Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence, the podcast
Speaker 1: that pulls back the curtain on global business so you
Speaker 1: can invest better across the Asia Pacific rim. I'm John
Speaker 1: Lee in Hong Kong. Hong Kong's wealth management industry is
Speaker 1: booming as rich mainland Chinese investors continue to pour funds
Speaker 1: into the city. Hong Kong's cross border wealth under management
Speaker 1: is now over two point two trillion dollars, making it
Speaker 1: the second largest in the world, and it's only a
Speaker 1: matter of time before it overtakes Switzerland as the biggest
Speaker 1: offshore finance center. What's driving China's individuals and families to
Speaker 1: invest overseas, what are they investing in and how will
Speaker 1: China's economic slump impact future flows. Here to discuss Hong
Speaker 1: Kong's wealth management industry is Lemiel Lee, head of Wealth
Speaker 1: management at BNP in Hong Kong, and Shani Wong, senior
Speaker 1: financials analyst that Bloomberg and tell ugents. Welcome, Lemuel and Channing.
Speaker 1: Thank you for having me here. Lemuel. What fact is
Speaker 1: a driving Hong Kong as a wealth hump?
Speaker 2: Well, several key opportunities are driving across the private wealth
Speaker 2: management industry in Hong Kong and Greater China. Firstly, the
Speaker 2: Hong Kong government is actively fostering a thriving ecosystem for
Speaker 2: family officers, making and attractive destinations for both clients and
Speaker 2: wealth management professionals. More importantly, initiatives like tax the new
Speaker 2: Capital Investment Entrance Scheme relaunched this year and other streamlined
Speaker 2: regulations are attracting families and entrepreneurs to establish a presence
Speaker 2: in Hong Kong, creating significant opportunities for wealth managers. Secondly,
Speaker 2: the continued growth potential in mainland China. While growth may
Speaker 2: have slowed, the sheer size and potential for the Chinese
Speaker 2: market reminds undeniable. Hong Kong serves as a crucial wealth
Speaker 2: management hub for its strategic location. Wealth managers with an
Speaker 2: onshore presence are well positioned to capitalize on this growth
Speaker 2: by catering for the growing affluent and high network segment
Speaker 2: that has an offshore need. Thirdly, well established capital markets
Speaker 2: Hong Kong is strengthening its position as a key connector
Speaker 2: between the Asia, the Middle East, and the mainland China.
Speaker 2: This interconnectedness, coupled with a revival and IPO activity, presents
Speaker 2: opportunities for wealth managers to offer investment solutions and capture
Speaker 2: a share of the growing capital flows or not. I
Speaker 2: see these three factors as the driving force to inflows
Speaker 2: in Hong Kong.
Speaker 1: Lemillu alluded to China's weak economic picture. It's well known
Speaker 1: that the country is suffering from a slow down. Its
Speaker 1: property market and stock markets are both pressed. Consumption is weak.
Speaker 1: But on the other hand, as we all know, mainland
Speaker 1: investors continue to pour money offshore. Are you surprised by
Speaker 1: the strength of all the flows given the weak economic picture.
Speaker 2: China continues to be a key growth drive in the region.
Speaker 2: Growth may have slowed down, but the potential is still huge.
Speaker 2: Our access and interactions determines our flows. For example, the
Speaker 2: connect schemes between Hong Kong and China enables international investors
Speaker 2: to gain broader access to onshore China capital markets. Through
Speaker 2: Hong Kong Remenbe internization presents opportunities for Hong Kong to
Speaker 2: position itself as an offshore Remenbee hub and wealth management
Speaker 2: center for remen Be assets for both China and international investors.
Speaker 2: In fact, after COVID, we have deepened interactions with prospects
Speaker 2: and existing clients. As Chinese investors get more sophisticated, our
Speaker 2: bankers have been taking the opportunity to engage in conversations
Speaker 2: around more complex wealth needs such as secession planning, family
Speaker 2: office setup, and wealth diversification for their offshore wealth, pivoting
Speaker 2: a lot from the traditional discussions around pure investments. The
Speaker 2: reduced iper activities and fundraising nevertheless has dampened overall investment
Speaker 2: sentiments and less pronounced wealth creations, hence less assets and flows.
