Beijing’s plan of passing a national security law in Hong Kong by August has not only created political tensions locally but also internationally. Just after China announced that it will draft a national security law, US Secretary of State Mike Pompeo declared that Hong Kong is “no longer autonomous”.
The US administration said it intends to revoke Hong Kong’s preferential economic and trade treatment from the US.
Pompeo’s comments have led to concerns over Hong Kong as an investment destination, especially given that the SAR’s currency is pegged to the US dollar, according to David Gaud, Singapore-based chief investment officer and head of discretionary portfolio management for Asia at Pictet Wealth Management.
“What is critical for us and to watch carefully, among other things, is the Hong Kong dollar peg, which has made the Hong Kong dollar very stable for many years. A sudden change in that rule will have a major impact on the valuation of assets in Hong Kong,” Gaud said at a recent media briefing.
However, he dispelled investor concerns over the currency and explained that the US dollar peg is independently managed by the Hong Kong Monetary Authority and is not subject to any policies enacted by the US.
“The peg is not put at risk by the removal of the ‘autonomous place tag’. These are different topics and the peg is very much managed by the HKMA, so we are confident about the currency now,” he said.
Financial hub status
Concerns have also been raised about Hong Kong’s status as a regional financial hub. But Gaud continues to believe that it will retain its place as hub for wealth managers.
“In Europe, the press has commented that Hong Kong is [in a difficult situation]. But we should not neglect the positives, such as Hong Kong being recognised as a wealth management hub in the Greater Bay Area (GBA),” he said.
“We are talking about the 140 million inhabitants who potentially are going to come and buy wealth management products in Hong Kong,” he said, noting that the development of a wealth management connect is still ongoing.
“When it comes to Hong Kong, we are still very much active and onboard and consider it as a key element in our Asia strategy,” he added.
Similarly, fund managers operating in the SAR continue to be positive despite Beijing’s planned imposition of a security law in Hong Kong, Bruno Lee, chairman of the Hong Kong Investment Funds Association (HKIFA), said recently. Like Gaud, fund managers see the GBA as a business opportunity, Lee said, citing survey findings conducted by the HKIFA.
