Hong Kong and mainland Chinese authorities plan GBA Wealth Management Connect scheme overhaul, allowing Chinese investors access to global equities
- GBA authorities finalising details of expanded Wealth Management Connect scheme, allowing mainland investors to buy global equity products
- The spillover impact of the banking crisis in the United States and Europe on Hong Kong and broader Asia is ‘minimal’
Plans are being finalised for upgrading the Wealth Management Connect scheme to include benefits like allowing residents of the Greater Bay Area (GBA) to buy global equity products, said Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA) on Tuesday.
Authorities in the bay area are discussing these changes to widen the product suite, increase quotas for individual investors and simplify the selling process, he said at the Bloomberg Wealth Asia Summit in Hong Kong. Investors in the bay area are currently allowed to buy only bond funds.
Yue also commented on the risk of spillover from the banking crisis in the US, saying Hong Kong is not seeing any impact.
“We will soon be introducing Wealth Management Connect 2.0 … We’re finalising our discussions with the mainland authorities,” Yue said. “I hope it can come soon, because it is the right time to put it out when we have started to open our borders, when flows will come this way [to Hong Kong].”
The long-waited expansion, which also aims to enhance financial connectivity between the cities in the bay area, raises hopes among financial institutions looking to tap mainland investors for funds as the world’s second largest economy reopens in the post-Covid era.
‘Higher quotas, more choice’ are key to Wealth Management Connect scheme
The current quota for an individual investor taking part in the scheme is 1 million yuan (US$144,399) on a remittance basis, with the total quota of the scheme set at 150 billion yuan (US$21.7 billion).
More than 20 Hong Kong banks, including HSBC, Standard Chartered and Bank of China (Hong Kong) are selling Hong Kong investment fund products to the residents of bay area cities through their mainland banking partners.
The spillover impact of the banking crisis in the United States and Europe to Hong Kong and broader Asia is “minimal”, Yue said, referring to the recent collapse of three mid-size American banks and rescue of a systemically important European bank.
“We’re not seeing any concerns from investors or depositors … The banks here are very well capitalised, [and have] big buffers,” he said, referring to the city’s prudent standards. These include an average 20 per cent capital adequacy ratio requirement for local lenders versus the 8 per cent global standard, and a 160 per cent liquidity coverage ratio requirement compared with the 100 per cent international requirement.
He expects Hong Kong’s economic growth to be at the upper end of the forecast band of 3.5 per cent to 5 per cent, as tourist arrivals and investments into the city have both surged after the borders reopened at the beginning of this year.
The HKMA will hold the Global Financial Leaders’ Investment Summit in November, with 30 chief executives of global financial institutions confirmed to participate as of now. As part of the HKMA’s 30th anniversary commemoration, a gathering of global central bank governors has been convened to discuss global trends as part of the Bank for International Settlements Special Governance Meeting.