Speaker 1: And where are the rich mainland investors?
Speaker 2: Like?
Speaker 1: Where they putting their money? Is it in like an
Speaker 1: S and P five hundred ETF? Is it gold? Is
Speaker 1: it bitcoin? Is it? You know? Money? Paintings give us
Speaker 1: some color? Where are they putting their money?
Speaker 2: Can I say all of the above?
Speaker 1: Okay? Look?
Speaker 2: After close to two years of pent up cash and
Speaker 2: deposit balances due to high interest rates, clients have finally
Speaker 2: started to return more broadly to lower risk and higher
Speaker 2: quality segments of the market. Top inflows were into fixed
Speaker 2: income such as global bond funds with a bias towards
Speaker 2: developed market and investment grade. These well rated bond funds
Speaker 2: provide relatively attractive, stable distribution income and our ideal position
Speaker 2: for the rates cut environment. Equities continues to build momentum,
Speaker 2: in particular towards Japan, India and US across different sectors
Speaker 2: related to technology. With heightened volatility, many clients choose to
Speaker 2: use structure products to cautiously enter the market to limit
Speaker 2: the downside. We also advocate higher portfolio diversification to improve
Speaker 2: risk return profiles for our clients and hence also saw
Speaker 2: good inflows for multi assets funds, but also to add
Speaker 2: higher components to alternatives including private debt, equity and hedge funds.
Speaker 2: In particular, liquid alternatives like relative value fixed income and
Speaker 2: long short global equity strategies receiving the best traction by
Speaker 2: Chinese investors.
Speaker 1: And you first mentioned bond funds. Now you can get
Speaker 1: much higher interest rates in the US and other parts
Speaker 1: of the world than in China. The US stock markets
Speaker 1: have also significantly outperformed those on the mainland. Is this
Speaker 1: also another reason why mainland investors want to invest overseas
Speaker 1: but just getting a lot better returns.
Speaker 2: I think returns headline is one target of which investors
Speaker 2: are yield seeking, but I think what's more the pertinent
Speaker 2: question is diversification. Many investors over the last four years
Speaker 2: have natural home bias and they've invested in their own markets,
Speaker 2: and we've seen the performance of Hong Kong and China
Speaker 2: as a result. They've learned the benefits of diversification and
Speaker 2: not only targeting returns with the US, but earlier mentioned Japan, India,
Speaker 2: and they're really yield seeking to find returns in those
Speaker 2: respective markets, and that's why we really see the benefits
Speaker 2: of dipersification outside of your home market.
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Speaker 1: me you're the head of wealth at BMP. A lot
Speaker 1: of listeners want to know how rich are these people.
Speaker 1: Are they sort of like crazy rich billionaires or are
Speaker 1: they more like the single digit millionaire types? Like what
Speaker 1: does it take to become a client of a private bank?
Speaker 2: Well, my definition private banking. There's several segments in the
Speaker 2: market but I'll use the industry standard of what we
Speaker 2: call the high network, which is generally between three to
Speaker 2: up to let's say twenty million or so, and the
Speaker 2: ultra high network, which is from normally thirty all the
Speaker 2: way up to one hundred or even to the billions.
Speaker 2: So the range is there. We are BNP par serve
Speaker 2: the spectrum of clients and are really agnostic to the size.
Speaker 2: What's more important is we're making sure that we serve
Speaker 2: the needs and the needs offshore.
Speaker 1: Okay, Shane, I want to bring you into the conversation.
Speaker 1: The chairman of UBS, Sergia Ermodi, warned earlier this year
Speaker 1: that Switzerland could lose its crown as the world's wealth
Speaker 1: management hub to Hong Kong. Now, can you give us
Speaker 1: some numbers? Is this a foregone conclusion and like when
Speaker 1: is this going to happen?
