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China connectivity to fuel Hong Kong wealth management growth

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Assets sourced from the mainland is expected to grow 10 percentage points to 51% in five years, according to wealth managers and clients surveyed by the Private Wealth Management Association (PWMA) and KPMG China.

The survey was conducted among 33 PWMA member institutions, and 280 clients of member institutions from June to July 2021.

Mainland China, especially with the recent launch and future development of the wealth management connect, is expected to be the key driver of the industry growth.

“It was just launched, so there is an individual quota of HK$1m (£94,000, $128,000, €110,000) only. But, we are in close dialogue with the regulators in Hong Kong and mainland China to lobby to increase the personal quota to HK$8m and to widen the product scope,” said Amy Lo, chairman of PWMA.

Apart from mainland China, 85% of the surveyed firms believe targeting the second or third generation of wealthy families would be the biggest opportunity for the PWM industry to grow, while 73% of the respondents think attracting more family offices to set up in Hong Kong would be the way to expand the Hong Kong PWM industry.

ESG tilt

The report also showed that investors’ appetite for sustainable investing is expanding.

Although only 6% of the firms that responded said they have more than 10% of AuM allocated to ESG investment, the percentage of companies with over one-tenth of assets allocated to ESG is expected to jump to 72% in five years’ time.

“The Covid-19 pandemic has shed light on sustainability issues and raised private investors’ desire to align their portfolios with their own values,” said Paul McSheaffrey, partner, financial services, at KPMG China.

“While many choose to play a role in addressing social issues, the heightened demand for ESG investment products from private wealth represents a significant growth opportunity for private banks in Hong Kong, Asia and globally.”

In 2020, Hong Kong’s PWM industry saw a net fund inflow of HK$656bn. Combined with a 17.5% return on assets, the total AUM increased 25% to HK$11.3trn, according to the Securities and Futures Commission.

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