The launch of the Guangdong-Hong Kong-Macau Greater Bay Area Wealth Management Connect (WMC) by the Chinese government earlier this month has offered immense opportunities for financial institutions to penetrate the deep pockets of residents in the area, according to Cerulli Associates’ newly released report.
The programme enables eligible mainland, Hong Kong and Macao residents in the Greater Bay Area (GBA) to invest in wealth management products distributed by banks in each other’s market, through a closed-loop funds flow channel established between their respective banking systems.
“While initial two-way capital flows could be small, fund managers who see long-term growth potential in the scheme should understand investors’ product preferences, deepen collaboration with both onshore and offshore distribution banks, and enhance their brands by building or leveraging on strong research and investment capabilities, in order to stand out from the competition,” said Ye Kangting, senior analyst at Cerulli.
“The GBA WMC scheme is likely to be better received among qualified mass affluent and middle-class, instead of high net-worth (HNW) investors, as many HNW individuals in Guangdong province already possess private banking accounts in Hong Kong, and some entrepreneurs have accumulated sufficient overseas assets for offshore investing,” she added.
The aggregate investment quota stands at RMB150bn ($23.2bn) for both northbound and southbound, with a quota of RMB1m per person.
The research firm estimates that the GBA produced annual gross savings of RMB4.7trn last year.
The Beijing administration also revamped the Qualified Foreign Institutional Investor and Renminbi Qualified Foreign Institutional Investor schemes in September 2020, allowing foreign fund managers to invest in China’s onshore equities and bond markets.
After obtaining the necessary licenses to operate in China, foreign asset managers should match their organisational structures and strategies in China, and retain the people with the appropriate abilities, Cerullli noted.
“A foreign manager’s success depends on its ability to establish itself locally and market its brand and funds. Achieving this demands a robust organisational structure and qualified talent,” said Cerulli.
Other liberalisation measures introduced by the Chinese government include cross-listings of ETFs between China and other economies, an expanded Qualified Domestic Limited Partner pilot scheme, and an updated Qualified Foreign Limited Partner programme in Beijing and Shenzhen.