Speaker 3: Yes, right now, Hong Kong has roughly about two point
Speaker 3: two trillion of our cross border wealth and Fwitzerland is
Speaker 3: the head with about two point four tillion. But when
Speaker 3: we look at the growth opportunity, the growth in Asia
Speaker 3: is a lot faster than what we're seeing in Europe,
Speaker 3: which is a developed market. So you know, a slam
Speaker 3: also mentioned. A key driving force is China. It is
Speaker 3: the second largest in terms of wealth globally, behind the US,
Speaker 3: and people are still getting richer. You know, despite COVID
Speaker 3: and despite their current property slump, people still save a lot.
Speaker 3: You know, the savings rates really high, about the third
Speaker 3: of their income. And right now with the fact that
Speaker 3: property's done, you know, it's not an attractive investment. And
Speaker 3: then with deposit rate cuts, there is this huge drive
Speaker 3: for them to use that money and invest in high
Speaker 3: yielding investment products. And I think offshore is definitely a
Speaker 3: very attractive destination for them. Even if the FED cuts
Speaker 3: rates later this year, the yields on something very low
Speaker 3: risk like a time deposit, it's still far higher than
Speaker 3: what they get on shore. So I think this is
Speaker 3: one of the key drivers that is pushing a lot
Speaker 3: of onshore customers to Hong Kong.
Speaker 1: Okay, And when will Hong Kong overtake Switzerland? Do you think.
Speaker 3: When we look at the growth potential, so for Hong
Speaker 3: Kong it could grow roughly about six to eight percent,
Speaker 3: so it should happen within the next two to three years.
Speaker 1: And when a rich mainland investor decides to pour money overseas.
Speaker 1: It's not just Hong Kong. There's other options as well.
Speaker 1: There's obviously Singapore, there's also maybe potentially Dubai. How does
Speaker 1: Hong Kong compete for this money shanny. Yeah, So one.
Speaker 3: Edge that Hong Kong has that none of the other
Speaker 3: places have would be their infrastructure connecting Hong Kong and
Speaker 3: global investors with China. And also the fact that right
Speaker 3: now regulators are really prioritizing these cross border schemes. They're
Speaker 3: really pushing ahead. So for example, earlier this year they
Speaker 3: increase the quotas for the southbound Wealth Management to connect
Speaker 3: and also they relax the eligibility criteria for the ETF
Speaker 3: connect And there's just so much going on. So when
Speaker 3: we look at the flows through so many of their
Speaker 3: cross border schemes, like the Neutral Cognition A fund scheme
Speaker 3: for example, with AUM there surging. We look at the
Speaker 3: GDII funds on shore that is also accelerating. So it
Speaker 3: goes to show that policy support is also very important,
Speaker 3: and I think that is one key differentiating factor with
Speaker 3: Hong Kong. Thus is anywhere else.
Speaker 1: And lemme or did you want to add to that?
Speaker 2: Well, absolutely, I think Hong Kong and Singapore both possess
Speaker 2: key advantages that make them both leading hubs for managing
Speaker 2: private wealth in Asia. They both have their unique strength
Speaker 2: catering to varying client needs. Rather than competing I outside,
Speaker 2: they're often complementing each other in serving needs of sophisticated investors.
Speaker 2: Some families now opt to set up accounts in both cities.
Speaker 2: Client seed diversification not only at a portfolio level, but
Speaker 2: also the custody of assets in terms of location the
Speaker 2: versification we see the growth of Asian high network and
Speaker 2: Ultra high network population, further strengthening the proposition for both hubs.
Speaker 2: Emerging markets like to buy are also worth monitoring, but
Speaker 2: unlikely to supersede establish plays. Yet, when we talk about competition,
Speaker 2: one point that I want to highlight for us is
Speaker 2: the competition on talent. This is something that keeps me
Speaker 2: up every night. You know, how do we position ourselves
Speaker 2: as to go to bank to attract the right talents,
Speaker 2: to build a good working environment that enables our people
Speaker 2: to unleash their potential and perform at the best.
