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Strong Hong Kong demand for structured products

Equity-linked vehicles gained traction among HK$5.7trn of all investment products sold in 2020, regulators found.
Hong Kong, Central District - Hong Kong, Hong Kong Island, Victoria Harbour - Hong Kong, Global Business

The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) announced the results of their first joint survey on the sale of non-exchange traded investment products.

“This information helps the SFC and HKMA supervise the selling practices of intermediaries and coordinate their responses to address areas of common concern,” the SFC said in a statement.

Structured products transactions lead all other product types with HK$2.76trn ($355bn), accounting for 48% of total transaction amounts in 2020.

The most common structured products sold for the year were equity-linked products (HK$1.60trn), especially stocks of internet and technology companies.

“Globally, economic activities during the reporting period were greatly affected by the Covid-19 pandemic, with a few remarkable exceptions such as businesses in the internet and technology sectors which facilitated non-face-to-face interactions and online activities,” according to the report.

Collective investment schemes (CIS) were the second most common structured products sold for the year with HK$1.43trn.

Money market funds, which were of higher quality and offered more liquidity during the pandemic, were the most popular fund type with 52%, followed by bond funds at 31%.

The survey also found that equity funds reported more inflows, especially those investing in technology, health-care and ESG-related stocks, as the market rebounded in the second half of 2020.

Online platforms

The SFC and the HKMA noted that the use of online platforms facilitated the distribution of CIS, with 54% of clients investing in CIS transacted on online platforms and online CIS sales accounted for 18% of the transaction amount for all CIS sold.

“With the aid of online platforms which facilitated the distribution of investment products, more investors could put their short-term idle cash in liquid money market funds to improve investment returns,” the survey found.

In 2020, 308 licensed corporations and 64 registered institutions reported selling investment products, with the participation of more than 700,000 investors.

Part of the Mark Allen Group.