Mainland investors’ trend to allocate assets globally on rise

Pedestrians walk past a cross-border financial advertising board in Hong Kong

On The Agenda

Chinese investors are increasingly seeking to diversify their assets globally, attracting attention from policymakers and financial service providers. An HSBC survey found that 52% of mainland Chinese investors plan to increase their overseas investments, reflecting a rising trend in global asset allocation, the China Daily reported from Shanghai.

Freeman Tsang, head of intermediaries at Pictet Asset Management Asia (excluding Japan), confirmed this, noting surging demand for overseas investments. The Qualified Domestic Institutional Investors (QDII) and Qualified Domestic Limited Partners (QDLP) programs, which connect Chinese investors to global markets, have seen growing activity. China’s lowered interest rates, with deposit rates slightly above 1%, have prompted investors to seek higher yields elsewhere, driving cross-border wealth management and Mutual Recognition of Funds (MRF) activity.

The Cross-boundary Wealth Management Connect (WMC) Scheme in the Greater Bay Area, launched in 2021, has also expanded. In February, the threshold for retail investors was lowered, investment products were broadened, and the investment ceiling was raised. By July 2023, capital flows through the WMC reached 83.5 billion yuan, a fourfold increase since February. The number of new individual investors surged 9.16-fold in one month, further highlighting the growing interest.

International banks have responded swiftly. HSBC offers over 100 funds under the southbound leg of the connect program, allowing mainland investors to access global markets. Standard Chartered and DBS have introduced hundreds of products, catering to this demand. Tsang emphasized that the regulator wouldn’t expand these programs without strong market demand.

The MRF, launched in 2015, allows Hong Kong-domiciled funds to be available to mainland investors and vice versa. Current regulations cap cross-border investment at 50%, but the China Securities Regulatory Commission proposed raising this limit to 80%. Though the revised regulations are pending, international institutions like Pictet are already positioning themselves for growth. With a local partner, Tianhong Asset Management, Pictet has tripled its sub-distributors in three months and plans to introduce more Hong Kong-domiciled products.

Pictet has strengthened its Hong Kong team and is set to launch an Asian US dollar bond fund, aiming to capitalize on the MRF’s potential.

As global investment opportunities expand, financial service providers are gearing up to meet the growing demand from Chinese mainland investors. MDT/China Daily