Speaker 1: I wanted to mention on Singapore. Now they had a
Speaker 1: huge money laundering scandal last year. Authorities jailed. I think
Speaker 1: a number of individuals from the mainland. I think it
Speaker 1: was over two billion dollars. It was reported by various
Speaker 1: press that the funds were from criminal activities. Now, the
Speaker 1: Singapore authorities subsequently tightened family office regulations, making it more
Speaker 1: difficult basically to park your money. There is this do
Speaker 1: you think benefiting Hong Kong at all? Like this money
Speaker 1: now moving.
Speaker 3: Back to Hong Kong, I think with Singapore's regulators really
Speaker 3: tightening the rules and you know, implementing tougher compliance criteria
Speaker 3: for a lot of these private banks, there could be
Speaker 3: a return of family officers to Hong Kong. So previously
Speaker 3: Singapore grew a lot faster than Hong Kong did, especially
Speaker 3: throughout COVID. There was a recent commission survey done by
Speaker 3: the Hong Kong government which showed that in Hong Kong
Speaker 3: there's about two thousand, seven hundred single family offices and
Speaker 3: then Singapore had about one thousand, four hundred. So right
Speaker 3: now Hong Kong family office space is still a lot larger.
Speaker 3: But I think going forward, you know, as Singapore's regulated
Speaker 3: tightened in terms of scrutiny on the industry, Hong Kong
Speaker 3: at the same time, they are easing rules to clean
Speaker 3: tax concessions. So I think for the next a couple
Speaker 3: of years we could see Hong Kong maybe extend its
Speaker 3: lead a little bit.
Speaker 2: I think what's important is to maintain a high standard
Speaker 2: of email vigilance in terms of onboarding, and I think
Speaker 2: Hong Kong over the years and decades there have been
Speaker 2: as an international hub, have maintained the standard, and that's
Speaker 2: why that has been proven to reinforce one of the
Speaker 2: earlier points around well capitalized our market. And that's in
Speaker 2: itself the attractiveness because of the soundness of the fact
Speaker 2: that Hong Kong remains robust as a world class international
Speaker 2: financial centers and has the ability to really make sure
Speaker 2: that the wealth comes in addressing this needs. I think
Speaker 2: it's more pertinent and also explains the reason why these
Speaker 2: inflows are being reinforced back into Hong Kong.
Speaker 1: And Lemielle, you talked about the war for talent. You
Speaker 1: are always trying to get the best people. Now, when
Speaker 1: I look at Hong Kong, I think a lot of
Speaker 1: people will be surprised at how strong the wealth management
Speaker 1: industry is doing. If you listen to the press, Hong
Speaker 1: Kong's property market is really suffering, especially on the commercial side.
Speaker 1: You know, Shannie mentioned that IPO activity is really down.
Speaker 1: Retail spending is down as well. But it seems like
Speaker 1: the wealth management industry is the one sort of shining
Speaker 1: light within the finance industry that's doing well. Are you
Speaker 1: getting a lot of people, a lot of cvs wanting
Speaker 1: to work at BMP, and how are you trying to
Speaker 1: attract the right talent?
Speaker 2: In terms of attracting talent, it's not something that we've
Speaker 2: only seen as the last couple of years. What's important
Speaker 2: to attract talent in the industry is making sure that
Speaker 2: we have the ecosystem for them to thrive. And I
Speaker 2: look at it in terms of three pillars or three pongs.
Speaker 3: One.
