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Wealth Management Connect whets investor appetite
Southbound investors prefer funds while their northbound peers favour equity wealth management products
The Asset 1 Dec 2021

Funds are the preferred investment choice among eligible investors of southbound services in the Wealth Management Connect scheme in the Greater Bay Area, while northbound investors generally favour equity wealth management products, a recent survey finds.

A majority of southbound (91%) and northbound (76%) respondents say they are interested to participate in the cross-boundary scheme, with “products meet my needs” and “enrich investment portfolio” as the two main reasons, according to the online survey conducted by HSBC in October. The poll involved 2,300 residents in Guangdong, Hong Kong and Macau with one million liquid assets in local currency.

For southbound respondents interested in joining the scheme, 83% show interest in funds, compared to other eligible products such as Hong Kong dollar deposit (70%), bonds (57%) and foreign currency deposit (25%). For northbound respondents, equity wealth management products rank the highest(74%), followed by public fixed-income wealth management products (58%) and public securities investment funds (27%).

“Funds and equity wealth management products are the preferred choices as they provide investors a gateway to capture the opportunities from certain sectors or geographical markets, which may not be available to them previously outside the scheme,” says Daniel Chan, HSBC head of Greater Bay Area.

“The survey also reveals that investors are particularly interested in funds with exposure to technology, energy and biotechnology, which have shown rapid development in the past few years.”

Source: HSBC

Interestingly, while the scheme provides a new channel for investors to diversify and globalize their investment portfolio, majority (62%) of the southbound respondents express interest in funds with China exposure, significantly higher than Asia and global (both at 40%).

“This might be because investors prefer to start their overseas investment with something they are more familiar with,” Chan explains. “Also, as a number of well-known Chinese firms are only listed overseas, mainland Chinese investors may not be able to participate in their growth journey previously and may want to seize the opportunities by picking funds with China theme in the scheme.”

The survey also highlights that brand image (80%) is the most common criteria for southbound investors when choosing the bank for the service, followed by product variety (66%) and a user-friendly digital channel (59%). For northbound investors, the top focuses are service charge (67%), brand image (60%) and return of product (54%).

When asked about expected annualized return from the investment, over half (55%) of southbound investors and 44% of northbound investors are looking for 7-9% yield, while a considerable portion of respondents (28% of southbound and 40% of northbound) target at least a double-digit rate of return.

Separately, the survey shows differences in preference for how to manage investment under this scheme. Northbound investors are mostly happy with mobile or online platform (62%), while 52% of southbound investors opt for ways with human touch, such as via relationship manager, local or Hong Kong/Macau branch.

“Like other cross-boundary financial initiatives, investors will need some time and support to better understand the opportunities in Asia and global markets,” says Chan. “We are confident the demand will continue to grow when people are getting more familiar with the scheme and a larger variety of products are available. HSBC will continue to strengthen the product shelf and focus on customer education.”

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