BlackRock, the world's biggest money manager, says Hong Kong needs to speed up its development as a fund management hub for Asia so that global capital can be retained and contribute to the region's economic growth.
"Policymakers should develop Hong Kong as a genuine fund management hub rather than an asset management centre per se," Mark McCombe, BlackRock's Asia-Pacific chairman, said at the annual conference of the Hong Kong Management Association yesterday.
"There is an absolute hole in Asia, in which you can create a cradle where capital feels very comfortable."
The former HSBC Hong Kong chief executive said efforts should be made to turn a saving culture into an investment culture. Most Asian residents' capital was being held in deposits that did not generate any interest, causing a stagnation of capital, the flow of which was so necessary for economic growth.
McCombe, who joined New York-headquartered BlackRock last year, said: "It is not only about managing money. In markets like London and New York, their industries are broad, deep and wide in their custodianship, legal framework, different types of vehicles and structures, which allow investment managers to become established.
"Make sure that Hong Kong is watching what's going on in the world. Don't be afraid to copy in a competitive environment, [where you need to be] aggressive."
Industry executives say the focus should be on the application of capital. For example, if a mutual fund is sold in Hong Kong and that mutual fund invests in European and US equities, that money disappears from Asia. And the capital supports companies in Europe and the United States.
International fund mangers have come to Hong Kong and set up locally-domiciled funds in order to begin business ventures on the mainland, where the saving rate is the world's highest - 46 per cent.
Under a supplement to the Closer Economic Partnership Arrangement signed in late August, Beijing endorsed the study of a Hong Kong government plan for the mutual recognition of fund products that would allow Hong Kong-domiciled funds to be sold on the mainland and vice versa.
"It is not where the capital resides, but about what the capital is doing." McCombe said. "Asia needs to holistically think about the development of capital markets."
Asian markets have been hammered by a wave of capital outflows since the US Federal Reserve hinted earlier this year about tapering its US$85 billion-a-month bond buying programme. Indonesia and India, which have similar current account deficits, were hit particularly hard.