Wealth Connect capped at 150b yuan each way

Business | Bloomberg and Reuters 23 Oct 2020

China's plan to allow investments for private wealth across the border between Hong Kong and its increasingly affluent southern region will be capped at 150 billion yuan (HK$174.01 billion) in each direction.

The Wealth Management Connect program, which will allow residents of Hong Kong, Macau and major cities in China's southern Guangdong province to invest across the border, will also have an individual quota of 1 million yuan, according to the Hong Kong Monetary Authority.

The program will take an "incremental approach, starting with a smooth launch with possibilities for enhancements down the road," a spokesperson for Hong Kong's de facto central bank said in an emailed statement to Bloomberg. "At the initial stage, available wealth management products will cover non-complex products with medium to low risk."

Hong Kong's Private Wealth Management Association hopes the launch of the program, which will initially target retail banking clients, will take place early next year, said its chairman, Amy Lo.

Meanwhile, China is preparing to grant additional quota for funds to invest in securities overseas, Caixin reported, a move that would allow more capital to flow out of the country.

The Qualified Domestic Institutional Investor quota will be bumped by US$10 billion in the near term, Caixin said on Thursday, citing an unidentified official from the State Administration of Foreign Exchange. An earlier version of the story had said the QDII would be increased by between US$2 billion and US$3 billion every quarter, with a cap for annual increases kept at US$10 billion. Caixin has since removed those references.

Separately, Citigroup is planning to include an investment banking unit in China to take advantage of an expected steady stream of big stock deals as the nation opens up and liberalizes its financial markets, a person familiar said.

In intensifying discussions in recent months, the bank's senior executives in Asia have been lobbying the bank's top brass in New York to revive an application as part of a plan to form a China securities business, the person said, asking not to be identified before a final decision is made.

In the currency market, the yuan retreated from a 27-month high yesterday as a weaker-than-expected official fixing and the approval of fresh outbound investment quotas suggested authorities have become increasingly wary over the recent rapid gains in the currency. The onshore yuan weakened 114 basis points to 6.6689 per US dollar.

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