retail investors can directly open and operate cross-border investment accounts.
Bond funds are expected to take the lead
However, the regulatory authorities of the two places have not yet made clear the product scope of the wealth management link, and the market still has many different interpretations. Ding Chen, a member of the board of directors of the Hong Kong gold development board, told the 21st century economic report that at the initial stage of its launch, the products should be easy to understand and risk controllable and should be gradually launched. Southbound products can start with products with clear and simple structure, including public funds rated as medium and low risk by distribution banks, bond mutual funds recognized by the Hong Kong Securities Regulatory Commission, and Exchange traded funds or products, monetary funds and other products .
Zou Jianxiong, chairman of the Hong Kong Investment Fund Association, told the 21st century economic reporter that, considering that the customers in the mainland cities of Dawan district are not familiar with overseas investment products, financelink will mainly focus on some simple and low-risk products, such as bond funds, equity bond hybrid funds and low volatility balance funds, which will be included in the sales scope for the first time, but the stock base will be the first to be included in the sales scope The gold wave amplitude is large, so it may not be included in the first stage product range.
In fact, so far this year, the bond funds sold in the Hong Kong market have achieved quite well. According to the data released by the Hong Kong investment fund, Hong Kong bond funds contributed the most in the first eight months of this year, accounting for about 48% of the total sales volume of the industry. Among them, the inflow of global, Asian and high-yield bond funds is particularly strong. Between April and August, net inflows of US $696 million, US $2815 million and US $345 million were recorded respectively.
In contrast, in the first eight months of this year, equity funds had a total inflow of $16 billion, with total sales up 52% year-on-year. Although a net outflow of US $797 million was recorded during the period, it was significantly narrowed from the net outflow of $3.9 billion recorded in 2019.
Financelink is mainly aimed at individual investors. Therefore, in the initial stage of opening, it will focus on low-risk and high defensive products, including bond funds and monetary funds. These products have high transparency, complete management fees and other information, and will expand to more complex products, such as private equity funds and hedge funds, after the market matures gradually. Liu Mingyang, President of the Greater China branch of the Australian Society of Accountants in 2020 and partner of Deloitte China tax and business consulting services, told 21st century economic reporter.
Breaking the pain of mutual recognition of funds
Tu Zhensheng, director of International Securities Research Department of ICBC, told reporters of the 21st century economic report. At present, mutual recognition of funds has been implemented between the mainland and Hong Kong, but the number and scale of funds allowed to be sold between the two places are not large. It is expected that the number and scale of mutual fund products, including bond funds, can be increased under the framework of financelink.
On July 1, 2015, mutual recognition of mutual funds between the mainland and Hong Kong was officially implemented, which means that the mutual fund markets of Hong Kong and the mainland are open to each other. However, since the launch of the plan, it has been hot in the north and cold in the south.
According to the data, as of March this year, a total of 29 funds were allowed to sell northward. The Aum of mainland investors was 14.4 billion yuan. A total of 50 mainland funds were allowed to sell in Hong Kong, while the asset management scale of Hong Kong investors was only $374 million.
Tu Zhensheng admitted that under the current mutual recognition scheme, funds need to be approved one by one, and there is also a certain threshold, so there are not many approved funds. According to the 21st century economic report, Beishang fund is popular with mainland investors because it generally covers overseas markets and its product categories tend to be more diversified, covering global stocks and bonds. In contrast, the sales situation of Nanxia fund has been ignored. In addition to the weakening of RMB exchange rate, the setting of redemption fee for Nanxia fund has also affected its attractiveness.
According to the mutual recognition of funds, the asset size of the fund shall not be less than 200 million yuan or equivalent foreign currency; the fund shall not take the Hong Kong market as the main investment direction; and the proportion of the sales scale in Hong Kong shall not exceed 50% of the total assets of the fund. Take last year as an example, only 6 funds were released in the whole year.
In addition, under the current cross-border fund mutual recognition arrangement, mainland investors investment in Beishang fund is still restricted by the place of registration and can only subscribe to funds registered in Hong Kong.
Ding Chen, a member of the board of directors of the gold development board, and Mr. Qu Jinglin, the chief executive officer of the board of directors, suggested that the cross-border wealth management link could invest in UCITS fund products registered in Hong Kong, recognized by the SFC and approved by the SFC.