Speaker 2: We need to make sure that we attract the right
Speaker 2: people for that to happen. We need to make sure
Speaker 2: that we ensure we train them. We train them so
Speaker 2: that they know how to be in the industry, they
Speaker 2: know how to help serve the clients. And that's really
Speaker 2: important because we need to make sure that they we're
Speaker 2: given the career to thrive and having a longer term
Speaker 2: prospect in the private wealth industry. Second of all, we
Speaker 2: need to make sure that they actually have the platform
Speaker 2: it was earlier shared by There's a lot of different
Speaker 2: regulations that come out, whether it be the SPI or
Speaker 2: the CIS. You know, how does the platform be agile
Speaker 2: enough to adapt to these new changes so you can
Speaker 2: be one of the earliest movers to be leading in
Speaker 2: the private banking industry. And I think what's also important
Speaker 2: is the platform allows you to customize to the needs
Speaker 2: of our clients, so that you're not having cookie cutters
Speaker 2: and pushing products, but really customizing the needs of the
Speaker 2: inversus of whether it's high net worth or or try networth.
Speaker 2: And lastly, what's important is to have the products. We
Speaker 2: need to make sure the products are there, that we
Speaker 2: are serving the needs of our clients. And now as
Speaker 2: clients needs are getting more sophisticated, we actually serve not
Speaker 2: only the needs based out of Asia, but they may
Speaker 2: have needs for MPa propose in Europe or we actually
Speaker 2: help them in terms of one bank. Also the business
Speaker 2: needs whether they need to raise capital or have M
Speaker 2: and A so all not to attract talent. I think
Speaker 2: these three pillars are vital so that we can serve
Speaker 2: our clients' needs holistically and as a result of this
Speaker 2: over the years, Yes, we've been getting a lot of cbs.
Speaker 1: To join us and Shannie. Looker Lemuel has been talking
Speaker 1: about BNP's role. But you know, just outside of B
Speaker 1: and P, which companies are really thriving in this wealth
Speaker 1: management environment in Hong Kong.
Speaker 3: So I think everyone is doing really well. When we
Speaker 3: look at the more Hong Kong centric global banks like
Speaker 3: HSBC and Standard Hearted, you know, they talk about very
Speaker 3: strong increase in wealth management revenue. There isn't that much disclosure,
Speaker 3: but of what they disclose it is going very well.
Speaker 3: So for example, Muta fund sales, insurance sales that they're
Speaker 3: doing very well. And then when we look at the
Speaker 3: Singapore banks as well, apart from them, you know, with
Speaker 3: a very big presence in Singapore, they also have a
Speaker 3: very large operation in Hong Kong too. So I think
Speaker 3: the Hong Kong banks and also the Singapore banks, just
Speaker 3: by their geographical footprint, they are pro the most positively
Speaker 3: leveraged to this Hong Kong Welsh growth story.
Speaker 1: And look, we talked a lot about the growth potential,
Speaker 1: but let's also talk about the risk. Now. We all
Speaker 1: know that investing in this part of the world, especially
Speaker 1: when it relates to China, there's always regulatory risk. Is
Speaker 1: there any regulatory risks you can see on the horizon?
Speaker 1: A Shani? Can you just talk about that.
Speaker 3: What we've seen the regulators do in recent years is
Speaker 3: to relax the rules, and it is quite unpredictable at times,
Speaker 3: but I don't think that they'll backtrack anytime soon. And
Speaker 3: from what the Hong Kong regulators and also mainline regulators
Speaker 3: have said, they do plan to increase the quotas for
Speaker 3: their current schemes, like for example, the Southound Wealth Management Connects.
Speaker 3: They already just tripled the individual quota to three million
Speaker 3: R and B and there is talk of that potentially
Speaker 3: being listed higher. Because you know, this quota it doesn't
Speaker 3: really cater to the private banking space, which you know
Speaker 3: have a far larger out of wealth. So I think
Speaker 3: going forward, it's likely that they're going to be more
Speaker 3: opportunities to come in terms of what could potentially go wrong. Ultimately,
Speaker 3: the regulators they do have a lot of control, so
Speaker 3: if any of these schemes were to not work, or
Speaker 3: if there's any sudden shock to the system or stress
Speaker 3: to the system, they could potentially pull back or tighten approvals.
