Wealth Management Connect: mainland Chinese investors eyeing 13 per cent returns unrealistic, HKIFA chief says

New energy, biotech and internet are top sectors favoured by mainland Chinese investors, who have little interest in ESG products

HKIFA hopes the authorities will relax restrictions in the connect scheme to allow investments in high risk products

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Employees work on photovoltaic solar panels at a factory in Ningbo, Zhejiang province. Mainland Chinese investors prefer to invest in renewable energy related stocks. Photo: Reuters

Published: 4:57pm, 22 Jun 2021Updated: 7:33am, 23 Jun 2021

Mainland Chinese investors on average are looking at 13 per cent annual returns from their investments under the Wealth Management Connect initiative, a level deemed as too high given the restrictions, according to a survey by the Hong Kong Investment Funds Association.

To achieve such high returns, mainland investors will have to invest in products with medium-to-high risk levels that have a higher exposure to equities, HKIFA chairman Nelson Chow told a media briefing to discuss the survey on Tuesday.

However, the impending scheme allows mainland investors to only invest in about 300 Hong Kong-domiciled funds with low to medium risks with exposure to bonds and large cap stocks.

“We hope the authorities will relax the Wealth Management Connect scheme in the future to allow investors to invest in products with different risks levels to fit their risk appetite,” Chow said. It’s “very difficult” to achieve 13 per cent without assuming more risks, he added.

Mainland investors on average can tolerate losses of up to 8 per cent per year under the connect scheme, the survey found. Last year, the Hang Seng Index lost 3.4 per cent following a gain of 9.1 per cent in 2019.

Some 1,000 residents living in the four Greater Bay Area mainland cities of Guangzhou, Shenzhen, Foshan and Zhuhai were asked about their views on investing in the new connect scheme between April and May.