As part of efforts to further integrate the Greater Bay Area, or GBA’s economies, the launch of Wealth Management Connect will encourage GBA residents to access unique investment opportunities.
This is the first cross-border investment scheme in the region, which will allow residents of Hong Kong, Macau and major Guangdong cities to invest in asset management products distributed by banks in the Gulf region. For the development of the region, it is important to launch the Wealth Management Connect scheme to promote capital flows and investments in 11 cities and turn them into economic powerhouses.
Ajay Mathur (毛安杰), Managing Director and Head of Consumer Banking Group and Wealth Management at DBS Bank Hong Kong, is enthusiastic about the new venture and thinks it will be a win-win for all parties.
The rapid growth of a region in wealth is based on probability
China has seen the fastest growth in wealth among its global peers. GBA, in particular, is one of the richest regions in the country. It has a population of about 72 million and a GDP of 7 1.7 trillion. The need for financial services is growing, as a reflection of the strong growth of China’s wealth management industry which is expanding at an annual rate of 6-8%. Total assets managed by GBA alone have already crossed the 1 trillion mark.
Ajay further says, “We see huge opportunities to expand and deepen our business in GBM through the Wealth Management Connect scheme. Over the next three years, a quarter of our Hong Kong Treasury Wealth customer base is expected to come from GBA.” Asked how long it would take to see the impact of Wealth Management Connect, he said, “It’s a tough question, but I have to say it’s not a question, it’s a question of when. I believe the quota will increase in the future. My opinion is that this testing program will allow GBA residents to take water tests. Knowing what opportunities are available on the other hand will be a moment of discovery for them. So in the first stage, the types of products offered can be medium to low risk non-complex products because regulators rightly believe that when you test water you should test it gently. Once relaxed, the market can grow rapidly. ”
Diversification is the main advantage
Ajay believes that Cross-Boundary Wealth Management Connect will bring better diversification, which is the biggest common theme for investors both north and south.
They share, “The Wealth Management Connect plan will give GBA customers the opportunity to access a wide range of international investment products and asset managers. GBA will help improve the diversity and quality of the portfolio customers have. ”
“Increasingly investors including Hong Kong will benefit from further diversification, as these customers have limited access for a long time or are unaware of the opportunities on the other side of the border,” he says.
Ajay emphasizes that diversification is not limited to geographical diversification, but there are unique opportunities in the three markets of China, Hong Kong and Macau, and also diversification and currency diversification in the region due to trading in different currencies.
He gives an example, “We know that interest rates are high in China. Savings accounts in Hong Kong earn only one base point of interest rate. Savers in Hong Kong may consider putting money in bank accounts in China, especially when Wealth Management Connect is started, it will be much easier to open a China Bank account in Hong Kong. The second thing is the appreciation of the renminbi (RMB). Customers want to keep RMB deposits or RMB-designated investments in China. In addition, the country’s equity and fixed income markets are also likely to offer higher returns. So it may be a draw or a temptation for Hong Kong residents to consider investing in the North. ”
“On the other hand, mainland customers will be attracted by the more international and diverse range of investments in Hong Kong,” he added. “Some worry that the products offered by Wealth Management Connect are low risk low returns, so there is no attraction to investors in the main market who usually get higher returns when investing in local markets. But I think investors are also looking for risk diversification. They want to invest at least part of their portfolio in low risk assets. Moreover, through the program, they can get some of the best and reputed global fund houses, their research and investment capabilities as well as insights. ”
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Top Markets News journalist was involved in the writing and production of this article.