Banks in the Grande Baie region prepare for cross-border investment program

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Hong Kong banks are preparing to participate in an experimental program to sell cross-border wealth management (WMP) products in the Greater Bay Area, although detailed rules for the program remain unresolved.

The cross-border wealth management pilot program will allow mainland residents of the nine cities of Guangdong in the Bay Area to invest in certain products sold by banks in Hong Kong and Macau. Residents of the two special administrative regions will be able to invest in eligible products distributed by the continental banks in the area.

A draft regulation for the program was released in May, but no detailed document has been released on the types of WMPs that will be available. China has set an initial quota of 150 billion yuan ($ 23.1 billion) for the pilot program. The cap on an individual’s investment has been set at 1 million yuan, according to the project.

Caixin interviewed 17 Hong Kong banks and branches of mainland and foreign banks. Eleven said they plan to participate in the Connect program. Among them, four have disclosed initial plans for products they intend to deliver to mainland investors.

The Hong Kong Monetary Authority (HKMA) has communicated with mainland banks and regulators on implementation to speed up preparations for the launch of the program. Details will be released in due course, the regulator said in response to an investigation from Caixin.

HKMA chief executive Eddie Yue told Caixin in an interview last year that qualifying products will mostly be relatively low risk at first, as for many investors this will be the first time to engage in investments. cross-border investments.

Since investors from Hong Kong or Macao will need to travel to the mainland to open investment accounts in person and travel has been limit in the midst of the pandemic, only the southbound program will be launched initially.

The HKMA has issued guidelines to banks on the program, Caixin learned. A spokesperson for Bank of East Asia Ltd. told Caixin that, according to the guidelines, eligible products will initially include funds established and approved in Hong Kong, bonds and deposits in renminbi, Hong Kong dollars and foreign currencies. The bank said it plans to provide the products to investors on the mainland.

Shanghai Commercial Bank, a Hong Kong-based bank, told Caixin that it plans to provide several medium to low risk investment products, including retail bonds, foreign currency deposits and global concept funds.

HSBC has said it will provide medium to low risk investment products, including bonds and funds, such as equity funds and money market funds. Bank of China (Hong Kong) Ltd. announced that it will launch WMPs with medium to low risks and simple structures.

Standard Chartered Plc has said it will offer deposits, currencies and funds as a first step and is actively preparing to launch retail bonds. The bank said at least 10 funds will be available, covering the global stock and bond markets. The bank said it was in talks with several large global fund companies over exclusive distribution deals.

Four in five mainland investors surveyed in the Bay Area said they plan to invest in Hong Kong through Cross-Boundary Wealth Management Connect, according to a survey by HSBC and Nielsen Co. in May. About two-thirds of those polled said they were optimistic about the outlook for the Hong Kong market, and 70% said they intended to increase their share of assets in the territory, according to the investigation.

Another survey by the Hong Kong Investment Funds Association (HKIFA) showed that around 95% of Bay Area investors expressed interest in purchasing Hong Kong fund products through the cross-border WMP connect program, with a expected average annual return of 13%.

Investment products that can achieve a return of 13% carry medium to high risk, such as stocks, but the program will initially provide only low to medium risk products, which may not meet investor demands. HKIFA President Nelson Chow Kin-hung said.

The HKIFA has estimated that 200 to 300 fund products are registered in Hong Kong and may be offered.

Meanwhile, Hong Kong banks are hiring talent for WMP products. HSBC is hiring 300 to 400 people in Hong Kong, and some of the new hires will be specifically for the WMP connect business. Citibank told Caixin it would hire more than 1,000 professionals in Hong Kong by 2025.

Contact journalist Denise Jia ([email protected]) and editor Bob Simison ([email protected])

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