On 12 July 2024, Hong Kong’s Securities and Futures Commission (SFC) published the findings of its annual Asset and Wealth Management Activities Survey for 2023 (Survey).
Overall, the asset and wealth management industry in Hong Kong saw positive growth in 2023, with a 2.1% year-on-year increase in its assets under management (AUM) to HK$31,193 billion. This was drive by a 342% surge in net fund inflows to HK$389 billion. Specifically:The AUM of Mainland headquartered licensed corporations (LCs) and registered institutions (RIs) in Hong Kong increased 4% year-on-year to HK$2,678 billion, a 50% rise since 2019. Their net fund inflows grew 16% to HK$153 billion.The net asset value of Hong Kong-domiciled funds authorised by the SFC rose 5% to HK$1,351 billion, with net fund inflows up 93% to HK$83 billion. The number of registered open-ended fund companies (OFCs) also increased 118% to 244.Hong Kong remained the world’s largest offshore renminbi deposit pool, with Renminbi (RMB) deposits totalling RMB1,134 billion as at June 2024, a 135% increase from 2022.
The Survey also highlighted recent developments to facilitate cross-border transactions and strengthen cooperation between the Mainland and Hong Kong financial markets. Such developments include:The cross-boundary Wealth Management Connect (WMC) scheme was enhanced to expand the scope of products and participants. This will allow Hong Kong-licensed brokers (other than banks) who wish to distribute eligible investment products, i.e. (i) Hong Kong domiciled funds authorised by the SFC and assessed as “non-complex” in accordance with Hong Kong regulations and “low risk to medium risk” by the Hong Kong bank distributing such funds; (ii) bonds assessed as “low” risk to “medium” risk and “non-complex” by Hong Kong banks distributing such bonds; and (iii) RMB, Hong Kong dollar and foreign currency deposits, through the enhanced WMC scheme, but the brokers will need to identify a partner broker in the Mainland. The partnership agreement must clearly define the parties’ respective obligations and operational arrangements. Additionally, existing investment account terms and conditions will need to be supplemented with provisions specific to the WMC scheme, such as investor undertakings and the onboarding process. Asset management firms can also expand the range of products offered to Mainland investors. The increased investment quota and eligible product scope will better meet investors’ demand for diversified investments, presenting new opportunities for Hong Kong-based fund managers. For details of the enhanced WMC scheme, please refer to our client alert of 2 February 2024.The China Securities Regulatory Commission (CSRC) announced initiatives to increase capital market cooperation with Hong Kong and improved the Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme. The CSRC has published a public consultation paper on proposed rule amendments to enhance the MRF scheme. The key draft proposals include: (i) Relaxing sales restrictions for recognized Hong Kong funds in the Mainland. Currently, the value of units sold to investors in the host market is capped at 50% of the fund’s total assets. This cap will be increased to 80%. (ii) Allowing delegation of investment management functions for recognized Hong Kong funds. Currently, such functions cannot be delegated to a firm outside the home market. After the enhancement, recognized Hong Kong funds can delegate these functions to an overseas entity within the same group, located in a jurisdiction that has a regulatory cooperation agreement with the CSRC. In a reciprocal move, the SFC will also relax the relevant restrictions on recognized Mainland funds accordingly. For detail of the CSRC’s proposed amendments, please refer here.
