The total transaction amount of investment products sold in Hong Kong fell 12% last year to HK$5trn ($639.5bn), according to a joint survey by the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority.
Despite the drop in transaction amount, the number of entities engaged in the sale of investment products in Hong Kong rose 5% year-over-year to 390.
The number of investors that bought investment products in 2021 also increased 5% to 770,000.
The report found that the decrease in total transaction amount was primarily attributable to a drop in the sale of structured products.
“Firms generally commented that the drop was due to unfavourable market sentiment and volatile markets in 2021 caused by the continuous impact of the Covid-19 pandemic, heightened geopolitical risks and expectations of interest rate hikes,” according to the survey.
Structured products continued to be the predominant product sold in 2021, with HK$2.4trn sold, down 14% from a year earlier, and equivalent to 48% of overall products sold.
This was followed by collective investment schemes (CIS) (HK$1.5trn), equivalent to 30% of products sold, and debt securities (HK$818bn), equivalent to 16%.
The most common structured products sold for the year were equity-linked products, accounting for HK$1.7trn or 70% of total structured products sold during the year.
Among the top five equity-linked products sold, 53% were comprised of internet and technology companies, down from 64% in 2021.
Meanwhile, traditional industries such as financial and automotive sectors became more popular in 2021.
“Some large firms attributed the increase in client activities in equity-linked products to buoyant equity markets, particularly the US market, which experienced a strong rally during the first half of 2021 amid abundant liquidity provided by central banks as monetary stimulus,” said the report.
“However, these activities gradually slowed during the rest of 2021 as investors began to worry about the high valuations of stocks and tightening of mainland regulatory policies on technology companies.”
Collective investment schemes
CIS was the only category that recorded a year-over-year increase in transaction amount, according to the survey. Only HK$1.4trn worth of CIS were sold in 2020.
“The increase in the overall sale of CIS was driven by the 8% increase in authorised CIS to HK$927bn in 2021,” the survey found.
A large distributer observed that clients were interested in investing in authorised CIS with technology themed funds or funds that post higher returns such as high-yield bonds funds and US equity funds.
Some large firms also observed that the demand for ESG-related funds picked up during 2021.
The popularity of CIS was further boosted as some companies with large retail client bases offered small-value cash investment services on their online platforms so that their clients could invest their short-term idle cash into authorised money market funds, the survey found.
In 2021, 70 firms used online platforms to distribute investment products, a 21% increase from the survey last year.
CIS remained the most popular product type, accounting for 91% of total online sales. About 65% of clients investing in CIS transacted online and the online sale of CIS accounted for 18% of the transaction amount of all CIS sold.
The survey was conducted with more than 300 firms that have sold investment products to investors in 2021, including 308 licensed corporations and 64 registered institutions.
“The survey reveals increased retail participation in the investment market, notwithstanding the difficult market environment and an increasing trend for firms to use online platforms for distribution,” said Julia Leung, deputy chief executive officer and executive director for intermediaries at the SFC.
“It yields useful information on market trends and distribution channels for the industry participants and regulators alike to better serve the interests of retail investors.”
