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Greater Bay Area investors eye foreign products

Investors from the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) have a preference for foreign products over local ones, finds new research.
An aerial view of Hong Kong-Zhuhai-Macao Bridge in Zhuhai, Guangdong Province of China. The Hong Kong–Zhuhai–Macau Bridge is a bridge–tunnel system, which consists of a series of three cable-stayed bridges and one undersea tunnel, as well as two artificial islands. The bridge was opened on 23 October 2018.

Given similar risks and returns, 66% of surveyed GBA investors will look beyond local borders, according to a report by the World Economic Forum (WEF) and Oliver Wyman.

This should be welcome news for international fund houses, given that the GBA is home to 20% of China’s ultra high net worth (UHNW) and high net worth (HNW) households.

Further, 70% of the region’s UHNW and HNW individuals have expressed strong interest in capitalising on the GBA and increasing their investments in foreign financial products as they become available, the report said.

“As investors get access to more investment opportunities, they will naturally look to diversify their holdings, and they will look to get exposure to investment opportunities overseas,” Kai Keller, initiative lead at the WEF Beijing Representative Office, told a media briefing.

“The GBA is a very interesting region where new policies are being tested, like the upcoming Wealth Management Connect,” he added.

The survey also highlighted that wealthy GBA residents show a strong appetite to invest in new offerings.

The findings also revealed that while almost 90% of investors have existing stock investment experience, a similar number are unfamiliar with foreign financial products. More than 80% have not previously invested in any foreign financial products.

The survey collected more than 2,000 responses from investors in Mainland China and Hong Kong, and 80% of respondents were below 40 years of age.

A larger and more mature market

Over the past year, China’s asset management industry continued to grow with the industry’s assets under management reaching $18 trillion, according to Oliver Wyman.

“We have also witnessed a multitude of partnerships between domestic and global industry leaders being set up to service this ever-growing market,” Ray Chou, a partner at the firm, said in a statement.

“The GBA is expected to lead a plethora of innovative, cross-border asset management opportunities and thus provides important levers for global asset managers to expand their presence in China,” he added.

To grow investor appetite for professionally managed solutions, however, the industry and its regulators need to enhance product offerings for onshore investors by developing innovative asset classes and strategies, and stepping up services and investor education efforts.

This includes product innovation onshore within the GBA and Hong Kong products becoming accessible via existing GBA schemes, such as Wealth Management Connect, ETF Connect, Pension Connect and real estate investment trusts (REIT), the report said.

The introduction of Wealth Management Connect has served as a live case of rolling out purpose-built GBA infrastructure. Banks with strong onshore and offshore branches in the GBA will enjoy an advantage when leveraging this opportunity. They can support the required operations by enabling cross-border account opening, vetting and transactions, complying with onshore and offshore regulatory requirements, and building centralised and integrated operations, Jasper Yip, a partner at Oliver Wyman, said in a statement.

Part of the Mark Allen Group.