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
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.
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.
“The Wealth Management Connect is the next big thing for Hong Kong’s fund industry,” Chow said. “It allows Hong Kong fund companies to capture a market with a population of 70 million, 10 times the size of Hong Kong.”
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Elisa Ng, vice-chairwoman of HKIFA’s unit trust sub-committee, said fund companies in Hong Kong were actively preparing for the launch of the scheme and were working with banks on the products’ distribution.
The HKIFA survey found that new energy, biotechnology and internet were the top three sectors favoured by mainland investors. Some 63 per cent said they would like to invest in new or renewable energy, followed by 57 per cent in biotechnology and 48 per cent in internet-related stocks.
Banking and finance, traditionally favoured by investors, ranked fourth at 34 per cent. Industrial and retail were the least preferred sectors at 14 per cent and 13 per cent, respectively.
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Hong Kong ranked as the respondents’ number one market under the new scheme. Around 66 per cent said they would like to invest in products in the Hong Kong market, followed by 37 per cent in Asia excluding Hong Kong and China.
The survey also showed over 90 per cent considered dividend payments to be important in the funds they invest in.