Travellers from Mainland China are increasingly using Hong Kong as their cross-border hub for fund investment, boding well for the latter jurisdiction as it competes with other centres for financial business, figures show.

Travellers from Mainland China are increasingly using Hong Kong as their cross-border hub for fund investment, boding well for the latter jurisdiction as it competes with other centres for financial business, figures show.

As centres such as Hong Kong and Singapore continue to promote themselves in a competitive drive against places such as the Shanghai Free Trade Zone, the Hong Kong Investment Funds Association has published figures is keen to draw attention to Hong Kong’s status.

Some 16 per cent of travelers from four Mainland cities (Beijing, Shanghai, Guangzhou and Shenzhen) invest in funds in Hong Kong, the HKIFA said in a statement yesterday.

Funds were the second most common type of financial products being taken up by the Mainland travelers in Hong Kong - after HK$ deposits (18 per cent indicated that they had HK$ deposits).

Of the Mainland travelers who invested in funds in Hong Kong, about 95 per cent said they would consider to make further investments in funds in the next 12 months.  Amongst non-fund investors, 55 per cent also said that they have similar plans. 

The survey was conducted by Nielsen in December 2013 and this is the second year that Nielsen conducted this survey. The survey aims to track Mainland travelers’ financial needs and usage of investment funds and other investment products.

About 2.4 million Mainland travelers from these four cities visited Hong Kong in 2013, up by 21 per cent over 2012. As for the purpose of visiting Hong Kong, 16 per cent of them came to Hong Kong solely for investment purposes, slightly up from the 14 per cent registered in 2012.

Cohorts
Respondents have been grouped into five cohorts according to the liquid assets being held in the Mainland and Hong Kong:  Mass (Below HK$100,000); Mass Affluent (HK$100,000 – 499,999); Emerging Affluent (HK$500,000 – $999,999); Affluent (HK$1 million – 4,999,999); and  VIP (HK$5 million and above).

Amongst the various cohorts, VIPs in particular attached great importance to investment, with 30 per cent saying that the reason why they visited Hong Kong was purely for investment purposes.  The Affluent cohort came second, at 27k per cent.

The intention to invest was particularly strong amongst fund investors - with 52 per cent of the fund investors indicating that they came to Hong Kong solely for such purposes.

In terms of risk appetite, for Mainlanders who had been investing in funds in Hong Kong, it seems that they were more ready to go higher up the risk curve.

Exactly half of all the respondents were ready to accept a loss of up to 15 per cent to 20 per cent.  The risk tolerance of fund investors seemed to be higher: 66 per cent indicated that they were willing to accept such a risk level, probably reflecting that they had larger financial wherewithal to brace for short term market volatilities.

As to why financial products being sold in Hong Kong appealed to Mainland investors, the key reasons cited were a wide array of product choices (32 per cent), more reliable (28 per cent), good customer service (26 per cent), better returns (25 per cent) and convenience/flexibility (24 per cent).

Distribution
In terms of distribution channels, 39 per cent of the Mainland fund investors indicated they had bought funds through banks; and 25 per cent via insurance companies.  Meanwhile, other financial institutions, e.g. independent financial advisors, in fact played an even more important role, with 46 per cent saying they had bought funds through these channels. 

Bruno Lee, chairman of HKIFA Unit Trust Subcommittee said: “Based on the survey, currently more than one million travelers from these four key cities are already investing in Hong Kong financial products.  It is likely that this will double in the next 12 months.”