Finance lobby group calls for bolder overhaul of Wealth Management Connect scheme to boost Chinese investments

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  • The investment quota for individuals should be raised to 8 million yuan (US$1.1 million) from 3 million yuan, says the CEO of ASIFMA
  • The scheme should also include products that mostly invest in global markets like the US and Europe, the lobby group suggests

Regulators should take bolder steps to expand the Wealth Management Connect scheme and encourage more investments in Hong Kong products by mainland China-based investors, according to a finance lobby group.

The government’s recent adjustments are “steps in the right direction”, but further relaxations are needed, as the support provided now is “not significant” enough to revitalise the industry, according to Peter Stein, CEO of Asian Securities Industry & Financial Markets Association (ASIFMA).

The scheme should raise the investment quota of individual investors to 8 million yuan (US$1.1 million), up from the current 3 million yuan, Stein said. That would allow them to meet the threshold for being classified as “professionals”, giving them access to a wider range of products.

The scheme should also open more products to mainland investors, such as those managed by subsidiaries of Hong Kong-domiciled funds and primarily investing in global markets like the US and Europe, said Eugenie Shen, head of ASIFMA’s asset management group.

Giving mainland users more diverse choices could boost investments, she said. “It’s really about mutual benefits for both the industry and investors.”

Launched in 2021, the Wealth Management Connect scheme allows residents of Hong Kong, Macau and nine cities in Guangdong province to invest directly in approved wealth management products across borders.

The Hong Kong Monetary Authority and People’s Bank of China last month announced new measures to further improve the platform, including raising the individual quota from 1 million yuan to 3 million yuan, and adding higher-risk products.

Despite the expanded offerings, currently only funds domiciled in Hong Kong are eligible for sales, which limits the investment choices for mainland investors and constrains the platform’s potential, according to Shen.

Hong Kong asset managers should also be allowed to provide more advisory services, so that mainland investors can be better educated on the products on offer, she added.

Founded in 2006, ASIFMA is an independent industry association representing global banks and asset managers, aiming to promote capital market development in Asia.

The group suggests that mainland market regulators should also relax cross-border information sharing by international financial firms.

Last year, the Chinese government said that cross-border financial information will be more intensely scrutinised as a matter of national security, but the official guidance is “somewhat unclear” and concerning for market participants, Shen said.

If authorities allow foreign asset management firms to share their research in China with overseas entities, it could help enhance market credibility and attract more investments from abroad, she said.

“At least for the time being, the economic outlook in mainland China is still unclear and our members, some of the largest global financial institutions, tend to be more conservative,” Shen said. “So it’s good timing to implement further reforms, attract more foreign investors and shore up confidence.”

 

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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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