The Hong Kong Investment Fund Association (HKIFA) said that it hoped to relax the mutual recognition scheme with respect to the types of fund products, fund approval and practitioners qualifications sold in the Dawan district under the wealth link, such as the mainlands recognition of the qualification of local fund licensees, and the inclusion of funds sold in Hong Kong but not in Hong Kongs registered place into the fortune link.
Since 2012, Hong Kong has successfully become an Asian wealth management center. According to the statistics of the Hong Kong Securities Regulatory Commission, by the end of 2019, the assets under management of the asset and wealth management industry in Hong Kong increased by 20% to HK $28.8 trillion.
As one of the most developed regions in China, Guangdong, Hong Kong and Macao have gathered a large number of high net worth people. According to Huruns report in 2019, there are 285000 high net worth families with 10 million assets in Guangdong Province, and 679000 rich families with 6 million assets, ranking second in China, accounting for 17.3%.
With the growth of the wealth of mainland residents and the increasing demand for overseas allocation, Hong Kongs bond funds can provide them with more investment options, including the opportunity to invest in overseas bonds and obtain higher returns. Financelink is expected to bring incremental capital to Hong Kongs fund industry, which will help to consolidate the position of Hong Kongs wealth management center. Tu Zhensheng said.
In February 2019, the development planning outline of Guangdong, Hong Kong and Macao Bay Area (hereinafter referred to as the outline) has laid a solid foundation for the coordinated development of Hong Kong, Macao and nine cities in Guangdong Province and the creation of world-class urban agglomerations. The outline defines Hong Kong, Macao, Guangzhou and Shenzhen as the four core cities to promote the development of Guangdong, Hong Kong and Macao Bay area, and clearly positions Hong Kong as a global financial and asset management center.
From the perspective of capital sources, Hong Kong has always been popular with mainland and international investors. For five consecutive years, the proportion of assets derived from non Hong Kong investors exceeded 60%, and about 10% came from the mainland. At the same time, more and more mainland asset management institutions are located in Hong Kong. As of the end of last year, the number of licensed corporations and registered institutions established by mainland related groups in Hong Kong increased by 7% to 387 from 362 at the end of 2018.
Financelink will undoubtedly open up a new market space for Hong Kongs asset management industry. It is understood that all walks of life in Hong Kong can not wait to rub their hands. Wu Guanhao, partner of risk and control services of PricewaterhouseCoopers, said that many banks in Hong Kong have already made preparations. At present, some large banks are fully prepared and are expected to start in a very short time after obtaining regulatory approval.
Taking Singapore based DBS as an example, 21st century economic report has learned that it has set up a special team in Dawan district last year, and plans to further increase the staff of Dawan district team in the future, and apply for the establishment of a joint venture securities company in mainland China. Liu Mingyang believes that as the fund is mainly sold through bank platforms, it is expected that banks with branches in Guangdong, Hong Kong and Macao markets will benefit more in the first stage, facilitating investors to handle cross-border account opening and certification. At present, banks are preparing for cross-border account opening, quota allocation, logistics management, and determining which investors can participate. As the accounts opened by investors in banks are of an investment nature, which is different from traditional deposit accounts, banks are also actively discussing with regulators how to improve the account procedures and regulatory details for investors in both places to handle investment functions. For more information, please download 21 finance and economics app. Source: 21st century economic report editor in charge: Ren Hui_ NBJ9607
Taking Singapore based DBS as an example, 21st century economic report has learned that it has set up a special team in Dawan district last year, and plans to further increase the staff of Dawan district team in the future, and apply for the establishment of a joint venture securities company in mainland China.
Liu Mingyang believes that as the fund is mainly sold through bank platforms, it is expected that banks with branches in Guangdong, Hong Kong and Macao markets will benefit more in the first stage, facilitating investors to handle cross-border account opening and certification. At present, banks are preparing for cross-border account opening, quota allocation, logistics management, and determining which investors can participate. As the accounts opened by investors in banks are of an investment nature, which is different from traditional deposit accounts, banks are also actively discussing with regulators how to improve the account procedures and regulatory details for investors in both places to handle investment functions.
For more information, please download the 21 finance and economics app