However, a growing preference of China’s HNWI for closer wealth managers is fast narrowing the gap.
Hong Kong loses to close regional rival Singapore for its international competitiveness in wealth management, according to a study from Deloitte, although the Asian financial centre has been making stellar progress as it continues to gain patronage of the Mainland’s high net worth individuals.
The city ranked third in terms of international competitiveness for wealth management as the crown was maintained by bank secrecy capital Switzerland whilst Singapore snagged second place. The United Kingdom and United Arab Emirates complete the top five.
Although Hong Kong has an impressive business environment enhanced by a simple tax and regulatory frameworks, it ranks poorly in ‘stability’ compared to Singapore with a score of 75 versus the lion city’s 83. Hong Kong also ranks lower in provider capability after scoring 56, losing to Singapore’s 65.
The lion city also has Hong Kong beat in managing cost income ratios as cost margins in Hong Kong defied the downward trend seen in US, UK and Switzerland after increasing 13%. This was driven by high occupancy costs, technological investments and compliance efforts to keep up with internationally certified regulatory regimes.
Nevertheless, Hong Kong continue to post stellar growth rates giving top contenders a run for their money as its IMV ballooned 125% between 2010 and 2017, to overtake Panama and Caribbean in terms of market share in the international wealth management pie. Hong Kong also witnessed seven straight year of asset inflows and has accumulated a positive net new assets (NNA) of US$410b since 2010 compared to Singapore’s measly US$39b.
“Hong Kong benefits from the growth in Chinese private wealth and the changing behaviour of Chinese HNWIs,” Deloitte noted, adding that the city’s proximity to the Mainland and the absence of taxes on capital gains, interest deposits and dividends are luring a greater share of the world’s wealthy.
The maturing of the city as a wealth management centre is exemplified by the strongest growth among all the centres in average revenue and cost margins (by 1.6 % CAGR and 2.4 % CAGR respectively, 2013–2017E).
However, Deloitte suggests that close ties with the Mainland may spell the difference between further growth and stagnation of Hong Kong as an emerging wealth management centre as “much may depend on the extent to which Chinese politics continue to tolerate further development.”
The US, Luxembourg, Bahrain and Panama & Caribbean snagged sixth, seventh, eighth and ninth places in the international wealth management competitiveness rankings respectively.
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