Hong Kong remains the top choice for Chinese high net worth investors who seek offshore investments, as 70% have accounts in the SAR, Alfred Shang, partner at consultant Bain & Co. said at yesterday's Annual Wealth Management and Private Banking Asia event in Hong Kong.
Private bank route
Shanghai-based Pudong Development Bank has been in Hong Kong for five years but in September 2015 opened private bank operations to service mainland investors, private banking general manager Ernest Choi said.
“We started the Hong Kong branch five years ago, focusing on corporate business as our bank’s strategy. We see the trend of mainland investors going overseas is pretty obvious, and that explains our expansion in Hong Kong.
“We focus on the open-ended platform, by partnering with other firms to offer products that mainland investors are more familiar with,” he added. The bank also owns SPDB International Holdings, an asset management business in Hong Kong.
“It is not realistic at the moment to talk about expanding to Europe or the US,” Choi added.
"We see the trend of mainland investors going overseas is pretty obvious, and that explains our expansion in Hong Kong"
Industrial Bank, the eighth largest Chinese bank by assets, is also considering launching a private banking business in the SAR, said Candice Cai, China Industrial Bank Hong Kong Branch head of global markets.
The bank already has an investment banking and corporate banking operations which are largely US dollar assets, she added, and that could bring an advantage by complementing a future private banking business.
Boston Consulting Group expected Chinese investors to double asset allocation to overseas markets in five years, to 9.4% in 2020 (or $1.98trn of new assets) from 4.8% in 2015, it said in a report earlier this week.
Slow DPM takeup
Rosita Lee, head of investment products and advisory business at Hong Kong-based Hang Seng Bank, noted that mainland investors are still mainly product focused and discretionary portfolio managment is not popular.
"Investors in Asia might not be too comfortable using a discretionary approach. Meanwhile, banks are also taking more risks if they are making the investment decisions for the client."
Andrew Xia, chief research officer at Noah Holdings Hong Kong, a wealth manager focusing on alternative investments, said the firm originally wanted to take the individual discretionary approach in the SAR.
"But it is too troublesome to manage and requires heavy human resources. Also, the top niche clients with $30m are already clients of other big name private banks."
Among Noah's clients, only 0.1% are using the discretionary service, he said.