An influx of funds would turn the tide after net fund inflows to Hong Kong declined sharply last year, falling 80 per cent year on year to HK$121 billion (US$15 billion), compared with HK$638 billion in 2021 and HK$656 billion in 2020, the PWMA said in a report.

Meanwhile, a recently created task force on enhancing stock market liquidity, chaired by Carlson Tong Ka-shing, will soon give its report examining the city’s listing regime and the market’s structure and trading mechanisms.

“It will also explore how to broaden fund flows, attract more quality enterprises to list in Hong Kong, promote product innovation and diversity, and enhance price discovery and trading efficiency,” Chan said. “In fact, a vibrant financial market, with a broad range of investment products, is crucial to the attractiveness and competitiveness of Hong Kong as an asset and wealth management centre.”

Even before Chan’s comments, Hong Kong-based private banks and wealth management companies were feeling positive about asset growth over the next five years. They believe mainland China, the Middle East and Southeast Asia will bring in new money, according to a survey by the PWMA.

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Some 18 per cent of PWMA members surveyed expect annual growth in the industry’s assets under management to exceed 10 per cent over the next five years, while 67 per cent expect growth between 6 and 10 per cent, according to the PWMA’s eighth annual Hong Kong Private Wealth Management Report, released on Friday. About 15 per cent expect growth of up to 5 per cent.

The positive outlook of the survey shows the city’s wealth management industry “remains strong and resilient”, Chan said.

“Although we saw a drop in assets under management last year – though still at US$4 trillion – it was consistent with the market returns in 2022,” he said.

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The number of ultra-high-net-worth individuals in Hong Kong last year reached 12,500, making Hong Kong the world’s top city in which wealthy individuals manage their investment portfolios.

“Despite the challenges posed by Covid-19 restrictions and external headwinds, the city’s many advantages as a private wealth-management hub remain intact,” Chan said.

The Chinese mainland, particularly the Greater Bay Area, as well as younger-generation clients and family offices will be the top growth drivers for wealth management growth, Amy Lo, UBS executive and chairwoman of the executive committee of the PWMA, said in the association’s report.

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The association surveyed 33 of the 42 members of the association and 200 clients between July and August. PWMA’s members include big players like UBS, Morgan Stanley, JPMorgan, Credit Suisse, Julius Baer and Citibank.

“There is some optimism about the potential for funding flows from Southeast Asia and the Middle East, based on the government’s efforts to introduce policies over the last six months aimed at attracting more family offices here,” Peter Stein, CEO and managing director of PWMA, told the Post. “These are quite positive for the private wealth management sector as a whole.”

“There is already a history of Hong Kong doing private banking with clients from Southeast Asia,” Stein said. “The Middle East is a very new market. We don’t have a lot of professionals who are familiar with these markets. We need to nurture and attract professionals who have the specialised knowledge and experience to work with clients from the Middle East.”

PWMA members believe mainland China will be the major source of funding, the survey showed. They believe Hong Kong’s assets under management sourced from mainland China will increase from 36 per cent currently to 46 per cent in five years.

Hong Kong’s role as a super-connector between mainland China and the world will further support the development of the city’s wealth management industry in coming years, said UBS’s Lo.

The survey also showed that after the Covid-19 restrictions were removed earlier this year in Hong Kong, many members reported more new account openings. Forty per cent of members saw an increase, 30 per cent saw a consistent level, and the rest saw a reduction.

Despite the optimism, PWMA members still have concerns about the tense relationship between China and the US.

“We are still facing challenges such as the geopolitical situation, volatile investment environment, and worldwide macroeconomic concerns,” Stein said. “We can’t ignore all of these things, and our members took all of them into consideration in their assessment of the market outlook.”