HK banks await ease on daily yuan conversion to push investment product sales

PUBLISHED : Monday, 23 December, 2013, 12:42pm
UPDATED : Monday, 23 December, 2013, 12:42pm

The sale of unit trusts – a type of investment product commonly seen in Hong Kong, often involving financial derivatives – hit a bump in the road in the second half of this year amid growing concern about uncertain investment sentiment, especially related to yuan-denominated wealth management products next year.

Bankers say whether market participants can see strong sale of unit trusts next year largely depends on the launch of a variety of yuan-denominated investment products, after the proposed relaxation of 20,000 yuan daily conversion for Hong Kong residents.

“Yuan-denominated products will definitely be the focus of all banks in Hong Kong next year,” said Janet Chong, executive director of consumer banking at Singaporean bank DBS in Hong Kong, adding that she expected currency-linked deposits and yuan-denominated funds to be rolled out once the relaxation on daily yuan conversion was officially announced.

Bankers are hoping a fresh surge of money led by the yuan will flow to investment products on the shelf next year after a relatively quiet sale in the second half of this year. Some bankers say they have also seen fast-growing demand from financial consumers who are keen to make bigger returns from yuan appreciation rather than just depositing yuan for regular interest rates at local banks.

Yuan-denominated products will definitely be the focus of all banks in Hong Kong next year
Janet Chong

“We believe the reason for holding yuan has shifted from purely capturing its potential appreciation to the attractive potential investment opportunities available,” said Elaine Lai, head of wealth development for the Hong Kong market at HSBC.

Edward Chu Ka-wah, a director at the local lender Shanghai Commercial Bank, said investors were cautious with both bond funds and equity funds in the second half of the year, due to tapering of quantitative easing which had an adverse effect on bonds and also increased market volatility.

The fund industry in Hong Kong registered a gross sale of US$56.4 billion for the first nine months, up 42.4 per cent from a year ago, according to the Hong Kong Investment Funds Association. However, the growth was mainly registered in the first half, with 71.1 per cent of the gross sale completed in the first and second quarters.

In the third quarter, gross sales of unit trust fell 19.4 per cent to US$16.2 billion from the previous quarter. The drop was mainly due to lacklustre sales of bond funds, the association said. Gross sales of bond funds were slashed by nearly 50 per cent and the fund industry has witnessed a net outflow of cash.