TLDR:
– Hong Kong’s fund industry is on the road to recovery, says a director from the city’s financial watchdog.
– Increasing the city’s global appeal and strengthening connections with other markets are top priorities.
Hong Kong’s fund industry has shown resilience in the face of macroeconomic challenges and is starting to rebound, according to Christina Choi, an executive director at the Securities and Futures Commission (SFC). Choi stated that 2023 was a challenging year due to high interest rates, inflation, and geopolitical tensions, but the asset-management industry remained comparatively resilient. Hong Kong-domiciled funds experienced 5% growth in assets under management in 2023, with net inflows increasing more than 200% year on year in the first three quarters to HK$54 billion.
To ensure future development, Choi highlighted the three-year strategic priorities for Hong Kong’s securities market released by the SFC. These priorities include maintaining market resilience, enhancing the appeal of the city’s capital markets, improving operational efficiency, leading financial transformation through technology and ESG (environmental, social, and corporate governance). Choi emphasized the importance of updating and implementing international standards while also considering product approvals in Europe.
The SFC aims to expand mutual recognition and cross-border trading schemes with mainland China, while also exploring opportunities in other markets such as the Middle East and other parts of Asia. Hong Kong, as Asia’s largest hedge fund hub and cross-border wealth management center, has an asset management business worth over HK$30.5 trillion, with the majority of funding sourced from non-Hong Kong investors.
Choi also discussed the focus on environmental, social, and corporate governance (ESG) in the fund industry, particularly in tackling potential greenwashing. Hong Kong has issued clear guidance on how regulators allow retail funds to name and market themselves as “ESG funds.” Choi emphasized the importance of good disclosure-based approaches and annual assessments of ESG goals.
In conclusion, Hong Kong’s fund industry is seeing signs of recovery and is prioritizing increasing its global appeal and strengthening connections with other markets. The SFC aims to maintain market resilience, enhance the city’s capital markets, and promote ESG practices, while also expanding cross-border trading schemes with mainland China and exploring opportunities in other regions.
