Big break for Bay Area with wealth connect

Top News | Kevin Xu 30 Jun 2020

The quota of the newly unveiled cross-boundary wealth management connect pilot scheme is said to be 150 billion yuan (HK$164 billion) for each side.

The connect scheme - allowing residents of Hong Kong, Macau and nine Guangdong cities to buy wealth management products in each other's markets - was jointly announced by the People's Bank of China, the Hong Kong Monetary Authority and the Monetary Authority of Macao.

Banking revenues in the Greater Bay Area are expected to hit US$185 billion (HK$1.44 trillion) by 2025, according to the Hong Kong and Shanghai Banking Corp.

The scheme has southbound and northbound components. Under the northbound connect, residents of Hong Kong and Macao can invest in eligible wealth management products distributed by mainland banks in the Greater Bay Area.

Under the southbound connect, residents of the mainland cities in the Greater Bay Area can invest in eligible products distributed by banks in Hong Kong and Macau.

Cross-boundary remittances will be carried out in yuan, with currency conversion conducted in the offshore markets. Cross-boundary fund flows under the scheme will be subject to aggregate and individual investor quota management.

Andrew Ng Wai-hung, group executive and head of treasury and markets at DBS, said the 150 billion yuan quota is "not very high" as there is a huge demand for wealth management products in the Greater Bay Area, which has a population of nearly 70 million people and ample capital.

The connect will bring opportunities to banks in both Hong Kong and the mainland, said Zhuo Chengwen, chief risk officer at BOC Hong Kong.

The date of the connect's launch and implementation details will be announced later. The HKMA said it will work with the Hong Kong Securities and Futures Commission, mainland authorities and the financial industry to formulate the implementation details.

These include investor eligibility, mode of investment, scope of eligible investment products, investor protection and handling of disputes.

"The two-way cross-boundary wealth management connect marks another important milestone for the mainland's capital account liberalization after the stock connect and the bond connect schemes," said Eddie Yue Wai-man, HKMA chief executive.

"It represents a major breakthrough in Hong Kong's offshore renminbi business development and a significant step to foster closer financial cooperation in the Greater Bay Area.

The Hong Kong Association of Banks and the Hong Kong Investment Funds Association said they welcome the scheme.

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