Speaker 3: Another example would be the MRF scheme. Right now, the
Speaker 3: rules are quite tight and even though the scheme does
Speaker 3: allow asset managers to access on shore retail customers, the
Speaker 3: pace of approval has been quite slow. But then again,
Speaker 3: there are talks of the rules being relaxed going forward.
Speaker 3: So you know that again is hope and more opportunity
Speaker 3: for Hong Kong FI managers to take advantage of these
Speaker 3: opportunities as they come.
Speaker 2: Maybe I want to share one point. I would say
Speaker 2: industry trends have been continually thinking that Hong Kong has
Speaker 2: attracted money purely from China, but I do believe that
Speaker 2: has changed. What I mean by that is that Hong
Speaker 2: Kong as a super connector attracts significant capital inflows from
Speaker 2: not only China, but also playing a pivotal role in
Speaker 2: linking to Southeast Asia and the Middle East. Its strategic location,
Speaker 2: robust legal framework, it's deep pool of financial talent and
Speaker 2: unparalleled service level makes it an attractive destination for both
Speaker 2: clients and wealth management professions. This we knows Hong Kong
Speaker 2: standing and Hong Kong has a long history of capital flows,
Speaker 2: expertise and device to and from Southeast Asia. The Hong
Speaker 2: Kong government has recently been putting a lot of effort
Speaker 2: in building the corridors with the Asian countries, which has
Speaker 2: helped to drive a lot of business opportunities from MOSO
Speaker 2: places like Indonesia and Thailand. We're also seeing how things
Speaker 2: will involve in terms of the Middle East, and this
Speaker 2: is rather new, so we haven't seen significant inflows, but
Speaker 2: there's a growing effort to develop this dialogue. So I
Speaker 2: thought it would be important for the listeners to also
Speaker 2: get a sense of where these flows are coming from
Speaker 2: across the region.
Speaker 1: Okay, before I let you go, Lemielle, there's listeners of
Speaker 1: Asia centric all around the world. You know, a lot
Speaker 1: of people listening to you probably want a job in
Speaker 1: private banking. But if you're not in private banking, how
Speaker 1: do you get your foot in the door? Like give
Speaker 1: them some tips?
Speaker 2: Well, I think what's important is to have transferable skill sets.
Speaker 2: What I mean by this is if you've been working
Speaker 2: in let's say, asset management, you may have an interest
Speaker 2: to join our discretionary or investment counselor's team. If you've
Speaker 2: got expertise across specific asset classes like equity, bonds of
Speaker 2: fixed income, you can join our products team. But if
Speaker 2: you overall have a passion to serve the needs of clients,
Speaker 2: have a real meaningful engagement with clients in general and
Speaker 2: serving their needs, then you can become a banker and
Speaker 2: relationship manager. And what's really interesting and makes the career
Speaker 2: and wealth management fun is there's something new every day
Speaker 2: because clients have multi angles of needs and they change
Speaker 2: throughout the life of their wealth journey. And what I
Speaker 2: mean by that is wealth is generally comes into three cycles.
Speaker 2: They have wealth generation, wealth management and wealth legacy. And
Speaker 2: what makes it fun is that we follow our clients
Speaker 2: through those cycle and that changes every day.
Speaker 1: Okay, that's a great answer, Lemiel. We have three Australians
Speaker 1: working in Hong Kong now speaking on this podcast. If
Speaker 1: three Australians can do it, then other people can do
Speaker 1: it as well. It's been an interesting discussion on Age's
Speaker 1: wealth industry, China's billionaires, and Hong Kong's role as offshore
Speaker 1: financial center. Thank you, Lemiel and Shannie for joining the show.
Speaker 2: Thank you.
Speaker 3: Thanks.
Speaker 1: I'm John Lee in Hong Kong. This podcast was produced
Speaker 1: by Clara Chen and you've been listening to the age
Speaker 1: of centric podcast