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Asset Management / Wealth Management
Wealth Connect sets no threshold for assets of Hong Kong investors
Banks urged to be more cautious in assessing northbound investors
Janette Chen 29 Jul 2021

Further details of the Wealth Management Connect revealed recently indicate that northbound investors face less requirements and restrictions compared to their southbound counterparts. Given this emerging scenario, Hong Kong banks need to be more cautious in assessing northbound participants.

The long-awaited investment scheme in the Greater Bay Area is expected to be launched soon. As preparations for its debut accelerate, Guangdong regulators are stepping up efforts to establish the GBA International Commercial Bank, which is aimed at capturing opportunities under the scheme. A working group is set to be revealed soon. Guangzhou Bank and Fortune Investment will participate as group members, while Guangzhou Metro is taking part as a shareholder, according to a source. 

Details of the Wealth Connect programme show that there will be no restrictions to the investable assets of northbound investors. Hong Kong citizens with ID cards who are not recognized as belonging to socially disadvantaged groups will be qualified as northbound investors, according to Hong Kong regulators.  

“Non-professional investors are allowed to invest northbound via the cross-boundary Wealth Management Connect,” says Eden Wong, CPA Australia's divisional deputy president for 2021 and chairman of the financial services committee in Greater China.

“These investors have varying degrees of investment knowledge and experience. It is therefore absolutely crucial for banks to carry out a comprehensive suitability assessment process to ensure that these investors are indeed not vulnerable customers and that the investment products are commensurate with their risk tolerance level.”

Furthermore, possible products available for southbound trading under the scheme include savings, low-to-middle-risk bonds, and funds registered in Hong Kong and recognized by the Securities and Futures Commission. 

“At the initial stage of the Wealth Management Connect, we believe it is appropriate to take a more prudent approach and limit the type of investment available to southbound investors to lower risk, simple, plain-vanilla wealth management products,” Wong adds.  

According to a new survey by the Hong Kong Monetary Authority, 95% of GBA mainland respondents are interested in investing in Hong Kong funds via the Wealth Management Connect to diversify asset allocation and risk, as well as to capture more overseas investment opportunities. The survey, conducted from April to May this year, covered 1,035 respondents.

“As both banks and investors become more familiar with the operation of Wealth Management Connect, and its regulatory framework, we would like to see a gradual expansion of its eligible product scope. We believe this will not only benefit Hong Kong-based investment managers and service providers but also allow mainland customers to diversify their investment portfolio,” Wong says. 

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